Toromont Industries Ltd.

Toromont Industries Ltd.

November 08, 2010 18:32 ET

Toromont to Spin Off Enerflex Subsidiary to Shareholders

Transaction Creates Two Distinct Public Companies: One a Pure-Play Supplier of Natural Gas Production & Processing Equipment, the Other an Integrated Distributor of Caterpillar and Industrial Equipment

TORONTO, ONTARIO--(Marketwire - Nov. 8, 2010) - Toromont Industries Ltd. (TSX:TIH) today announced its Board of Directors has unanimously approved a proposal to spin off to its shareholders Enerflex Ltd., a market leading supplier of natural gas production & processing equipment, as a separate, publicly traded company. 

The spinoff is designed to enhance long term value for the shareholders of Toromont by separating its businesses into two distinct public companies. Each will be better able to pursue independent strategies and opportunities for growth.

"We believe this transaction will provide compelling long term value for our shareholders," said Robert M. Ogilvie, Chairman of the Board and Chief Executive Officer of Toromont. "Both companies will be leaders in their respective markets. This spinoff will position each for more robust growth and enhanced profitability."

"The combination of Enerflex with Toromont's legacy natural gas production & processing equipment business earlier in the year created a global leader," said Blair Goertzen, President of Enerflex. "Once this spinoff is complete we will be better equipped to compete in North American and international markets. As a public company, we will execute our growth strategy with a strong balance sheet and sharply focused management. Our ability to take advantage of growth opportunities is greatly enhanced as an independent entity."

After the spinoff, Toromont's operations will consist of Toromont CAT, one of the world's larger Caterpillar dealerships by revenue and geographic territory; Battlefield – The CAT Rental Store, an industry-leading rental operation; and CIMCO Refrigeration, Canada's largest supplier of industrial and recreational refrigeration equipment. "We can now focus our efforts on the many exciting growth opportunities available to Toromont," continued Mr. Ogilvie. "These include the growing mining business, additional products and the pursuit of additional territories."

Enerflex is the market leader in the compression business in Western Canada and Australia and is a leading supplier in the United States and the Middle East.

The transaction will see existing Toromont shareholders exchange each current Toromont share for shares in both the new Toromont and in Enerflex, which intends to apply for its own listing on the Toronto Stock Exchange.

The spinoff is expected to provide a number of benefits to the existing shareholders of Toromont.

Creates distinct market leaders with critical mass and momentum The spinoff will create two market leaders in their respective industries with the scale and operational strength to compete effectively in their distinct markets.

Sharper business and strategic focus – The proposed successor companies have different business cycles, serve different markets, sell to different customers, are subject to different competitive forces and require different short term and long term strategies. Their separation into two independent companies, each with its own board of directors, will provide management of each company with a sharper business focus. This will permit them to pursue independent business strategies best suited to their business plans, and allow them to pursue opportunities in their respective markets.

Incremental growth opportunities – Each of the two businesses has attractive opportunities for both organic expansion and external growth through acquisitions, capital investments and geographic expansion. Separating Toromont and Enerflex will enable each to pursue independent growth strategies that may not be available to them as part of a consolidated Toromont.

Enhanced access to growth capital As separate companies, Toromont and Enerflex will have independent public currencies and balance sheets, which will provide them with enhanced access to the capital necessary to finance their respective growth strategies.

Improved market understanding and valuation - By establishing two separate public companies with independent public reporting and a simplified corporate structure, investors and analysts can more easily evaluate each one on a stand-alone basis relative to competitors, benchmarks and performance criteria specific to their respective industries. This should improve alignment of the two companies with their direct public company comparables and facilitate sector-specific analyst coverage.

Better ability to attract, retain and motivate key employees – The separation of Toromont into two independent public companies will also enable each to provide business-specific incentives to key employees. Compensation arrangements can more closely align the role of each employee with the performance of the business that employs them, enhancing each company's ability to better attract, retain and motivate key people.

Continuity in management and governance

The management teams of Toromont and Enerflex will remain in place following the spinoff. Toromont will be led by Robert M. Ogilvie as Chairman and CEO, continuing more than 25 years of leadership. Enerflex will continue to be led by Blair Goertzen as President and CEO. Mr. Goertzen has been Enerflex's CEO for four years, including three years while Enerflex was an independent, TSX listed issuer. 

Toromont and Enerflex will also benefit from continuity at the Board level. The Enerflex Board of Directors will include four current members of Toromont's Board: Stephen J. Savidant (as Chairman Designate), Robert S. Boswell, Wayne S. Hill and H. Stanley Marshall. J. Blair Goertzen will also join the Enerflex Board. Each of these Directors has strong energy-industry and public company experience. Robert M. Franklin, Ronald G. Gage, David A. Galloway, Wayne S. Hill, John S. McCallum and Robert M. Ogilvie will continue as Directors of Toromont. Additional independent Directors will be appointed to each Board over time.

Toromont will continue to be headquartered in Toronto and Enerflex will continue to be headquartered in Calgary. Both companies intend to proceed with business as usual during the transitional period, maintaining existing relationships with employees, customers and suppliers.


Toromont plans to structure the proposed transaction as a tax-deferred divestiture for Canadian tax purposes. Completion of the spinoff will be subject to Toromont's receipt of confirmation from Canada Revenue Agency that the transaction may be implemented on a tax-deferred basis for Toromont, Enerflex and Canadian resident shareholders who hold their Toromont shares as capital property. Shareholders who are not Canadian residents should consult with their tax advisors to determine the tax implications of this proposed transaction.

