CCS Income Trust

CCS Income Trust

March 22, 2006 15:55 ET

CCS Income Trust Announces a $230 Million Bought Deal Subscription Receipt Financing, the Acq. of the Assets of Grizzly Well Servicing and Announces the Acq. of the Assets of HMI Industries Inc.

CALGARY, ALBERTA--(CCNMatthews - March 22, 2006) -


CCS Income Trust (the "Trust") (TSX:CCR.UN) is pleased to announce today that it has signed an asset purchase agreement with Grizzly/Hi-West & Poncho Well Servicing Inc. and its affiliates and related companies ("Grizzly" or the "Grizzly Acquisition"), conditional on financing and regulatory approvals, and that the Trust has signed today a $230 million bought deal subscription receipt financing, related to the Grizzly acquisition. The Trust also announces that it entered into an agreement on March 16, 2006 to acquire the assets of HMI Industries Inc.

Accretive Acquisition of Grizzly Well Servicing Assets:

Today the Trust, through its wholly owned subsidiary, CCS Inc. ("CCS" or the "Company"), has entered into an exclusive asset purchase agreement with Grizzly to purchase 86 well servicing rigs, spare parts, related inventory and real estate. For the twelve months ended January 31, 2006, Grizzly generated revenue of approximately $130 million according to information provided by Grizzly.

The purchase price for the assets is $285 million; allocated approximately $275 million for the service rigs and $10 million for the spare parts, related inventory and real estate. Consideration will consist of approximately $242 million of cash and $43 million in CCS Income Trust units ("Trust Units"), to be issued to Grizzly at a price of $36.75 per Trust Unit. The vendor has the option, exercisable until five days before closing, to increase Trust Unit consideration to a maximum of $71.3 million, with a corresponding reduction to the cash consideration.

Of the Trust Units issued, 25% will be advanced to the vendors on closing, with the balance of Trust Units to be held in escrow and released over the next three years. The Trust Units advanced at closing will be subject to a four month statutory hold period from the date of closing the Grizzly Acquisition. Closing of the Grizzly Acquisition is conditional upon satisfaction of various conditions typical to transactions of this nature, including completion of financing and obtaining competition and regulatory approvals. The acquisition is expected to close on May 1, 2006 but not later than May 23, 2006.

The Grizzly acquisition is expected to:

- be accretive to operating cashflow and cash available for distribution in 2006;

- expand the Trust's service rig fleet from 53 to 139, or by 162%, and provide more diversification of its service rig fleet across the western Canadian sedimentary basin;

- allow the Trust to meet its existing customer demands, while also obtaining new customers operating in different geographic segments of the western Canadian sedimentary basin;

- provide the Trust's Concord Well Servicing division ("Concord") with improved operational efficiencies resulting from greater economies of scale;

- expand CCS' management and operational depth within its Concord division; and

- strategically position the Trust to be more competitive with other larger service rig contractors.

Other Grizzly Information:

- all rigs are modern, with free standing capabilities and have been subject to rigorous ongoing maintenance and rebuilding programs;

- all rigs acquired are fully crewed and current crews will be offered continuing employment.

"We are excited about the opportunity to team up with another well respected service rig operator and join forces with a talented and energetic group of people to offer improved services to an expanded customer base" comments Gordon Vivian, Vice President and General Manager, Concord Well Servicing. "We believe the Grizzly Acquisition is a strategic fit and the combination of a well maintained, fully crewed service rig fleet provides Concord greater opportunity to better serve our customers."

Accretive Acquisition of HMI Industries Inc.

The Trust also announces today that on March 16, 2006 the Trust signed an Asset Purchase Agreement with HMI Industries Inc. ("HMI"). Headquartered in Red Deer, Alberta, HMI operates a scrap metal processing facility complete with a container drop off business for collection of scrap metal. The acquisition allows CCS to diversify into services that are complementary to its HAZCO Environmental Services ("HAZCO") division. The purchase price for these assets is $35.5 million, payable by way of $23 million in cash and $12.5 million through the issuance of Trust Units to be issued at $36.75 per Trust Unit. HMI may elect, until closing to increase the Trust Unit consideration to a maximum of $17.8 million, with a corresponding reduction to cash consideration. Closing of the acquisition is conditional upon the satisfaction of various conditions typical to transactions of this nature.

