Cosmos Capital Inc.

July 20, 2009 07:29 ET

Cosmos Group Seeks to Acquire Cossette inc. for $4.95 per Share, Representing a 52.3% Premium to the Previous Closing Price

MONTREAL, QUEBEC--(Marketwire - July 20, 2009) - Cosmos Capital Inc. ("Cosmos Capital") announced today that it has submitted on behalf of a group of investors (the "Cosmos Group") a proposal to the Board of Directors of Cossette Inc. ("Cossette") to acquire all of the issued and outstanding subordinate voting shares of Cossette, including subordinate voting shares resulting from the conversion of all outstanding multiple voting shares, other than shares owned by the members of the Cosmos Group and their affiliates, at a price of $4.95 per share. This price represents a 52.3% premium over the previous closing price and a 45.7% premium over the average trading price of Cossette's subordinate voting shares on the TSX for the 30 trading days preceding this announcement. The text of the letter containing the proposal is attached is set below.

Cosmos Capital has entered into a lock-up agreement with Burgundy Asset Management Ltd. ("Burgundy") with respect to an offer as contemplated under the proposal. Burgundy owns 1,847,500 subordinate voting shares of Cossette, representing approximately 11.1% of Cossette's outstanding shares on a fully diluted basis. Under the terms of the lock-up agreement, Burgundy has irrevocably agreed that, if Cosmos Capital makes an offer of not less than $4.95 in cash per share, it will tender the shares it owns, or over which it exercises control or direction. Burgundy can terminate the lock-up agreement in only limited circumstances, including in the event of a superior offer that is not matched by Cosmos Capital.

The Cosmos Group currently includes Francois Duffar, former Vice Chair and President of Cossette who has 35 years of history with Cossette, as one of its founding partners, Georges Morin, former Senior Vice President of Cossette, Jean Monty, President of Libermont Inc., and Daniel Bernard, President of Provestis and current Chairman of Kingfisher plc. The Cosmos Group also includes a multi-billion dollar, international private equity firm. Cosmos Capital is a company controlled by Francois Duffar.

"We are seeking to work together with the Board of Directors and holders of multiple voting shares of Cossette to conclude a supported transaction that is compelling to the shareholders, clients and employees of Cossette," said Francois Duffar.

In making the announcement, Mr. Duffar stated that "all members of the Cosmos Group share a common understanding and vision for the future growth of Cossette. It is a vision driven by the needs of its clients, and the success of which rests on the extraordinary talent of its employees."

"Our objective is three fold", he said. "The truly international character of our shareholder group, with North American and European investors, will allow us to strengthen Cossette's positioning and presence in international markets. Secondly, we will welcome enthusiastically the continued participation of the existing senior management team and, indeed, European and North American entrepreneurs who will join the leadership of the company. And lastly, we will build upon Cossette's legacy as a highly client-centric organization in which creativity, efficiency and innovation are the hallmark of a more integrated offering of the Company's products and services."

Mr. Duffar added that "a reorganization of its resources and capital will lead to a more efficient and dynamic Cossette." Mr. Duffar also made clear that Cossette's head office would continue to be based in Quebec.

Genuity Capital Markets is acting as the exclusive financial advisor to the Cosmos Group in connection with the proposal. McCarthy Tetrault S.E.N.C.R.L., s.r.l. and Torys LLP are acting as legal advisors to the Cosmos Group.

The members of the Cosmos Group and their affiliates currently own 2,911,580 multiple voting shares and 205,733 subordinate voting shares, representing approximately 18.7% of Cossette's outstanding shares on a fully diluted basis. This announcement does not constitute an offer and there is no assurance that any offer will be made or completed. Any such offer will be made only by a formal offer and take-over bid circular.




Letter to Cossette Inc.

