CanWel Building Materials Group Ltd.

CanWel Building Materials Group Ltd.

October 12, 2006 08:24 ET

CanWel Announces Signing of Definitive Agreement to Acquire Pressure Treating Businesses

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Oct. 12, 2006) -


CanWel Building Materials Income Fund (the "Fund")(TSX:CWX.UN) announced that its majority-owned subsidiary, CanWel Holding Partnership, has entered into a definitive agreement (the "Purchase Agreement") with Western Pacific Wood Preservers Ltd., Western Cleanwood Preservers Ltd., Alberta Wood Preservers Ltd., Eastern Wood Preservers Ltd. and Quebec Wood Preservers Ltd. (collectively, the "Vendors") pursuant to which it will acquire (the "Acquisition") the assets of five lumber pressure treating plants (the "Plants"), as previously announced on October 2, 2006.

The purchase price for the Plants will be satisfied as follows: the issuance to the Vendors of 3,111,111 exchangeable Class B CanWel LP units, the payment to the Vendors of approximately $21 million in cash, and pursuant to a vendor take back commitment, the net issuance to the Vendors of promissory notes in the aggregate maximum principal amount of $3.8 million. The promissory notes will be non-interest bearing and repayable in equal monthly instalments over a period of three years.

As previously disclosed, the Acquisition constitutes a related party transaction for purposes of Ontario Securities Commission Rule 61-501 Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions and Regulation Q-27 Respecting Protection of Minority Securityholders in the Course of Certain Transactions of the Autorite des marches financiers. The Acquisition has received the recommendation of the special committee of the board of trustees of the Fund, which was established for purposes of reviewing the Acquisition, and, on October 8, 2006, received the approval by the board of trustees of the Fund (Mr. Amar Doman, Chairman of the Fund and the direct or indirect owner of the Vendors, having abstained from such proceedings.) The Acquisition remains subject to the approval of a majority of the Fund's disinterested unitholders at a special meeting of unitholders to be held on November 14, 2006, and other customary conditions. An information circular will be mailed to unitholders later this month providing unitholders with important information about the Acquisition. Once mailed, the information circular will be available at the SEDAR website at The Acquisition is expected to close in January 2007.

About CanWel.

The Fund trades on the Toronto Stock Exchange under the symbol CWX.UN and is one of Canada's largest national distributors in the building materials and related products sector, operating 17 distribution centres across Canada. The Fund distributes a wide range of hardware, building materials, lumber and renovation products.

Further information on the Fund can be found in the disclosure documents filed by CanWel Building Materials Income Fund with the securities regulatory authorities, available at

Securities of the Fund have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States without registration or applicable exemption from the registration requirements of that Act. This news release does not constitute an offer to sell or the solicitation of an offer to buy securities.

Certain statements in this press release may constitute "forward-looking" statements. When used in this press release, such statements use words, including but not limited to, "may", "will", "expect", "believe", "plan", "intend", "anticipate" and other similar terminology. These forward-looking statements reflect the current expectations of the Fund's management regarding future events and operating performance, but involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund, including the performance of, and distributable cash generated by the Fund, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Actual events could differ materially from those projected herein and depend on a number of factors. These factors include (i) the risk that the integration of the Acquisition may result in significant challenges, and management of CanWel may be unable to accomplish the integration smoothly or successfully or without spending significant amounts of money; any inability of management to successfully integrate the operations of the combined business, including, but not limited to, information technology and financial reporting systems, any of which could have a material adverse effect on the business, financial condition and results of operations of CanWel;
(ii) the risk that Plant revenues, profits and margins may not remain consistent with historical levels, (iii) the risk that competing firms which manufacture or distribute competitive product lines will aggressively defend or seek market share, or that existing customers of the Plants (some of whom are competitors of CanWel) cease doing business with the Plants or CanWel, in each case reducing, eliminating or reversing any potential positive economic impact on the Fund of the Acquisition; (iv) the risk that any increased sales, margin, profit or distributable cash resulting from the Acquisition may not be fully realized, realized at all or may take longer to realize than expected; (v) the risk of disruption from the introduction and implementation of the Acquisition making it more difficult to maintain relationships with customers, employees or suppliers, (vi) risks related to the operation of pressure treatment facilities, including but not limited to environmental risks, labour risks, risks related to maintenance capital expenditures for manufacturing facilities and risks related to capital expenditures for environmental risks, and
(vii) the risk that the Acquisition is not completed or completed on terms that are different than as indicated herein. As indicated above, completion of the transactions described herein are subject to various conditions, including (among others) receipt of all necessary regulatory approvals and third party consents. There can be no assurance that each of these conditions will be satisfied to the satisfaction of CanWel and that these transactions will be concluded. Additional risks and uncertainties affecting the Fund, which could cause results to differ materially from those described in these forward-looking statements, include, among others: increased debt and interest costs, general economic and business conditions, product selling prices, product performance, design and liability risk, software and software design risk, commodity price fluctuations, information systems risk, interest rate changes, operating costs, and competitive conditions. A further description of these additional factors can be found in the periodic and other reports filed by the Fund with Canadian securities commissions and available on Sedar ( These forward-looking statements speak only as of the date of this press release. The Fund does not undertake, and specifically disclaims, any obligation to update or revise any forward looking information, whether as a result of new information, future developments or otherwise, except as required by applicable law.

Reference is made above to EBITDA and distributable cash. We define EBITDA as earnings before interest expense, income taxes, depreciation and amortization and stock-based compensation expense. We define distributable cash as net earnings before depreciation, amortization, gain or loss on sale of fixed assets, provision for future income taxes, stock based compensation and after maintenance of business capital expenditure and contributions to any reserves the Board of Trustees of the Fund deem to be reasonable and necessary for the operations of the Fund.

EBITDA is a measure used by management of CanWel to evaluate financial performance. In addition, management of CanWel believes that distributable cash is a useful financial measure as it provides investors with an indication of cash available for distribution and is a measure generally used by Canadian income funds as an indicator of financial performance. EBITDA and distributable cash, however, are not measures of earnings or financial performance recognized by Canadian generally accepted accounting principles (''GAAP'') and do not have standardized meanings prescribed by GAAP. Items excluded from EBITDA and distributable cash are significant to understanding and assessing financial performance. EBITDA and distributable cash should not be considered in isolation or as alternatives to net income, cash flows generated by operations or other financial statement data presented in the consolidated financial statements of the Fund, as indicators of financial performance or liquidity under GAAP. Because neither EBITDA nor distributable cash is a measure determined in accordance with GAAP, as presented, investors are cautioned that EBITDA and distributable cash may not be comparable to similarly-titled measures presented by other issuers (such as other income funds).

Contact Information

  • CanWel Building Materials Income Fund
    Tom Donaldson
    President and CEO
    (604) 432-1400
    CanWel Building Materials Income Fund
    Ali Mahdavi
    Investor Relations
    (416) 962-3300 or 1-866-430-6247