Drive Products Income Fund

Drive Products Income Fund

September 17, 2010 13:16 ET

Drive Products Enters into Letter of Intent For Privatization Transaction

TORONTO, ONTARIO--(Marketwire - Sept. 17, 2010) - Drive Products Income Fund (the "Fund") (TSX:DPI.UN) and 2256479 Ontario Inc. (the "Offeror"), a company controlled by Greg Edmonds, Chief Executive Officer of the Fund and Russell Bilyk, President of Drive Products, the operating partnership owned by the Fund, announced today that they have entered into a letter of intent (the "Letter of Intent") under which the Offeror has expressed its intent to make an offer to acquire all of the outstanding units ("Units") of the Fund not currently owned or controlled, directly or indirectly, by Messrs. Edmonds and Bilyk for cash at a price of $2.50 per Unit (the "Offer"). The Offer will be made by way of a take-over bid that is expected to be mailed to unitholders of the Fund on or before October 8, 2010. The transaction is expected to be completed on or about November 15, 2010.

The $2.50 per Unit cash consideration represents a 92% premium over the closing price of the Units on September 15, 2010, the last day of trades prior to public announcement of the Offer and a 72% premium over the volume weighted average price of the Units over the last 20 trading days.

A take-over bid circular containing the terms of the Offer is expected to be mailed to unitholders as is a Trustees' circular describing the background and negotiations leading up to the Offer. Once mailed, these documents will also be available on SEDAR at The Offer will be subject to customary conditions, including the tender to the Offer of a sufficient number of Units of the Fund that will result in the Offeror, together with its affiliates, owning at least 66 2/3% of the outstanding Units of the Fund. Messrs. Edmonds and Bilyk together own and/or control, directly or indirectly, approximately 8% of the currently outstanding Units and 97% of the Class B limited partnership units of Drive Products Limited Partnership that are exchangeable for Units and together with the Units currently owned or controlled by Messrs Edmonds and Bilyk represent 51% of the Units on a fully diluted basis. If the Offer is successful, the Offeror intends to proceed with a second stage transaction that will result in Messrs Edmonds and Bilyk beneficially owning 100% of the Units.

In connection with the Offer, the Offeror has entered into lock-up agreements with unitholders of the Fund pursuant to which such unitholders, who control approximately 41% of the currently outstanding Units and approximately 21% of the voting securities of the Fund, have agreed to tender to the Offer all of the Units under their control.

The Board of Trustees, all of whom are independent of the Offeror, has commissioned a fairness opinion with respect to the proposed transaction. If the offer price is supported by the fairness opinion, it is expected that the Board of Trustees will enter into a definitive support agreement with the Offeror and recommend that unitholders tender their Units to the Offer. 

The Letter of Intent is subject to certain conditions and completion of definitive documentation. There can be no assurance that the Offer will be consummated on the proposed terms or timetable or at all.

The transaction is subject to the receipt of applicable approvals and other customary closing conditions and supersedes the corporate conversion transaction contemplated by the Fund and discussed in recent communications with unitholders of the Fund.

About Drive Products Income Fund

Drive Products Income Fund holds a 52% indirect interest in Drive Products. Founded in 1983, Drive Products is a Canadian leader in the design and installation of systems solutions that transform a conventional new truck chassis into a specialized vehicle that meets a customer's technical and performance requirements. To achieve this, Drive Products offers a wide variety of products such as power take-offs, hydraulic pumps, motors and coolers, winches, cables and controls, drivelines, blowers and compressors, hoses and fittings, custom consoles, snowplows, spreaders and electronic spreader controls, from leading international manufacturers, in many instances as the sole distributor in Canada.

Cautionary Statement Regarding Forward-looking Information

This press release contains forward-looking information (as defined in the Securities Act (Ontario)) and forward-looking statements (as defined in the United States Securities Exchange Act of 1934) (collectively referred to herein as "forward-looking information" or "forward-looking statements"). Forward-looking statements include all statements that are predictive in nature or that depend on future events or conditions. Forward-looking information is typically identified by words such as "may", "will", "intend", "should", "expect", "believe", "plan", "anticipate", "estimate", "predict", "potential", "continue" or the negative of these terms or other similar terminology. All statements in this press release, other than statements of historical fact, are forward-looking statements. Specifically, this press release contains forward-looking statements regarding the anticipated support agreement between the Offeror and the Fund, the mailing date for the Offer and circular by the Offeror and the Trustee circular by the Board of Trustees and the expected completion date of the Offer. Forward-looking information should not be read as a guarantee of future performance or results. Investors should not rely unduly on forward-looking information as a number of factors could cause actual results to differ materially from the results discussed in the forward-looking information. Although the forward-looking information contained in this press release is based upon what management believes are reasonable assumptions, neither the Fund, Gregory Edmonds, Russell Bilyk nor 2256479 Ontario Inc. can assure investors that actual results will be consistent with results anticipated in such forward-looking information.

The forward-looking information is provided as of the date of this press release and none of the Fund, Gregory Edmonds, Russell Bilyk nor 2256479 Ontario Inc. assumes any obligation to update or revise the forward-looking information to reflect new events or circumstances except as required by applicable law.

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