Tree Island Wire Income Fund

Tree Island Wire Income Fund

April 02, 2007 21:20 ET

Tree Island Announces Acquisition of US and Chinese Wire Products Manufacturers

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - April 2, 2007) -

Tree Island Wire Income Fund (TSX:TIL.UN) will hold a conference call to discuss this announcement on Tuesday, April 3, 2007 at 10 a.m. Pacific Time (1:00 p.m. Eastern). The call can be accessed by dialing: 1-877-888-3490 or (416) 695-6622.

A replay will be available through April 17, 2007 at: 1-888-509-0081 or (416) 695-5275, Passcode: 642791.

Tree Island Wire Income Fund (the "Fund") today announced that it has entered into a binding letter of intent to acquire Baoan International Investment Co. ("BII") and Universal Metal New Material Co., Ltd. ("UM") for approximately US$18.5 million. BII, a California-based corporation, and UM, a Hong Kong-registered company, are majority owned by China's first publicly listed company, China Baoan Group Company Ltd. ("China Baoan"). UM owns and operates two wire products manufacturing facilities in the Binhai New Development Zone in Tianjin, China. BII owns Universal Sourcing of America Industries Inc. ("USA Wire"), a wire products business with a manufacturing facility located in Corona, California, corporate offices in Covina, California and a Representative Liaison Office in Beijing, China.

BII and UM's combined manufacturing operations produce drawn wire, stucco reinforcing products, engineered mesh and various industrial wire products. Their trading operations source and export a diverse range of wire products from China to customers in North America. In 2006 BII and UM reported combined sales volumes of approximately 78,000 tons, with revenues of approximately Cdn$67 million.

"Our acquisition of Baoan International Investment Co. and Universal New Metals Co. is a key step in our strategy to establish an operational base in Asia," said Daniel McAtee, President and CEO of Tree Island Industries ("Tree Island") and a trustee of the Fund. "Together, BII and UM bring us a highly experienced, international team of managers and supply chain experts, along with the rights to manufacture, export and trade from China, and to sell products within China. As a result of this acquisition, Tree Island will be positioned to not only offer our North American customers an expanded range of offshore products, but to also extend our international sales to China and across the entire Asia region."

"Another important benefit of this acquisition is that both BII and UM have well-developed business relationships with China's steel industry and direct access to its competitively priced raw material and semi-finished supply. This will help us meet our strategic objective of lowering our raw material and conversion costs," said McAtee.

"Closer to home, BII's US production facility in Corona, California is located just 20 miles from our four manufacturing facilities in central California, and provides an ideal fit with our existing operations," added McAtee. "The Corona plant will significantly expand production capacity of our engineered and stucco reinforced mesh products, while providing opportunities for further consolidation of our US operation."

"In addition to creating a platform for our Asian expansion, we expect this acquisition to generate significant synergies. These synergies will be realized by combining efficiencies at our California commercial and manufacturing operations, implementing operating improvements at the two mills in China, and sharing best practices across the combined operation," said McAtee.

"Overall, we believe this acquisition aligns perfectly with our business strategy, and we look forward to welcoming BII and UM's excellent team of managers and employees to Tree Island," said McAtee.

Transaction Details

Under the terms of the binding letter of intent, the Fund will acquire all of the assets and operations of BII and UM for US$18.5 million, subject to potential adjustment for working capital on closing. Completion of the acquisition is subject to conditions customary for transactions of this nature, including the completion of satisfactory confirmatory due diligence, the execution of a definitive purchase agreement and arrangement of satisfactory financing. The Fund currently expects to finance the acquisition and ongoing working capital requirements with a term loan and operating loan. Subject to the foregoing conditions, the Fund expects to complete the acquisition in the second quarter of 2007.

Fund Profile

Tree Island Wire Income Fund was launched on November 12, 2002, with the completion of an Initial Public Offering. There are 21,918,400 units of the Fund outstanding, representing a 100% ownership interest in Tree Island.

The Fund's performance depends entirely on the performance of Tree Island.

Tree Island Profile

Headquartered in Richmond, British Columbia, Tree Island Industries produces wire products for a diverse range of construction, agricultural, manufacturing and industrial applications. Its products include bright wire, stainless steel wire and galvanized wire; a broad array of fasteners, including packaged, collated and bulk nails; stucco reinforcing products, engineered structural mesh, fencing and other fabricated wire products. The company markets these products under the Tree Island, K-Lath, Halsteel, Tree Island Wire and Industrial Alloys brand names. Tree Island Wire Income Fund owns a 100% ownership interest in Tree Island Industries.

About Baoan International Investment Co. and Universal Metal New Materials Co.

BII is majority owned by China Baoan, which is publicly listed on the China Shenzhen Stock Exchange. BII's corporate offices are located in Covina, California, and it operates a wire manufacturing facility in Corona, California and a Representative Liaison office in Beijing, China. UM, also majority owned by China Baoan, has two wire products manufacturing facilities in the Binhai New Development Zone in Tianjin, China. The combined companies' product lines include various types of galvanized wire, high-carbon and low-carbon industrial processed wire, reinforcing meshes, engineered meshes, stucco netting, PC strands, oil tempered wire, collated and bulk nails and other fasteners, metal laths and related accessories, inner spring units, building paper, scaffold-tubing, and various low-carbon, high-carbon, CHQ, IQ and welding wire rods. BII and UM market their products under the USA Wire and Baoan Int'l brand names.

Forward-Looking Statements

This press release contains forward-looking statements based on assumptions considered reasonable at the time they were prepared. Any statements that are contained herein that are not statements of historical fact may be deemed to be forward-looking statements. These statements speak only to the conditions in existence as of the date of this press release, and the Fund maintains no obligation to update such statements.

Forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the statements. Such risks and uncertainties include, but are not limited to, risks associated with operations such as competition, dependence on the construction industry, supplies of raw materials, dependence on key personnel, labour relations, regulatory matters, environmental risks, the successful execution of acquisition and integration strategies, foreign exchange fluctuations, the effect of leverage and restrictive covenants in financing arrangements, product liability, the ability to obtain insurance, energy cost increases, the ability to fund necessary future capital investments and acquisitions, and changes in tax legislation.

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