Brascade Corporation
TSX : BCA.PR.B

November 10, 2006 17:17 ET

Brascade Announces Third Quarter Financial Results and Proposed Amalgamation With Diversified Canadian Financial II Corp.

TORONTO, ONTARIO--(CCNMatthews - Nov. 10, 2006) - Brascade Corporation (TSX:BCA.PR.B) today announced net income for the nine months ended September 30, 2006 of $164.7 million, compared to income of $1,275.7 million for the same period last year. The 2005 results included $1,159.7 million in gains from the restructuring and partial monetization of Brascade's investment in the mining and metal sector, net of tax and other non-cash items. The 2005 results also included a contribution from that investment, which was substantially sold during the third quarter of 2005. The results for the first nine months of 2006 reflect a loss incurred in the company's paper investments.

Net income for the three months ended September 30, 2006 was $158.7 million, compared to $770.2 million in the same period in 2005 which included the above-mentioned restructuring and monetization gains.

Following the sale of substantially all of Brascade's interest in Falconbridge Limited in August 2005, the company no longer records any equity income from mining and metals investments. These investments contributed $87.0 million during the first nine months of 2005.

Forest product investments contributed a net loss of $10.9 million for the first nine months of 2006, compared with income of $64.7 million for the same period last year. Panelboard investments contributed income of $36.6 million, which was a strong performance but lower than the same period of 2005 as oriented strandboard prices came off their record high levels. Paper investments generated a loss of $47.5 million, arising mainly from closure of a pulp mill in New Hampshire and the writedown of an investment in a US paper company.

Amalgamation with Diversified Canadian Financial II Corp.

Brascade also announced that, subject to shareholder approval, it has agreed to amalgamate with Diversified Canadian Financial II Corp. and Diversified Canadian Holdings Inc. effective on or about January 1, 2007. The amalgamated company will continue as a public company under the name Brascade Corporation and is expected to continue to serve as an investment company. The amalgamated corporation will have a larger capital base and more diversified portfolio of investments than its predecessors, and should also benefit from reduced administrative, operating and regulatory costs.

In conjunction with this amalgamation, the holders of Brascade's Class I Senior Preferred shares, Series B, who are resident in Canada, will be given the option to receive either (a) $40.00 in cash in Canadian funds per senior preferred share they now hold, which is the current redemption price for these shares; or (b) 1.6 senior preferred shares of the amalgamated corporation having a redemption price of $25.00 per share in Canadian funds and paying quarterly dividends based on an annual rate of 4.70% . Residents of jurisdictions outside Canada will automatically receive on amalgamation $40.00 in cash per senior preferred share they now hold.

The terms of the proposed amalgamation and the resulting impact on the holders of the company's senior preferred shares, other than Brookfield Asset Management Inc. and its affiliates, have been reviewed by a committee of independent directors of Brascade. The Independent Committee has confirmed to the board of directors of Brascade that it has determined that the amalgamation is in the best interests of the company and fair to the holders of the senior preferred shares. The Independent Committee was assisted in its deliberations by The Hathaway Corporation, an independent financial advisor and qualified valuator, which provided a valuation of Diversified Canadian Financial II Corp. and an opinion as to the fairness, from a financial point of view, of the amalgamation to holders of senior preferred shares.

A meeting of Brascade's shareholders will be held at 10:00 a.m. (Toronto time) on Wednesday, December 13, 2006 to vote on the proposed amalgamation and other related matters, including the continuance of Brascade under the Business Corporations Act (Ontario). A proxy circular will be mailed to the company's shareholders shortly.

The company's Board of Directors declared the regular quarterly dividends on its Senior Preferred shares, Series B payable on December 31, 2006 to shareholders of record on December 20, 2006.

Brascade Corporation currently holds investments in the forest products and property sectors. The common shares of Brascade are wholly owned by Brookfield Asset Management Inc., an asset management company focussed on property, power and infrastructure assets.

Edward C. Kress, Chairman and President, will be available at 416-363-9491 to answer any questions on the company's financial results.

This news release contains forward-looking statements concerning the company's business and operations such as "will", "is expected" and "should". The company cautions that, by their nature, forward-looking statements involve risk and uncertainty and the company's actual results could differ materially from those expressed or implied in such statements. Reference should be made to the most recent Annual Information Form for a description of the major risk factors.



Consolidated Statements of Operations

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(unaudited) Three months ended Nine months ended
US$ millions, except per share September 30 September 30
amounts 2006 2005 2006 2005
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Income
Equity income from Falconbridge
Limited $ - $ 10.8 $ - $ 87.0
Equity income from Norbord Inc. 2.7 16.7 36.6 67.8
Equity loss from Fraser Papers
Inc. (3.0) (2.1) (47.5) (3.1)
Foreign exchange loss (2.1) (29.2) (11.2) (14.0)
Other income 29.2 (16.0) 90.9 27.3
Gain on disposition of
investment 141.6 800.3 141.6 1,159.7
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168.4 780.5 210.4 1,324.7
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Expenses
Interest expense 9.5 10.3 45.1 48.8
Corporate 0.2 -- 0.6 0.2
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9.7 10.3 45.7 49.0
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Net income $ 158.7 $ 770.2 $ 164.7 $ 1,275.7
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Net income per common share $ 3.45 $ 19.74 $ 3.58 $ 42.99
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Consolidated Statements of Deficit

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Three months ended Nine months ended
(unaudited) September 30 September 30
US$ millions 2006 2005 2006 2005
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Deficit, beginning of period $ (325.3) $ (503.3) $ (331.3) $ (1,008.8)
Purchase of Falconbridge shares - (332.2) - (332.2)
Net income for the period 158.7 770.2 164.7 1,275.7
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(166.6) (65.3) (166.6) (65.3)
Common share dividend (105.0) (275.0) (105.0) (275.0)
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Deficit, end of period $ (271.6) $ (340.3) $ (271.6) $ (340.3)
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Consolidated Balance Sheets

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September 30 December 31
US$ millions 2006 2005
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(unaudited)
Assets
Loans receivable $ 556.3 $ 214.8
Securities 176.3 434.9
Investment in Norbord Inc. 175.1 199.3
Investment in Fraser Papers Inc. 154.7 196.9
Investment in Canary Wharf Group, plc 342.3 342.3
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$ 1,404.7 $ 1,388.2
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Liabilities
Accounts payable $ 148.0 $ 217.4
Retractable preferred shares (Note 3) 484.6 478.2
Shareholders' equity (Note 4) 772.1 692.6
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$ 1,404.7 $ 1,388.2
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Contact Information

  • Brascade Corporation
    Edward C. Kress
    Chairman and President
    (416) 363-9491