IPL Inc.
TSX : IPI.A

IPL Inc.

September 07, 2010 09:46 ET

IPL Announces Agreement to Privatize the Company for a Cash Consideration of $6.50 per Multiple Voting Share

SAINT-DAMIEN, QUEBEC--(Marketwire - Sept. 7, 2010) - As a result of a strategic review process announced on December 10, 2009, IPL Inc. (TSX:IPI.A) ("IPL"), one of North America's leading manufacturers of plastic products, is pleased to announce today that it has entered into a merger agreement (the "Merger Agreement") with Novacap and Fonds de solidarité FTQ (collectively, the "Purchasers") and certain of their affiliates, in order to effect an amalgamation of IPL with affiliates of the Purchasers (the "Amalgamation").

Pursuant to the Amalgamation, each holder (the "Shareholders") of multiple voting shares of IPL will receive one redeemable preferred share (an "Amalco Redeemable Preferred Share") of the amalgamated company ("Amalco") for each multiple voting share held immediately prior to the Amalgamation. Each Amalco Redeemable Preferred Share will immediately upon the Amalgamation be redeemed for $6.50 payable in cash by Amalco (the "Redemption Price"). The Redemption Price to be received by the Shareholders under the Amalgamation represents a premium of 28.50% to the volume weighted average trading price of the multiple voting shares on the TSX for the 20 days ending on September 3, 2010 and a premium of 62.9% over the closing price of $3.99 for the multiple voting shares on the TSX on December 9, 2009, being the trading day prior to the announcement of the strategic review process. The transaction, which values IPL's equity at approximately $94.2 million, will be implemented by way of an amalgamation under the Companies Act (Québec) and is subject to customary conditions precedent, including approval of the Amalgamation by the Shareholders and obtaining any required regulatory approvals.

Clément Métivier, Rémi Métivier and Michel Labadie and members of senior Management (namely, Serge Bragdon, Serge Mercier, Éric Doyon, Gaston Lacasse, Pierre Fradette, Marcel Riou and Michel Fillion (the "Senior Management Shareholders")) holding, in the aggregate, 6,913,968 multiple voting shares, representing approximately 47.71% of the currently outstanding multiple voting shares, have agreed, pursuant to support and voting agreements with the Purchasers, to irrevocably support and vote in favour of the Amalgamation. Pursuant to their support and voting agreements, such shareholders cannot agree to or contemplate any competing transaction until four months from the termination of the Merger Agreement in accordance with its terms.

In addition, Julien Métivier and François Béchard holding, in the aggregate, 2,887,656 multiple voting shares, representing approximately 19.93% of the currently outstanding multiple voting shares, have agreed, pursuant to support and voting agreements with the Purchasers, to support and vote in favour of the Amalgamation. Pursuant to their support and voting agreements, such shareholders cannot agree to or contemplate any competing transaction unless the Merger Agreement is terminated or if the board of directors of IPL (the "Board") approves or recommends or publicly proposes to or publicly states that it intends to approve or recommend another acquisition proposal.

As part of the Amalgamation, Senior Management Shareholders who hold options to purchase subordinate voting shares of IPL have agreed to reinvest the net proceeds relating to the cancellation of certain of their options as part of the Amalgamation in debentures of the parent company of Amalco and exchange the balance of their options having an exercise price which is less than $6.50 for options to purchase common shares of Amalco having a value equivalent to the value of their IPL options. All options having an exercise price which is greater than $6.50 shall be cancelled as part of the Amalgamation.

The Amalgamation was considered at length by the Board and was approved unanimously thereby (with Messrs. Julien Métivier, Rémi Métivier, Clément Métivier, Serge Bragdon, Michel Labadie and François Béchard abstaining in light of the fact that such directors have entered into voting and support agreements with the Purchasers) following the report and a favourable unanimous recommendation of the strategic review committee (the "Special Committee") comprised of three independent members of the Board, namely Pierre Racine (Chair), Alain Michel and Jean-Yves Leblanc. In doing so, the Board determined that the Amalgamation is fair to the Shareholders other than Shareholders who have entered into voting support agreements (the "Public Shareholders"), and in the best interests of IPL, and authorized the submission of the Amalgamation to Shareholders for their approval. The Board has also determined unanimously (with interested directors abstaining) to recommend to the Public Shareholders that they vote in favour of the Amalgamation.

In making their respective determinations, the Board and the Special Committee considered, among other things, a fairness opinion from KPMG Corporate Finance Inc. to the effect that, as of September 7, 2010 and based upon and subject to the limitations, assumptions and qualifications contained therein, the Redemption Price is fair, from a financial point of view, to the Public Shareholders. A copy of the fairness opinion will be included in the management information circular that will be sent to the Shareholders in connection with the special meeting of Shareholders to consider the Amalgamation which is expected to take place in October, 2010. Copies of the management information circular, the Merger Agreement, the voting support agreements and certain related documents will be filed with Canadian securities regulators and will be available on SEDAR at www.sedar.com as part of IPL public filings.

Furthermore, the Board considered the following reasons for its recommendation:

Significant Premium

The Redemption Price of the Amalco Redeemable Preferred Shares to be received by Shareholders under the Amalgamation represents a premium of 28.50% to the volume weighted average trading price of the multiple voting shares on the TSX for the 20 days ending on September 3, 2010 and a premium of 62.9% over the closing price of $3.99 for the multiple voting shares on the TSX on December 9, 2010 being the trading day prior to the announcement by IPL of the strategic review process.

Extensive Review Process

The extensive strategic review conducted by the Special Committee involved a broad range of potential strategic and financial buyers and was part of the public domain since the issue of the press release by IPL on December 10, 2009. No other formal offer to purchase the multiple voting shares were received by the Special Committee or Ernst & Young Orenda Corporate Finance Inc., financial advisors to the Special Committee, subsequent to the public announcement.

