OFI Income Fund (TSX: OFB.UN), a producer of fibreglass insulation products, today announced that the Fund and Fibreglass Holdings Inc. have entered into a definitive agreement with CertainTeed Insulation Canada, Inc., pursuant to which CertainTeed will acquire all of the operating assets of the Fund, by becoming an owner of all the outstanding shares of OFI GP Inc., the general partner of OFI LP, and all of the outstanding limited partnership units of OFI LP.
Under the Agreement, CertainTeed will acquire the assets of the Fund for approximately $41 million, plus the assumption of the Fund's adjusted debt, which will be calculated in accordance with a formula set out in the Agreement and adjusted at closing. Unitholders of the Fund will be entitled to receive approximately 96% of the Purchase Price and Fibreglass Holdings Inc. will be entitled to receive the balance.
The final redemption price is subject to a number of adjustments, including the amount of net debt outstanding at closing, and certain other adjustments. To the extent these adjustments are different from the Fund's estimates, the actual amount paid to the unitholders could be different.
Based on the Fund's current debt and working capital balances, and estimates of other adjustments at closing, the Fund's unitholders would receive approximately $3.05 per Fund unit through the redemption of all outstanding Fund units and the cash proceeds of the Purchase Price to Fibreglass Holdings Inc. would be approximately $0.16 per Class B subordinated exchangeable limited partnership unit. Immediately prior to closing there will be approximately 12,962,618 Fund units and 10,239,540 Class B subordinated exchangeable limited partnership units outstanding. The redemption of the outstanding Fund units will occur shortly after the closing of the transaction.
The estimated redemption price per unit represents a premium of approximately 320% over the 30-day volume weighted price of the Fund's units on the Toronto Stock Exchange for the period ending on Monday, October 20th, 2008, the last full trading day prior to this announcement.
The transaction will be subject to unitholders approval, regulatory approval and other customary closing conditions, and is expected to close very early in 2009. The Fund will set a record date for a special meeting of unitholders, which is expected to be held in December 2008, to approve the terms of the transaction and the wind up of the Fund.
Holders of approximately 56% of outstanding Fund units and special voting units, including a Canadian mutual fund manager, members of the Board of Trustees and Fibreglass Holdings Inc., have agreed to vote their units in favour of the proposed transaction.
The transaction is the outcome of a previously announced review of strategic alternatives conducted by the Joint Special Committee of the Board of Trustees of the Fund, formed in April 2008. CIBC World Markets Inc., the Special Committee's financial advisor, conducted a broad and thorough sale process for OFI by way of an auction and has provided an opinion to the Special Committee and to the Board of Trustees of the Fund that the consideration payable under the transaction is fair from a financial point of view to unitholders of the Fund. The Fund's Board of Trustees has unanimously determined (other than trustees having declared a conflict) that the Agreement and the proposed transaction are fair to the Fund's unitholders and in the best interests of the Fund and its unitholders. Accordingly, the Board has unanimously recommended (other than trustees having declared a conflict) that the unitholders vote in favour of the special resolution to approve the proposed sale and the winding-up of the Fund.
"We are very pleased to support what we believe is an attractive transaction for the Fund's unitholders. The transaction represents a positive outcome for OFI, its unitholders, employees and customers. OFI, with its strong presence in insulation in Canada, will be part of a much larger organization, which will include CertainTeed's leading insulation operations in the United States and gypsum wallboard operations in Canada" said George Rossi, Chairman of the Special Committee.
"We are excited about partnering with CertainTeed as our combined resources will allow us to better serve our customers and grow our business," commented Joseph Skarzenski, Chief Executive Officer of the Fund.
The all cash transaction will be financed by CertainTeed through existing available sources.
The Agreement provides for, among other things, a non-solicitation covenant on the part of the Fund, subject to customary "fiduciary out" provisions which entitle the Board of Trustees of the Fund to consider and accept a Superior Proposal, subject to CertainTeed's right to match such Superior Proposal or to receive a termination fee of $1.7 million. -- www.cnxmarketlink.com
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