Crius Energy Trust
TSX : KWH.UN

Crius Energy Trust

May 17, 2016 17:10 ET

Crius Energy Trust Will Initiate a Tender Offer to Acquire Remaining Interest in Crius Energy, LLC

Announces C$63 Million Bought Deal Offering of Subscription Receipts

TORONTO, ONTARIO--(Marketwired - May 17, 2016) -

NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE SERVICES

Crius Energy Trust ("Crius" or the "Trust") (TSX:KWH.UN) is pleased to announce that the Trust and Crius Energy Corporation, an indirect wholly-owned subsidiary of the Trust, will initiate a tender offer (the "Tender Offer") to purchase all of the memberships units (the "LLC Units") of Crius Energy, LLC (the "Company") not already owned, directly or indirectly, by the Trust (the "Remaining LLC Acquisition").

Each holder of LLC Units (each, a "Seller") who validly tenders all but not less than all of their LLC Units to the Tender Offer will receive, in exchange for each LLC Unit, a buy-out payment (the "Buy-Out Payment") comprised of (i) 0.766 trust units of the Trust (the "Unit Portion"), and (ii) C$2.93 (the "Cash Portion"), representing an implied value of C$9.74 per LLC Unit and a total of C$189.4 million assuming all Sellers validly tender their LLC Units to the Tender Offer.

TRANSACTION HIGHLIGHTS

  • Purchase of LLC Units represents a 5% discount to market-implied value, based on a 20-day VWAP
  • Supported by significant holders of LLC Units, who have entered into binding commitments to tender all of their LLC Units to the Tender Offer
  • Structured to be non-dilutive to existing Unitholders (as defined herein)
  • Funded through bought deal public offering of Subscription Receipts (as defined herein) to satisfy the Cash Portion of the Buy-Out Payment
  • Enhanced scale and profile on capital markets
  • Simplified organizational structure
  • Expected to generate administrative cost savings
  • Expected to have no material impact on the Trust's distribution policy, payout ratio or net after-tax distributions to Unitholders

Remaining LLC Acquisition

At present, the Trust indirectly owns 14,716,582 LLC Units, representing an approximate 43.1% interest in the Company. Pursuant to the Remaining LLC Acquisition, the Trust intends to acquire, directly or indirectly, an additional 19,458,942 LLC Units, following which, if successful, the Trust will own, directly or indirectly, an aggregate of 34,175,524 LLC Units, representing a 100% interest in the Company. In connection with the Tender Offer, the Trust has entered into sale of interest agreements (the "Sale of Interest Agreements") with holders of an aggregate of 12,807,733 LLC Units (approximately 37.4% of the outstanding LLC Units) pursuant to which such holders have agreed to tender all of such LLC Units into the Tender Offer.

The issuance of units of the Trust ("Units") to satisfy the Unit Portion of the aggregate Buy-Out Payment under the Remaining LLC Acquisition will require the approval of at least 50% of the votes cast by holders of Units at the annual and special meeting of the unitholders of the Trust (the "Unitholders") expected to take place on June 20, 2016 (the "Meeting"). The independent directors of Crius Energy Administrator Inc. (the "Board"), in its role as administrator for and on behalf of the Trust, has unanimously approved the Remaining LLC Acquisition and recommends that Unitholders vote in favour of the issuance of Units in connection with the Remaining LLC Acquisition.

"We are very pleased to be moving forward with this transaction which will take the Trust's ownership position in the Company to 100% on a non-dilutive basis", commented David Kerr, Chairman of the Board "The transaction greatly simplifies the Trust's structure and will improve our market capitalization and trading liquidity, as well as enhance our access to the capital markets, which will benefit investors as we continue to progress with our growth strategy."

Desjardins Capital Markets acted as exclusive financial advisor to Crius in the context of the transaction.

Bought Deal Offering of Subscription Receipts

In conjunction with the Remaining LLC Acquisition, Crius has also entered into an agreement with Desjardins Capital Markets ("Desjardins"), Scotiabank ("Scotiabank") and RBC Capital Markets ("RBC") on behalf of a syndicate of underwriters (collectively, the "Underwriters"), pursuant to which the Underwriters have agreed to purchase from Crius and sell to the public 7,462,000 subscription receipts of the Trust ("Subscription Receipts") at a price of C$8.45 per Subscription Receipt (the "Offering Price") for total gross proceeds of C$63,053,900 (the "Offering"). In addition, the Trust has also granted the Underwriters an option (the "Over-Allotment Option") to purchase up to an additional 1,119,300 Subscription Receipts (the "Additional Subscription Receipts") at the Offering Price per Additional Subscription Receipt, exercisable in whole or in part, at any time up to 30 days following the closing of the Offering. If the Over-Allotment Option is exercised in its entirety, then the aggregate gross proceeds of the Offering will be C$72,511,985. The Underwriters will receive a cash commission equal to 5.0% of the gross proceeds of the Offering (the "Underwriters' Fee").