All-Cash Consideration

The Amalco Redeemable Preferred Shares to be received by Shareholders will be immediately redeemable for an all-cash consideration of $6.50 per share, which will permit Shareholders to realize promptly a fair value for their multiple voting shares without being subject to risks inherent in IPL's business plan or market risks inherent in non-cash offers.

Shareholder Approval

In addition to the Shareholder approval required by the Companies Act (Quebec), the special resolution of the Shareholders confirming the by-law relating to the Amalgamation (the "Amalgamation Resolution") must also be approved by a majority of the votes cast by the Shareholders other than the Senior Management Shareholders.

Strong Support from Supporting Shareholders

Clément Métivier, Rémi Métivier, Julien Métivier, Michel Labadie, François Béchard and the Senior Management Shareholders have expressed their intention, pursuant to support and voting agreements (the "Voting Agreements"), to vote in favour of the Amalgamation.

Reasonableness of the Merger Agreement

The terms and conditions of the Merger Agreement were reviewed by the members of the Special Committee in consultation with its legal advisors and were determined to be fair and reasonable in the particular circumstances of the Amalgamation. Such terms and conditions are the results of arm's length negotiations between the Special Committee and the Purchasers.

Low Execution Risk

There are no material competition or other regulatory issues which are expected to arise in connection with the Amalgamation and prevent its completion, and all required regulatory clearances and approvals are expected to be obtained.

Ability to Respond to Superior Proposals

Under the Merger Agreement, the Board maintains the ability to consider and respond, in certain circumstances and in accordance with its fiduciary duties, to unsolicited proposals that would be more favourable to Shareholders from a financial point of view than the Amalgamation. The termination fee payable to the Purchasers in certain circumstances involving a superior proposal is, in the Board's judgment, reasonable in the context of break-up fees negotiated in other transactions and the particular circumstances of the Amalgamation. In the event the Board approves or recommends or publicly proposes to or publicly states that it intends to approve or recommend another acquisition proposal, the Voting Agreements with Julien Métivier and François Béchard would immediately terminate.

IPL has agreed not to solicit competing acquisition proposals but has retained the ability to consider a competing acquisition proposal not solicited by it which the Board believes constitutes or could reasonably be expected to lead to a superior proposal and to make a change of recommendation in the event of a superior proposal, subject to the Purchaser's right to match, and payment of a break-up fee of $4,500,000.

The requisite approval for the Amalgamation Resolution will be: (i) 66â…”% of the votes cast on the Amalgamation Resolution by the Shareholders, and (ii) a simple majority of the votes cast on the Amalgamation Resolution by the Shareholders, excluding the Senior Management Shareholders and any other interested parties, and certain of their related parties and joint actors, if any (within the meaning of, and as provided by, Section 8.1 of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Specific Transactions), in each case present in person or by proxy and entitled to vote at the special meeting of Shareholders.

Ernst & Young Orenda Corporate Finance Inc. is acting as financial advisor to the Special Committee and McCarthy Tétrault LLP is acting as legal counsel to IPL and the Special Committee. Fasken Martineau DuMoulin LLP is acting as legal counsel to the Purchasers.

Subject to receiving the required Shareholder and regulatory approvals and the satisfaction of the other customary conditions, it is anticipated that the Amalgamation, if approved by the Shareholders, will be completed shortly after the special meeting of Shareholders.

About IPL

IPL Inc. is one of the leading North American producers of moulded plastic products through injection and extrusion for various industrial manufacturing sectors. IPL employs close to 900 people in its four plants located in Saint-Damien, Saint-Lazare and Lawrenceville (Québec), and Edmundston (New Brunswick). The Company manufactures and markets over 400 products for the packaging, materials handling and environment sectors. IPL also provides highly technical value-added custom moulding services for the transport industry, as well as for various industrial uses. Further information about IPL is available at www.ipl-plastics.com.

About Novacap

With over $750 million in assets under management, Novacap is one of Canada's leading private equity and venture capital firms. Since 1981, its partnership strategy has helped over 50 companies accelerate growth and maximize value. Novacap is one of North America's top private equity firms, with first-quartile returns in North America. Further information about Novacap is available at www.novacap.ca.

About the Fonds de solidarité FTQ

The Fonds de solidarité FTQ helps drive our economy. With net assets of $7.3 billion as at May 31, 2010, the Fund is a development capital investment fund that channels the savings of Quebecers into investments in all sectors of the economy to help further Québec's economic growth. The Fund is a partner, either directly or through its network members, in 2,052 companies. With its 577,511 owner-shareholders, it has helped, on its own or with other financial partners, to create, maintain and protect 180,934 jobs. For more information, visit www.fondsftq.com.

Forward-Looking Statements

Except for historical information provided herein, this press release contains "forward-looking statements" within the meaning of the applicable securities legislation regarding the proposal to privatize IPL, including the statement regarding the terms of the proposed transaction. Therefore, readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of IPL to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements in this press release. These risks and uncertainties include, but are not limited to, the satisfaction of the conditions to consummate the Amalgamation, including the approval of the Amalgamation Resolution by the Shareholders, the occurrence of any event, change or other circumstances that could give rise to termination of the Merger Agreement, a delay in the consummation of the Amalgamation or failure to complete the Amalgamation for any other reason, the amount of the costs, fees, expenses and charges related to the Amalgamation, and the risks associated with general economic conditions. The forward-looking statements in this press release are made as of the date of this press release and, except as required by law, IPL disclaims any obligation to update or revise publicly any forward-looking statements, whether as a result of new information or future events.

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