Ember Resources Inc.
TSX : EBR

Ember Resources Inc.

April 19, 2011 19:58 ET

Ember Resources Inc. to Be Acquired by Brookfield Special Situations Group and ARC Financial Corp. Led Investor Group

CALGARY, ALBERTA--(Marketwire - April 19, 2011) -

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Ember Resources Inc. ("Ember") (TSX:EBR) announced today that it has entered into an arrangement agreement (the "Arrangement Agreement") with an investor group led by Brookfield Special Situations Group ("Brookfield") and funds that are part of the ARC Financial Corp. group ("ARC"), a current Ember shareholder, with participation by funds that are part of the KERN Partners Ltd. group ("KERN"), another current Ember shareholder, and certain members of Ember management ("Management Shareholders"). The Arrangement agreement has been entered into between Ember and ERI Acquisition Ltd. ("Acquireco"), a corporation controlled by Brookfield and ARC, with participation by KERN and the Management Shareholders, collectively, being the "On- Going Shareholders".

Pursuant to the Arrangement Agreement, Acquireco will acquire all of the issued and outstanding common shares (the "Common Shares") of Ember by way of a plan of arrangement under the Business Corporations Act (Alberta) (the "Arrangement") in a transaction valued at approximately CDN$125 million, including the assumption of net debt, liabilities and other obligations totaling approximately CDN$88 million and inclusive of the value of approximately 42.2% of the outstanding shares of Ember already held by the On-Going Shareholders.

Under the terms of the Arrangement Agreement, each Ember shareholder, other than On-Going Shareholders (the "Public Shareholders"), will receive CDN$0.50 in exchange for each Common Share, and each On-Going Shareholder will receive common shares of a corporation to be formed upon the amalgamation of Ember and Acquireco. The Arrangement represents a 10% premium to the weighted average trading price of the Common Shares for the 20 trading days ended April 18, 2011, a premium of approximately 11% over the closing price of the Common Shares on April 18, 2011 and a premium of approximately 45% over the closing price of the Common Shares prior to the announcement of Ember's strategic alternatives process on October 29, 2010.

In October, 2010 the Board of Directors of Ember (the "Ember Board") formed an independent committee (the "Independent Committee") to engage in a review of strategic alternatives and to conduct discussions with interested parties. These alternatives included, among other things, a possible rights offering or other form of recapitalization transaction, a potential merger or sale transaction of the Corporation as a whole and the sale of certain assets of the Corporation, or all or substantially all of the assets of the Corporation in one or more transactions. Throughout late 2010 and early 2011, the Independent Committee engaged in a review and evaluation of potential strategic alternatives involving Ember and its assets. Ember engaged Macquarie Capital Markets Canada Ltd. ("Macquarie") as its financial advisor to assist it in its review and evaluation of strategic alternatives. As part of this process, Macquarie made contact with a large number of companies and confidentiality agreements were entered into with 17 different entities. The proposed Arrangement with Acquireco resulted from Ember's strategic review process and has been unanimously recommended by the Independent Committee to the Ember Board.

The Ember Board (with interested directors abstaining), after receiving the unanimous recommendation of the Independent Committee, has unanimously determined that the Arrangement is fair to the Ember Public Shareholders and that the Arrangement is in the best interests of Ember and has unanimously approved the Arrangement and resolved to recommend that Ember shareholders vote in favour of the Arrangement. Macquarie, Ember's financial advisor, has provided the Independent Committee and the Ember Board with its opinion that, as of the date hereof, the consideration to be received by Ember's Public Shareholders (other than the On-Going Shareholders and any other "related parties", "interested parties" and "joint actors") pursuant to the Arrangement is fair, from a financial point of view to such Public Shareholders.

All of the members of the Ember Board and Ember's executive officers and the On-Going Shareholders, who collectively own approximately 42.2% of the outstanding Common Shares, have entered into lock-up agreements with Acquireco to vote their Common Shares in favour of the Arrangement.

In addition, Black Diamond Offshore Ltd., Double Black Diamond Offshore Ltd. and Carlson Capital, L.P. (the "Independent Shareholders"), who collectively own approximately 22.3% of the outstanding Common Shares, have also entered into a lock-up agreement and confirmed their intention to vote their Common Shares in favour of the Arrangement. The Independent Shareholders were involved in the negotiation of the consideration offered to Ember Public Shareholders and as such, Ember intends to rely on the "previous arm's length negotiations" exemption from the formal valuation requirements of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions.

The Independent Committee commented that over the past six months, a thorough review of strategic alternatives had been completed by the Ember Board, management and their outside advisors. It also noted that the Acquireco offer had been selected primarily as a result of the strong financial position of ARC and Brookfield and their corresponding ability to support Acquireco, the cash nature of the Arrangement and a high degree of deal certainty.

The Arrangement is subject to customary Toronto Stock Exchange, Court and regulatory approvals, including, but not limited to, the approval of at least 66 2/3% of the votes cast in person or by proxy at a special meeting of Ember's shareholders and the approval of a simple majority of votes cast by shareholders, other than the On-Going Shareholders and any other "related parties", "interested parties" and "joint actors". The Arrangement is also conditional upon Ember receiving the necessary consents and waivers of Ember's lenders. Ember is currently in discussions with a new lending group to replace current debt facilities due on April 29, 2011.

The special meeting of Ember shareholders is expected to be held in early June 2011. An information circular in connection with the Arrangement is expected be mailed to Ember shareholders in early May.

Under the Arrangement Agreement, Ember has agreed that it will not solicit or initiate any discussions concerning the pursuit of any other acquisition proposals. Ember has also agreed to pay a termination fee of CDN$6.5 million to Acquireco in certain circumstances. In addition, Acquireco has the right to match any competing superior proposal for Ember in the event such a proposal is made.

Following the Arrangement, the Common Shares will be de-listed from the TSX, and Ember will continue to be run by its current management team led by Mr. Doug Dafoe. Mr. Terry Meek, the current Chief Operating Officer of Ember, will not be remaining with Ember and intends to pursue other interests. The Ember Board and Ember wishes to thank Mr. Meek for his contributions to Ember over the past 6 years and success in his new ventures.

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements including anticipated timing of various matters relating to the completion of the transactions contemplated by the Arrangement Agreement. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual events to differ from those anticipated. These risks include, but are not limited to: the risks associated with the completion of the transactions contemplated by the Arrangement Agreement and the timing and receipt of required shareholder, court, regulatory and other approvals and consents. No assurances can be given that any of the events anticipated by the forward looking statements will transpire or occur. Except as required by law, Ember undertakes no obligation to update or revise any forward-looking statements.

Ember Resources Inc. is a resource company specializing in coalbed methane (CBM) with extensive land and resource holdings in Alberta, Canada. Ember's shares are traded on the Toronto Stock Exchange under the trading symbol "EBR".

Contact Information

  • Ember Resources Inc.
    Mr. Douglas A. Dafoe
    President & CEO
    403 270-0803
    403 270-2850

    Ember Resources Inc.
    Mr. Bruce Ryan
    Vice-President Finance & CFO
    403 270-0803
    403 270-2850