Each Subscription Receipt will entitle the holder thereof to receive upon exercise, without further consideration or action on the part of the holder thereof, one Unit. The Subscription Receipts shall be deemed to be exercised by the holders thereof at 4:59 p.m. (Toronto time) on the date upon which the Release Conditions (as defined herein) are satisfied, provided that such conditions have been satisfied at or prior to 5:00 p.m. (Toronto time) on July 29, 2016 (the "Termination Time"). In the event that (a) the Release Conditions are not satisfied at or prior to the Termination Time, (b) the Trust has advised the Underwriters in writing that the Sale of Interest Agreements have been terminated or that it does not intend to proceed with the Remaining LLC Acquisition, or (c) the Trust has formally announced to the public by way of press release that it does not intend to proceed with the Remaining LLC Acquisition, (each a "Termination Event"), the Subscription Receipts shall be cancelled and each holder of a Subscription Receipt shall receive from the Escrow Agent (as defined herein), and the Trust where applicable, an amount in cash equal to the holder's aggregate Offering Price, plus the holder's pro rata entitlement to the interest earned or income generated, if any, on the Escrowed Funds (as defined herein) between the Closing Date (as defined herein) and the date of the Termination Event, less any applicable withholding tax.

The Offering is expected to close on or about June 7, 2016 (the "Closing Date"), subject to all required approvals being obtained, including that of the Toronto Stock Exchange (the "TSX"). On the closing of the Offering, the gross proceeds from the Offering, less an amount equal to: (i) 50% of the Underwriters' Fee; and (ii) the costs and expenses of the Underwriters payable by the Trust, (collectively, the "Escrowed Funds") will be deposited in escrow and held by a Canadian trust company or other escrow agent (the "Escrow Agent") and invested in short-term obligations of, or guaranteed by, the Government of Canada (or other permitted investments) until the earlier of: (i) the satisfaction of the Release Conditions; and (ii) a Termination Event. Provided the Release Conditions are satisfied, the Escrowed Funds will be released to the Trust (along with any accrued interest thereon).

The term "Release Conditions" means the satisfaction of each of the following:

(a) the completion, satisfaction or, subject to the prior approval of the co-lead Underwriters, waiver of all conditions precedent to the Remaining LLC Acquisition, other than the release of the Escrowed Funds;

(b) the receipt of all necessary third party, unitholder, regulatory and stock exchange approvals, including listing of the Subscription Receipts and the Units to be issued from treasury upon exercise of the Subscription Receipts, including the Additional Subscription Receipts, on the TSX, subject only to customary listing conditions.

The Trust intends to use the net proceeds of the Offering to fund, directly or indirectly, the aggregate Cash Portion of the Buy-Out Payment payable in connection with the Tender Offer, provided that the Release Conditions have been satisfied on or before the Termination Time. To the extent that the net proceeds from the Offering, including upon the exercise of the Over-Allotment Option, if applicable, exceed the aggregate cash required to fund the aggregate Cash Portion of the Buy-Out Payment payable in connection with the Tender Offer, the remaining funds are expected to be used by the Trust to pay the expenses of the offering and for general corporate purposes.

The Offering will be made by way of a short form prospectus to be filed in all provinces in Canada, other than Québec, and in the United States on a private placement basis pursuant to an exemption from the registration requirements of the United States Securities Act of 1933, as amended, (the "1933 Act") as well as certain offshore jurisdictions as agreed between the Trust and the Underwriters.

