CanWel Building Materials Group Ltd.

CanWel Building Materials Group Ltd.

November 14, 2006 18:24 ET

Canwel Building Materials Income Fund Receives Unitholder Approval to Proceed With Acquisition

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 14, 2006) -


CanWel Building Materials Income Fund ("CanWel" or the "Fund") (TSX:CWX.UN) announced that, at the special meeting of unitholders held today (the "Meeting"), unitholders of CanWel approved the acquisition (the "Acquisition") of the assets of five lumber pressure treating plants (the "Plants") from 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") by CanWel Holding Partnership, a majority owned subsidiary of the Fund.

The Acquisition was approved by over 83% of unitholders voting at the meeting. 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. Amar S. Doman, Chairman of the Board of Trustees of the Fund, holds, directly or indirectly, approximately 33 percent of the issued and outstanding units of the Fund and also owns, directly or indirectly, the Vendors. Accordingly, approval of the Acquisition was sought and obtained at the Meeting from a majority of minority unitholders of the Fund, in accordance with the above securities regulatory requirements. Provided that all other conditions to the transaction are satisfied, the Acquisition is expected to close on January 2, 2007.

On October 31, 2006 the Department of Finance (Canada) announced the "Tax Fairness Plan" whereby the income tax rules applicable to publicly traded trusts and partnerships will be significantly modified. In particular, certain income of (and distributions made by) these entities will be taxed in a manner similar to income earned by (and distributions made by) a corporation. These proposals will be effective for the 2007 taxation year with respect to trusts which commence public trading after October 31, 2006, but the application of the rules will be delayed to the 2011 taxation year with respect to trusts which were publicly traded prior to November 1, 2006 (although the announcement suggested that this grandfathering could be lost in certain circumstances). The proposed rules may adversely affect the marketability of the Fund's units and the ability of the Fund to undertake future financings and acquisitions. Moreover, at such time as the proposed rules apply to the Fund, the distributable cash(1) of the Fund may be materially reduced.

The Fund is considering whether its entitlement to the four-year grandfathering could be adversely affected by the completion of the Acquisition. The Fund is seeking clarification from the Department of Finance (Canada) in this regard.

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, with 17 distribution centres across Canada. The Fund distributes a wide range of hardware, building materials, lumber, and renovation products.

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

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.

The Government of Canada has also recently announced significant changes impacting income trusts. It is unclear what the impact of these announcements may be on the Fund, the Fund's unitholders or the Acquisition at this time. Readers are urged to consult with their professional financial, legal or accounting advisors to consider the potential impact of such measures.

Although the forward looking statements contained in this press release are based upon what CanWel believes to be reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward looking statements, and differences may be material. The Fund undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, other than as required by applicable law.

(1) Reference is made to distributable cash of the Fund. This is a non-GAAP measure generally used by Canadian open-ended income funds as an indicator of financial performance. Management believes that this measure provides investors with an indication of the cash available for distribution to unitholders. The Fund defines distributable cash as the Fund's net earnings before depreciation, amortization, stock-based compensation, gain or loss on sale of fixed assets, provision for future income taxes and after maintenance of business capital expenditure and contributions to any reserves the Board of Trustees deem to be reasonable and necessary for the operations of the Fund.

Contact Information