The HMI Acquisition is expected to:

- be accretive to operating cash flow and cash available for distribution in 2006;

- allow HAZCO to expand HMI's services across Western Canada;

- allow HAZCO to vertically expand its services offered to existing HAZCO customers;

- provide HAZCO with scrap valuation expertise which is essential when bidding on fixed priced decommissioning projects; and

- expand the Trust's capability and capacity to maximize value from the ferrous and non-ferrous scrap metal that it recovers.

"HAZCO has been a great customer of HMI for many years as well as a respected competitor" explains Al Laplante, President and owner of HMI, "and joining forces with HAZCO will enable HMI to continue to grow and expand its services across western Canada." "The acquisition of HMI vertically expands HAZCO's service offering to existing customers and the processing and recycling of scrap metal fits well with the Trust's long term strategic objectives" states John Thompson, HAZCO's CEO.

Bought Deal Financing

Today the Trust has entered into an agreement to sell, to a syndicate of Canadian underwriters, 6,258,503 subscription receipts at $36.75 each to raise gross proceeds of $230,000,000 on a bought deal basis. CCS has granted the underwriters an option, exercisable in whole or in part prior to closing, to purchase up to an additional 544,218 subscription receipts at the same offering price. Should the underwriters' option be fully exercised, the total gross proceeds of the financing will be $250,000,000. The subscription receipts will be exchangeable into CCS Trust Units on a one-for-one basis, conditional upon the closing of the Grizzly Acquisition.

The underwriting syndicate is led by Raymond James Ltd. and includes TD Securities Inc., BMO Nesbitt Burns Inc., CIBC World Markets Inc., RBC Dominion Securities Inc., First Energy Capital Corp., National Bank Financial Inc., Sprott Securities Inc., and Orion Securities Inc.

The gross proceeds from the sale of the subscription receipts will be held in escrow. If the Grizzly Acquisition closes on or before May 24, 2006, the proceeds will be released to CCS to finance a portion of the acquisition. Purchasers of the subscription receipts will receive payments equivalent to the amount of any cash distributions paid or declared payable to unitholders of the Trust in respect of distribution record dates that occur between the closing of the equity offering and the closing of the Grizzly Acquisition, provided the subscription receipts are subsequently converted into Trust Units. However, if the Grizzly Acquisition fails to close by May 24, 2006, the escrow agent will return to the holders of subscription receipts the issue price and their pro rata entitlement to interest earned thereon, but no distribution equivalent payments will be made.

The offering of the subscription receipts is being made in Canada by means of a short-form prospectus and on a private placement basis to qualified institutional buyers in the United States pursuant to applicable exemptions.

This press release contains certain statements that are not historical in nature and are forward-looking statements. These forward-looking statements include statements relating to the Trust's plans, strategies, objectives, expectations, intentions and resources which are not guarantees as to the Trust's future results since there are inherent difficulties in predicting future results. When used throughout this press release, the words "anticipate," "expect," "project," "believe," "estimate," "forecast," "intends," and similar expressions identify forward-looking statements, which include statements relating to pending and proposed projects and business activities. Such statements are subject to certain risks, uncertainties and assumptions pertaining to operating performance, regulatory parameters, weather and economic conditions and, in the case of pending and proposed projects, risks relating to design and construction, regulatory processes, obtaining financing and performance of other parties, including partners, contractors and suppliers. Accordingly, actual results could differ materially from those expressed or implied in forward-looking statements.

CCS Income Trust is a recognized industry leader providing integrated and environmentally responsible solutions along with other complementary energy services. Headquartered in Calgary, Alberta, CCS provides a diverse number of services across four divisions. CCS Energy Services provides oilfield waste treatment, recovery and disposal. The second division, HAZCO Environmental Services provides integrated remediation, waste management and decommissioning solutions. The third division, Concord Well Servicing, manages well completions, workovers and abandonments utilizing a fleet of 53 service rigs (prior to the aforementioned acquisition). In 2004, CCS initiated its CCS Energy Marketing division which provides crude oil and condensate marketing services to CCS Energy Services and third parties.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. The securities offered have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold in the United States except in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable state securities laws.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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