Sherritt International Corporation

Sherritt International Corporation

March 18, 2008 08:43 ET

Sherritt Announces Intention to Acquire Royal Utilities Income Fund and $400 Million Bought Deal Share Issue

TORONTO, ONTARIO--(Marketwire - March 18, 2008) -


Sherritt International Corporation ("Sherritt") (TSX:S) announced today that it has informed the Board of Trustees of Royal Utilities Income Fund ("Royal Utilities") that it intends to make an offer to purchase all of the issued and outstanding Royal Utilities trust units ("Units") that it does not already own.

Sherritt and Teachers' each owns and controls 40,255,342 Units, representing approximately 41.2% of the outstanding Units for each of Sherritt and Teachers'. The balance of the Units, representing approximately 17.6%, is widely held.

Under the proposed transaction, Royal Utilities unitholders would receive $12.25 per Unit, consisting of, at the unitholder's option, cash, 0.8033 of a Sherritt common share, or a combination of cash and Sherritt common shares, subject to a maximum of $225 million to be paid in cash. Assuming the full amount of cash is paid, the aggregate number of common shares issued by Sherritt would be approximately 31.4 million.

Teachers' and Sherritt have entered into a lock-up agreement pursuant to which Teachers' has agreed to tender its 40,255,342 Units to the proposed transaction.

Management of Sherritt believes that this proposed transaction is an important step in Sherritt's growth strategy as a premier, growth-oriented natural resource company. The acquisition of Royal Utilities internalizes significant cash flow which will allow Sherritt to invest in growth projects in its Coal and other segments.

The offer would provide the following benefits to Royal Utilities unitholders:

- a 15.5% premium to the 20-day volume weighted average Unit price;

- opportunity to shift investment to Sherritt, with continued exposure to coal, but with a higher growth profile

- privatization offers a platform to pursue superior longer-term returns on Sherritt's growth projects.

The acquisition would provide the following benefits to Sherritt shareholders:

- internalization of significant operating cash flow, allowing the company to reinvest in growth projects

- management expects the transaction to be accretive to cash flow per share in 2008 and beyond

- strengthening of Sherritt's balance sheet.

Sherritt is a proven operating company with a track record of excellent performance, marked by combined revenues of $1,845 million and combined EBITDA of $893 million in 2007. Sherritt's expansion projects in base metals and energy build on world-class reserves and unit-operating cost positions in resources. With solid long-term market fundamentals in nickel, cobalt, oil and coal, significant untapped opportunities in coal and oil, and a conservative balance sheet with surplus liquidity, management expects Sherritt to meet its growth targets.

If an offer is commenced, that offer will be subject to certain conditions to be outlined in the definitive offer documentation. There can be no assurance that an offer will be made or completed and any such offer by Sherritt will be made only by a formal offer and take-over bid circular. This press release does not constitute an offer for or solicitation of Units in any jurisdiction. Any such solicitation would be made only by formal offer and only in those jurisdictions where Sherritt may legally do so.

Sherritt has been advised by Mr. Ken McCready, lead trustee of Royal Utilities, that a special committee of Royal Utilities has been established and that the special committee will respond to Sherritt's offer in a timely manner.

Sherritt was advised by National Bank Financial Inc.

Sherritt also announced today that it has entered into an agreement with a syndicate of underwriters, co-led by GMP Securities L.P. and National Bank Financial Inc. and including Scotia Capital Inc., for the purchase by the underwriters of 26.25 million common shares of Sherritt at a price of $15.25 per common share, for total gross proceeds of approximately $400 million.

Sherritt has also granted the underwriters an over-allotment option, exercisable in whole or in part at any time up to 30 days after closing, to purchase up to an additional 3,937,500 common shares at the same offering price.

The offering is expected to close on or about March 31, 2008. The offering is being made under Sherritt's base shelf prospectus dated December 18, 2007 and will be described in a prospectus supplement.

The net proceeds from the offering will be used by Sherritt for general corporate purposes and growth capital expenditures, in each case in Canada and Madagascar.

This press release shall not constitute an offer to sell, or the solicitation of an offer to buy, any securities in any jurisdiction. The securities being offered have not been and will not be registered under the U.S. Securities Act of 1933 and state securities laws. Accordingly, the securities may not be offered or sold to U.S. persons except pursuant to applicable exemptions from registration requirements.

Conference Call and Webcast Information

The investment community is invited to participate in the conference call and webcast as follows:

Tuesday, March 18, 2008, at 10:00 a.m. (EDT)

Toll Free: 1-800-594-3615

The live webcast and investor presentation can be accessed by visiting

The conference call will be available for replay until Friday, April 18, 2008, by calling 1-877-289-8525, pin number 21266714#. The archival webcast of the presentation can be accessed via the Internet by visiting

About Sherritt

Sherritt is a diversified resource company that produces thermal coal, nickel, cobalt, oil and gas and electricity. It also licenses its proprietary technologies to other metals companies. A low-cost operator across all segments, Sherritt's success is built on utilizing innovative technologies and the breadth of its financial and operational expertise to increase productivity and profitability. Sherritt continues to explore opportunities to grow its $5.5 billion asset base through expansion of its existing businesses and strategic acquisitions. Sherritt's common shares are listed on the Toronto Stock Exchange under the symbol "S".

In addition to its significant nickel production, Sherritt operates and owns 41.2% of Royal Utilities Income Fund, the largest thermal coal producer in Canada. Sherritt currently produces over 30,000 barrels of oil equivalent per day and has 376 megawatts of power generation capacity.

Forward-looking Statements

This news release may contain forward-looking statements. Forward-looking statements generally can be identified by the use of statements that include words such as "believe", "expect", "anticipate", "intend", "plan", "likely", "will" or other similar words or phrases. These forward-looking statements are not based on historic facts, but rather on current expectations, assumptions and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that are beyond Sherritt's ability to control or predict. Sherritt does not intend, and does not assume any obligations, to update these forward-looking statements.

Contact Information