July 20, 2009

Mr. Claude Lessard
Chairman of the Board
Cossette Inc.
801 Grande Allee Ouest
Suite 200
Quebec, Quebec
G1S 1C1


Dear Claude:

Further to our discussions, I am pleased to set out the terms under which a group of investors led by Cosmos Capital Inc. (the "Cosmos Group") proposes to purchase all of the subordinate voting shares of Cossette Inc., including subordinate voting shares resulting from the conversion of all outstanding multiple voting shares, other than shares held by members of the Cosmos Group and their affiliates. In the interests of advancing these discussions, we have prepared the following non-binding proposal for consideration by Cossette's board of directors. We sincerely hope that we can work together to conclude a transaction supported by the board of directors of Cossette that is beneficial to the shareholders, clients and employees of Cossette, as well as the Cosmos Group.

The Cosmos Group currently includes Jean Monty, President of Libermont Inc.; Daniel Bernard, President of Provestis, a private investment firm owned by him based in Paris, France, and also current Chairman of Kingfisher plc.; Georges Morin, former Senior Vice-President of Cossette and myself. The Cosmos Group also includes an international private equity firm with billions of dollars of investible funds. Cosmos Capital Inc. is a company controlled by me.

1. Consideration and Transaction Structure. We propose to purchase by way of take-over bid all of the issued and outstanding subordinate voting shares of Cossette, including subordinate voting shares resulting from the conversion of all outstanding multiple voting shares, other than shares held by the Cosmos Group, at a price of C$4.95 per share, in cash. Our proposed offer represents a 45.7% premium over the average closing price of Cossette's subordinate voting shares on the TSX for the previous 30 trading days.

2. Conversion of Multiple Voting Shares. The offer would be conditional on the conversion of all of the outstanding multiple voting shares of Cossette into subordinate voting shares. As you are aware, due to Georges Morin and myself ceasing to be employees of Cossette, the multiple voting shares held by companies controlled by us will convert into subordinate voting shares within 90 days of the dates on which our respective employment ceased. Both Mr. Morin and I have committed not to sell our respective multiple voting shares. Following such conversions, the total number of outstanding multiple voting shares will be less than the minimum number of shares specified in the Trust Agreement dated June 18, 1999, below which all outstanding multiple voting shares are required to be converted into subordinate voting shares. As a result, all remaining outstanding multiple voting shares will also immediately convert into subordinate voting shares on October 16, 2009 in accordance with Section 8.3 of the Trust Agreement and Article 1502 of the Civil Code of Quebec. The making of our offer and our obligation to take up and pay for shares under it will be conditional on no action having been taken that, in the opinion of the Group, delays, prejudices or impairs the conversion of multiple voting shares into subordinate voting shares.

3. Insider Bid. As this proposed transaction constitutes an insider bid under applicable securities laws, we request that the board of directors immediately form an independent committee to consider our proposal and supervise the preparation of the formal valuation of Cossette's shares. Once you have selected the valuator, please contact us so that we may finalize the terms of the valuator's engagement.

4. Financing. We do not anticipate any difficulty with financing the proposed transaction and any definitive agreement to acquire Cossette will not be conditional on financing.

5. Due Diligence. While the making of our offer is subject to completion of customary due diligence for a transaction of this nature, we believe that with your full co-operation and willingness to commit the appropriate management and advisory resources, we can complete our due diligence on an expedited basis. As you know, both I and Georges Morin have knowledge of Cossette and its operations which may not be public. However, as a result of our confidentiality obligations to Cossette, we are not permitted to share that information with the other members of the Cosmos Group. In order to accelerate our due diligence review, we request that Cossette waive our respective confidentiality obligations with respect to other members of the Cosmos Group, subject to those other members entering into satisfactory confidentiality agreements with Cossette.

6. Definitive Documentation. We believe that definitive transaction documents could be drafted and negotiated in parallel with the completion of our due diligence. Assuming that we are able to begin our work immediately, we believe that we could be in a position to execute definitive documentation immediately following the completion of the formal valuation and our due diligence.

7. Conditions. Our offer will be subject to customary conditions, such as receipt of regulatory approvals, no material adverse change, absence of proceedings, and appropriate levels of shareholders support.