The transaction will be implemented by way of a plan of arrangement, which is subject to court approval and the approval of two-thirds of the Toromont shares that are voted at the meeting to consider it. Completion of the spinoff will also be subject to prior approval of the TSX and fulfillment of certain other conditions.

It is intended that if the transaction is completed as contemplated, the initial quarterly dividends paid by the two separate companies will be equal in total to the current annual rate of $0.64 per share paid for the combined organization. Ultimately, dividends will be at the discretion of the respective boards of directors of each company.

Key Dates and Additional Information

Toromont intends to seek shareholder approval for the spinoff in the spring or early summer of 2011. If approved, the spinoff would be completed shortly thereafter, subject to the receipt of all necessary approvals.

Additional information in respect of the spinoff can be found on a transaction specific section of Toromont's website at

Financial and Legal Advisors

TD Securities Inc. is acting as financial advisor and Davies Ward Phillips & Vineberg LLP is acting as legal advisor to Toromont and its Board of Directors.

Conference Call

Toromont will discuss the spinoff during the conference call being held to discuss third quarter 2010 financial results. The call will be held on Tuesday, November 9, 2010 at 5 pm (ET). The call may be accessed by telephone at 1-866-223-7781 (toll free) or 416-340-8018 (Toronto area). A replay of the conference call will be available until Tuesday, November 23, 2010 by calling 1-800-408-3053 or 416-695-5800 and entering passcode 3102015. Both the live webcast and the replay of the quarterly conference call can be accessed at

About Toromont Industries

Toromont Industries Ltd. operates through two business segments: The Equipment Group and the Compression Group. The Equipment Group includes one of the larger Caterpillar dealerships by revenue and geographic territory in addition to industry leading rental operations. The Compression Group is a global leader specializing in the design, engineering, fabrication and installation of compression systems for natural gas, coal-bed methane, fuel gas and carbon dioxide in addition to process systems and through CIMCO, industrial and recreational refrigeration systems. Both Groups offer comprehensive product support capabilities. This news release and more information about Toromont can be found on the web at

Advisory Regarding Forward-Looking Information

Information in this press release that is not a historical fact are "forward-looking information". Words such as "plans", "intends", "outlook", "expects", "anticipates", "estimates", "believes", "likely", "should", "could", "will", "may" and similar expressions are intended to identify statements containing forward-looking information. Forward-looking information in this press release is based on current objectives, strategies, expectations and assumptions which management considers appropriate and reasonable at the time including, but not limited to, general economic and industry growth rates, commodity prices, currency exchange and interest rates, competitive intensity and shareholder and regulatory approvals.

By its nature, forward-looking information is subject to risks and uncertainties which may be beyond the ability of Toromont Industries Ltd. ("Toromont") to control or predict. The actual results, performance or achievements of Toromont or Enerflex Ltd. ("Enerflex") could differ materially from those expressed or implied by forward-looking information. Factors that could cause actual results, performance, achievements or events to differ from current expectations include, among others, risks and uncertainties related to: obtaining approvals, rulings and consents, or satisfying other requirements, necessary or desirable to permit or facilitate completion of the spinoff; future factors that may arise making it inadvisable to proceed with, or advisable to delay, all or part of the spinoff; the operations and financial condition of Toromont and Enerflex as separately traded public companies, including the reduced industry and geographical diversification resulting from this separation; the impact of the spinoff on the trading prices for, and market for trading in, the shares of Toromont and Enerflex; the potential for significant tax liability for a violation of the tax-deferred spinoff rules; the potential benefits of the spinoff; business cycles, including general economic conditions in the countries in which Toromont and Enerflex operate; commodity price changes, including changes in the price of precious and base metals and natural gas; changes in foreign exchange rates, including the Cdn$/US$ exchange rate; the termination of distribution or original equipment manufacturer agreements; equipment product acceptance and availability of supply; increased competition; credit of third parties; additional costs associated with warranties and maintenance contracts; changes in interest rates; the availability of financing; environmental regulation; and the integration of Enerflex's operations with the gas compression operations of Toromont. Additional information on certain of these factors and other risks and uncertainties that could cause actual results or events to differ from current expectations can be found in the "Risks and Risk Management" and "Outlook" sections of Toromont's annual Management Discussion and Analysis for the year ended December 31, 2009, which is filed with Canadian securities regulators and may also be found at Certain risks and uncertainties specific to the proposed spinoff and Enerflex will be further described in the information circular to be mailed in advance of the shareholder meeting at which the spinoff will be considered. Other factors, risks and uncertainties not presently known to Toromont or that Toromont currently believes are not material could also cause actual results or events to differ materially from those expressed or implied by statements containing forward-looking information. 

Readers are cautioned not to place undue reliance on statements containing forward–looking information that are included in this press release, which are made as of the date of this press release, and not to use such information for anything other than their intended purpose. Toromont disclaims any obligation or intention to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable law.

Contact Information

  • Management
    Toromont Industries Ltd.
    Robert M. Ogilvie
    Chairman & Chief Executive Officer
    (416) 667-5554
    Toromont Industries Ltd.
    Paul R. Jewer
    Vice President Finance and Chief Financial Officer
    (416) 667-5638
    BarnesMcInerney Inc.
    Ken Barnes
    Managing Partner
    (416) 367-5000 ext. 226