Voting and Lock-Up Agreements

Each Seller tendering his, her or its LLC Units to the Tender Offer shall enter into a lock-up agreement whereby such Seller, together with any other person who, immediately prior to the closing of the Remaining LLC Acquisition, holds LLC Units and is determined by the Trust to be: (i) acting jointly or in concert with the Seller, and/or (ii) under common control, or with a common manager or management with the Seller, will agree to a restriction on resale in relation to the Units received as part of the Remaining LLC Acquisition (the "Relevant Units"). Any Seller beneficially owning or exercising control or direction over, directly or indirectly: (i) 1% or less of the issued and outstanding Units, on a non-diluted basis, after giving effect to this Remaining LLC Acquisition, will agree to a six-month lock-up period in relation to the Relevant Units, and (ii) more than 1% of the issued and outstanding Units, on a non-diluted basis, after giving effect to the Remaining LLC Acquisition, will agree to a twenty-four-month lock-up period in relation to the Relevant Units, with such Units being released in 25% increments, every six months starting on the six month anniversary of the completion of the Remaining LLC Acquisition.

In addition, any Seller, together with (i) any person acting jointly or in concert with the Seller; or (ii) any person under common control, or with a common manager or management with the Seller, directly or indirectly, beneficially owning or exercising control or direction over 10% or more of the issued and outstanding Units, on a non-diluted basis, after giving effect to the Remaining LLC Acquisition, will enter into an agreement to vote, or cause to be voted, all Units owned, or over which voting control is exercised, in such proportion and in such manner as other Unitholders.

This news release does not constitute an offer of securities for sale in the United States. The securities being offered have not been, nor will they be, registered under the 1933 Act, and such securities may not be offered or sold within the United States absent U.S. registration or an applicable exemption from U.S. registration requirements.

About Crius

The Trust was established to provide investors with a distribution-producing investment through its indirect ownership interest (currently 43.1%) in the Company. With over 900,000 residential customer equivalents, the Company is a comprehensive energy solutions partner that provides electricity, natural gas and solar products to residential and commercial customers. The Company connects with energy customers through an innovative family-of-brands strategy and multi-channel marketing approach. This unique combination creates multiple access points to a broad suite of energy products and services that make it easier for consumers to make informed decisions about their energy needs. The Company currently sells energy products in 17 states and the District of Columbia with plans to continue expanding its geographic reach.

The Trust intends to continue to qualify as a "mutual fund trust" under the Income Tax Act (Canada) (the "Tax Act"). The Trust will not be a "SIFT trust" (as defined in the Tax Act), provided that the Trust complies at all times with its investment restriction which precludes the Trust from holding any "non-portfolio property" (as defined in the Tax Act). Material information pertaining to the Crius may be found on SEDAR under the Trust's issuer profile at www.sedar.com or on the Trust's website at www.criusenergytrust.ca.

Caution Regarding Forward-Looking Statements

This news release contains forward-looking statements and forward-looking information (collectively, "Forward-Looking Statements") that involve substantial known and unknown risks and uncertainties, most of which are beyond the control of Crius, including, without limitation, those risks described in the annual information form of the Trust for the fiscal year ended December 31, 2015, dated March 15, 2016 (under the heading "Risk Factors") and in the MD&A of the Trust for the three month period ended March 31, 2016. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words of phrases such as "will likely result", "are expected to", "expects", "will continue", "is anticipated", "anticipates", "believes", "estimated", "intends", "plans", "forecast", "projection" and "outlook") are not historical facts and may be Forward-Looking Statements which involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such Forward-Looking Statements. Forward-Looking Statements in this news release include, but are not limited to, the anticipated benefits of the Remaining LLC Acquisition to the Trust, Unitholders and Sellers; the Buy-Out Payment and value of the Unit Portion being delivered to the Sellers upon the closing, if at all, of the Remaining LLC Acquisition; the timing and ability of the Trust to satisfy the Release Conditions, if at all; the timing and ability of the Trust to complete the Remaining LLC Acquisition or the Offering; the timing and receipt of required approvals for the Remaining LLC Acquisition and the Offering; the anticipated timing to hold the Meeting; the amount to be returned to holders of Subscription Receipts should a Termination Event occur and the Trust's objectives and status as a "mutual fund trust" and not a "SIFT trust".

These Forward-Looking Statements are based on reasonable assumptions and estimates of management of the Trust at the time such statements were made. Actual future results may differ materially as Forward-Looking Statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Trust to materially differ from any future results, performance or achievements expressed or implied by such Forward-Looking Statements. Crius cautions investors of the Trust's securities about important factors that could cause Crius' actual results to differ materially from those projected in any Forward-Looking Statements included in this news release. No assurance can be given that the expectations set out in this news release will prove to be correct and accordingly, prospective investors should not place undue reliance on these Forward-Looking Statements. These statements speak only as of the date of this news release and Crius does not assume any obligation to update or revise them to reflect new events or circumstances, except as required by law.

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