Brampton Brick Limited

Brampton Brick Limited

December 07, 2006 17:10 ET

Brampton Brick Acquires Remaining 30% Minority Interest in Oaks Concrete Products Ltd.

BRAMPTON, ONTARIO--(CCNMatthews - Dec. 7, 2006) - Brampton Brick Limited (the "Company")(TSX:BBL.A) announced today that it has acquired the remaining 30% minority interest in Oaks Concrete Products Ltd. ("Oaks Concrete") that it did not already own. The aggregate purchase price of $15,000,000 was satisfied by a cash payment of $4,000,000 and the issuance of a promissory note in the amount of $11,000,000 to be paid in installments of $4,000,000 due on December 7, of each of 2007 and 2008 and a final installment of $3,000,000 due on December 7, 2009. The promissory note bears interest at 5% per annum.

The Company had originally acquired a 63% interest in Oaks Concrete for cash consideration of $31,500,000 in May, 2002 when it acquired the Pavers and Walls division of Lafarge North America Inc. in the Province of Ontario and the State of Michigan. The remaining 37% minority interest was held by a consortium of investors including developers, builders and contractors active in the Greater Toronto Area. The minority investor group included Messrs. Rudolph P. Bratty, Q.C. and Jim V. De Gasperis who are also members of the Board of Directors of the Company. In June, 2004, the Company acquired an additional 7% interest for cash consideration of $3,844,000.

Operations of Oaks Concrete generated significant earnings in 2002 and were virtually breakeven in 2003. Losses were incurred in 2004, 2005 and to date in 2006. These losses were due, at least in part, to foreign currency exchange losses which resulted from the strengthening of the Canadian dollar versus the U.S. dollar during that period, from approximately 64 cents in May, 2002 to approximately 88 cents currently.

The acquisition of the 30% minority interest eliminates the conflicts of interests which were inherent in the previous ownership structure and, thus, will allow the Company to put into place the strategies that it believes are necessary to return the concrete products operations to profitability. These strategies include the introduction of new products and marketing programs, integration of personnel and operating procedures and rationalization of manufacturing operations and facilities, including the manufacturing plant acquired from Richvale York Block Inc. in April of this year. The Company has identified a number of cost savings and other synergistic benefits which it believes can be achieved, but which, otherwise, could not have been implemented in a manner that would have allowed the Company to fully realize the benefits thereof.

The Company intends to undertake a short-form amalgamation to combine the Canadian legal entity, Oaks Concrete Products Ltd., with Brampton Brick Limited effective January 1, 2007. Sales and marketing activities pertaining to paving stone, retaining walls and related products will continue to be conducted under the Oaks Concrete Products trade name and logo. Certain changes are also expected to be undertaken in the ownership structure of the Company's U.S. subsidiaries, including Oaks Concrete Products Inc. and Brampton Brick Inc., a newly incorporated subsidiary through which the U.S. clay brick operations will be conducted, such that all U.S. operations will be structured under a single U.S. holding company.

As noted above, each of Rudolph P. Bratty, Q.C. and Jim V. De Gasperis is a director of the Company and held, directly or indirectly, equity interests in Oaks Concrete. As disclosed in the Company's Management Information Circular, corporations controlled by Mr. Bratty, together with others, are parties to an amended and restated shareholders agreement made as of the 25th day of January, 1991 (the "BBL Shareholders Agreement").

The BBL Shareholders Agreement creates a voting trust whereby all of the Class B multiple voting shares are voted together as directed by holders of the Class B Shares representing 85% of the Class B Shares, or, at the instance of 15% of the holders thereof, withheld from voting. The BBL Shareholders Agreement also provides for a right of first refusal mechanism whereby Class B Shares have to first be offered to the other holders of Class B Shares before being converted to common shares and sold through the Toronto Stock Exchange.

Accordingly, the transaction is a "related party transaction" for the purposes of Ontario Securities Commission Rule 61-501 and Policy Q-27 of the Autorite des marches financiers du Quebec. However, because the fair market value of the subject matter of and the consideration for the transaction is less than 25% of the market capitalization of the Company, the transaction is exempt from the formal valuation and minority approval requirements of the Rule and the Policy.

The Company established a committee of independent directors (the "Independent Committee") to consider the parameters of a proposed offer by the Company to acquire all of the minority interest in Oaks Concrete. The Independent Committee engaged Dundee Securities Corporation ("Dundee") as its independent financial advisor in connection with such offer and the resulting transaction.

Dundee assisted the Independent Committee in, among things, reviewing the purchase price that was ultimately agreed upon, and its payment terms. In connection with its mandate, Dundee delivered an opinion to the Independent Committee and the Board of Directors that the transaction is fair, from a financial point of view, to the Company. After an extensive review of, among other things, the financial and other history of the Oaks Concrete business, the business prospects and anticipated synergies associated with the Company owning all of Oaks Concrete, and Dundee's fairness opinion, the Independent Committee concluded that value could be enhanced by the Company acquiring the minority interest in Oaks Concrete, and formally recommended to the Board of Directors of the Company that it should proceed with the proposed transaction.

Based in part on this recommendation and its own review of the terms of the transaction and the prospects and anticipated synergies of the business, the Company's Board of Directors determined that the transaction was in the best interests of, and fair to, the Company, and approved the transaction, with those directors who had a conflict of interest in connection with the transaction declaring their interests and abstaining from voting.

Certain statements contained herein constitute "forward-looking statements". Such forward-looking statements involve known and unknown risks, uncertainties and other factors but not limited to, those identified under "Risks and Uncertainties" in the Company's 2005 Annual Report, which may cause actual results, performance or achievements of the Company to be materially different from any future result, performance or achievements expressed or implied by such forward-looking statements.

Brampton Brick is Canada's second largest manufacturer of clay brick. Products are used for residential construction and for industrial commercial, and institutional building projects. Oaks Concrete Products Ltd., manufactures concrete paving stones, retaining walls and enviro products and sells related accessory products for residential use and for industrial, commercial and institutional building projects. Da Vinci Stone Craft Ltd., a 75% owned subsidiary of Oaks Concrete Products Ltd., manufactures fireplace surrounds and accessory products. Medical Waste Management Inc., a 65% owned subsidiary, operates facilities for the destruction of biomedical and pharmaceutical waste in Ontario, including the only commercially operated medical waste incinerator in Ontario, and in Nova Scotia.

Contact Information

  • Brampton Brick Limited
    Jeffrey G. Kerbel
    President and Chief Executive Officer
    (905) 840-1011
    Brampton Brick Limited
    Kenneth J. Mondor
    Vice-President, Finance and Chief Financial Officer
    (905) 840-1011
    (905) 840-1535 (FAX)