Thirdcoast Limited

May 30, 2012 16:39 ET

Thirdcoast's Response to Parrish & Heimbecker Offer

GODERICH, ONTARIO--(Marketwire - May 30, 2012) - Thirdcoast Limited ("Thirdcoast" or the "Company") announces today that its Board of Directors (the "Board") is considering the increased consideration offered pursuant to the unsolicited insider bid (the "Insider Bid") of Parrish & Heimbecker, Limited ("P&H") for all issued and outstanding common shares of the Company. The Independent Committee has engaged Scotiabank as its financial advisor to consider the Insider Bid and strategic alternatives which may increase the value received by shareholders of Thirdcoast in light of the Insider Bid.

P&H currently owns 86,608 common shares of Thirdcoast, which represents 28% of the issued and outstanding common shares of Thirdcoast. In addition, two of the directors of Thirdcoast are also directors of P&H, namely Messrs. Philip and Alan Heimbecker. As a result of the current significant ownership of Thirdcoast by P&H and the shared directorship of Messrs. Philip and Alan Heimbecker, the unsolicited offer is considered an "Insider Bid" pursuant to applicable securities legislation, which required the completion of the formal valuation before P&H could proceed with its bid. An Independent Committee of the board of directors of Thirdcoast has been formed which excludes Messrs. Philip and Alan Heimbecker.

Formal Valuation

National Bank Financial Inc. ("NBF") was engaged by the Independent Committee to complete the formal valuation. NBF determined that the fair market value of the common shares of Thirdcoast is in the range of $130 to $170 per share. As a result of reviewing the formal valuation, P&H increased its offer from $115 per share to $155 per share. In consultation with its financial advisor Scotiabank, the Independent Committee believes the formal valuation is very conservative for the following reasons: 1) NBF significantly reduced the forecasts provided by Thirdcoast management, which was disappointing given the management team's track record; 2) NBF used an abnormally high discount rate (WACC) that includes small company and company specific risk premiums which, when combined, are in excess of 10%; 3) The discounted cash flow model, which is ordinarily afforded the most weight when completing a valuation, was given less emphasis by NBF. Given Thirdcoast's history of producing strong cash flow, the discounted cash flow model provides a much greater valuation for Thirdcoast shares. Even using NBF's reduced projections and abnormally high discount rate, the discounted cash flow model provides a valuation range of $160 to $190 per share, with the bottom of the range being higher than P&H's increased offer of $155 per share; and 4) The public trading comparables and precedent transactions do not provide good comparisons to Thirdcoast, and yet these metrics were afforded greater weight than the discounted cash flow model.

Thirdcoast Adopts Shareholder Rights Plan

The Board has adopted a shareholder rights plan (the "Rights Plan") to allow the Board time to explore and develop strategic alternatives in the context of the Insider Bid. The Rights Plan also seeks to ensure the fair treatment of shareholders and to provide them with adequate time to properly assess any potential takeover bid or other alternative without undue pressure.

The Board has already taken concrete steps to solicit competing offers and evaluate strategic alternatives. The Board believes that the Rights Plan will allow this process to be conducted in a structured manner in order to get the best results for Thirdcoast's shareholders. The Board believes that the Rights Plan is in the best interest of Thirdcoast, its shareholders and other stakeholders.

The Board has authorized the issuance of one right in respect of each common share of the Company outstanding as of the close of business on May 30, 2012 and each share issued thereafter. The rights will become exercisable and a Flip-in Event will occur if a person, together with its affiliates, associates and joint actors, acquires beneficial ownership of common shares which, when aggregated with its current holdings, total 20% or more of the outstanding common shares (determined in the manner set out in the Rights Plan).

P&H is grandfathered under the Rights Plan and its beneficial ownership of more than 20% of the outstanding common shares as of today's date will not trigger a Flip-in Event. However, if subsequent to today, P&H becomes the owner of any common shares not beneficially owned by it as of the close of business on May 30, 2012 or if P&H enters into additional lock-up agreements with other shareholders, then a Flip-in Event will occur.

Upon the occurrence of a Flip-in Event, each right held by a person other than the acquiring person and its affiliates, associates and joint actors would, upon exercise, entitle the holder to purchase additional common shares at a substantial discount to the market price thereof at that time.

The Board has the discretion to defer the time at which the rights become exercisable and to waive the application of the Rights Plan and/or redeem the rights if the Board determines it is in the best interest of Thirdcoast to do so.

The Rights Plan permits the acquisition of control of Thirdcoast through a "permitted bid" under the terms of the Rights Plan, a competing permitted bid or negotiated transactions. A "permitted bid" is a bid that, among other things, is made to all holders of common shares, is open for a minimum of 60 days and is accepted by a majority of Thirdcoast's independent shareholders.

Strategic Alternatives

The Independent Committee has engaged Scotiabank to act as its financial advisor to assist in fully considering any other strategic alternatives available to Thirdcoast. The Independent Committee will update shareholders from time to time on any developments.

Financial Results for the Year Ending March 31, 2012

As part of the formal valuation process, National Bank has taken into consideration the management prepared unaudited financial statements for the year ending March 31, 2012. The audited financial statements will be completed in a few weeks, but to account for the unaudited figures having been incorporated in the formal valuation, the Company is providing the following preannouncement of those unaudited results.

Highlights for the Year Ending March 31, 2012

  • Revenue of $26.4 million
  • EBITDA of $5.9 million
  • Net Income of $7.6 million or $23.96 per share (includes 2012 tax provisions)
  • Cash balance, investments and insurance receivables totaling $16.5 million

Readers are cautioned that the above figures should not be relied upon as they remain subject to the completion of the audit for the year ending March 31, 2012.

About Thirdcoast Limited

Thirdcoast (formerly Goderich Elevators Limited) is a holding company for operations involved in the handling and processing of food grains and food ingredients shipped around the globe. The goal of the Company is to maximize customer and shareholder value through world class practices and continually strive for the highest levels of quality and customer care in the services and products it provides. Thirdcoast's operations are primarily carried out through its two main wholly-owned operating subsidiaries: Southpier Terminals and G.S. Dunn.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of applicable securities laws. These statements include, but are not limited to, Thirdcoast's future outlook, business strategy, plans, expectations, results or actions, or the assumptions underlying any of the foregoing. Forward-looking statements can generally be identified by words such as "may", "should", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", "outlook" and similar expressions. These statements are based on information currently available to Management and on the current assumptions, intentions, plans, expectations and estimates of Management regarding Thirdcoast's future growth, results of operations, performance, business prospects and opportunities and ability to attract and retain customers as well as the economic environment in which it operates. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors which could cause actual results of Thirdcoast to differ materially from the conclusion, forecast or projection stated in such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to: audited results for the year ending March 31, 2012 being different than the management prepared results included in the formal valuation; future actions by P&H in connection with its Insider Bid; the strategic alternatives being explored by the Company; general economic conditions; harvest volumes; elevator storage capacity; terminal elevator competition; and, other factors referenced in Thirdcoast's MD&A for the year ended March 31, 2011 and Thirdcoast's other continuous disclosure filings which are available on SEDAR at Readers should not place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this press release, and, except as required by applicable securities laws, Thirdcoast assumes no obligation to update or revise them to reflect new events or circumstances.

Contact Information

  • Thirdcoast Limited
    Don Henry