8. Support Agreement. Our proposal is based on the entering into of a mutually acceptable acquisition agreement which has been approved by and supported publicly by your board and which contains representations and warranties, conditions precedent and deal protections customary for transactions of this nature.

9. Lock-Up Agreement. We have entered into an agreement with Burgundy Asset Management Ltd., which owns or exercises control or direction over 1,847,500 subordinate voting shares of Cossette, representing approximately 11.1% of the shares on a fully-diluted basis. Burgundy has agreed to tender those shares to an offer by Cosmos Group, subject to certain conditions, including that the offer is $4.95 in cash per share. This lock-up agreement may be terminated by Burgundy only in limited circumstances.

10. Timing. Given the significant work required to meet the timing objectives outlined herein, we believe that we should execute a customary confidentiality agreement with Cossette and commence our due diligence as soon as possible.

11. Key Contacts. The Cosmos Group has retained Genuity Capital Markets, McCarthy Tetrault S.E.N.C.R.L., s.r.l. and Torys LLP to advise it in connection with the transaction. Should you have any questions concerning our proposal, I have included a list of the key contacts that can assist in answering your questions:



Francois Duffar
Cosmos Capital Inc.
Tel: (514) 866-7171
Fax: (514) 861 9813

Marc Fredette
Genuity Capital Markets
Tel: (514) 281-3240
Fax: (514) 281-3022

Iain C. Scott
McCarthy Tetrault S.E.N.C.R.L., s.r.l.
Tel: (514) 397-5697
Fax: (514) 875-6246

Kevin M. Morris
Torys LLP
Tel: (416) 865 7633
Fax: (416) 865 7380


12. Legal Obligations. Our proposal is for discussion purposes only and does not constitute a binding offer or proposal capable of being accepted, and is not an agreement to enter into any transaction. We reserve the right to amend or withdraw the proposal at any time. There will only be an agreement between you and us with respect to the subject matter of our proposal at such time as you and we sign a mutually agreeable definitive agreement to implement the proposal that has been approved by Cossette's board of directors and all of the members of the Cosmos Group.

13. Press Release. We intend to issue a press release July 20, 2009, prior to the opening of The Toronto Stock Exchange, announcing the submission of this proposal to the Board of Directors of Cossette. As a courtesy, I enclose a copy of our press release.

We believe that our proposal will be very favourably received by all of Cossette's stakeholders and that the proposed transaction will provide Cossette shareholders with the opportunity to recognize liquidity and a significant premium for their shares. Given the time and resources invested by the Cosmos Group to date, our non-binding proposal represents a very serious and credible offer.

I will be in touch with you shortly to discuss our proposal further and continue our dialogue. We look forward to working with you towards the successful consummation of this transaction.

Yours very truly,

Francois Duffar, President, Cosmos Capital Inc.

c. Members of the Board of Directors of Cossette Inc.


Cautionary Note:

This news release contains "forward-looking statements" regarding the proposal of the Cosmos Group to purchase all of the subordinate voting shares of Cossette including subordinate voting shares resulting from the conversion of all outstanding multiple voting shares (other than shares owned by members of the Cosmos Group and their affiliates), including statements regarding the terms and conditions of the proposed offer. Readers are cautioned not to place undue reliance on forward-looking statements. Actual results and developments may differ materially from those contemplated by these statements depending on, among others, the risks that the Cosmos Group will not proceed with a formal offer or its offer will be unsuccessful for any reason.

The forward-looking statements contained in this document are made as of the date of this document and the Cosmos Group does not undertake any obligation to update publicly or revise any of the forward-looking statements contained in this news release, whether as a result of new information, future events or otherwise, except as required by law. The forward-looking statements contained in this news release are expressly qualified by this cautionary note.

Legal Notice:

This news release does not constitute an offer for or solicitation of shares in any jurisdiction. Any such solicitation would be made only by formal offer and only in those jurisdictions where the Cosmos Group may legally do so. The issuance of this news release is not an admission that anyone named herein owns or controls any securities described herein or is a joint actor with another named entity (except as expressly disclosed).

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