Press Conference in downtown Toronto on Monday,
November 12, 2012 at 10:00am
ET (details below)
TORONTO,
Nov. 11, 2012 /CNW/ - Leon's
Furniture Limited (TSX: LNF) and The Brick Ltd. (TSX: BRK) are
pleased to announce that they have entered into a definitive
agreement (the "Arrangement Agreement") that provides for
the acquisition of The Brick by Leon's by way of plan of
arrangement (the "Arrangement") for $5.40 per share (the "Share
Consideration"). Leon's will also acquire all of the
outstanding common share purchase warrants of The Brick for
$4.40 per warrant. The total
consideration payable to Brick shareholders and warrantholders is
approximately $700 million.
The Share Consideration represents a premium of
approximately 62% to the 20-day volume weighted average price of
The Brick's common shares on the TSX as of November 9, 2012. The warrants, which have an
exercise price of $1.00 and expire on
May 27, 2014, had a closing price on
the TSX of $2.36 on November 9, 2012. The closing price of the Brick
shares on the TSX on November 9, 2012
was $3.50.
Leon's and The Brick will continue to operate as
separate banners out of offices in Toronto and Edmonton. Terry
Leon will remain as CEO of Leon's and will be CEO of the
combined entity. Vi Konkle,
President and CEO of The Brick, will continue as President of The
Brick. Bill Gregson, currently
Executive Chairman of the Board of The Brick, has agreed to stay on
in an advisory capacity. It is anticipated that Mr. Gregson will
join the Leon's Board in due course. Mark
J. Leon will continue to serve as the Chairman of the Board
of Leon's.
Terry Leon,
President and CEO of Leon's, said, "This transaction brings
together two great Canadian companies with complementary geographic
footprints to strengthen our position in the home furnishings
marketplace. We will apply the best practices of both companies to
offer even greater value to our customers and create more
opportunity for our associates. Our combined team will have access
to national buying opportunities in merchandising and marketing,
and a national distribution network that will enable us to greatly
enhance our online shopping capabilities. We are very excited to
build on the relationships we have established over the years with
our respective associates, franchises, customers, shareholders,
suppliers and the many communities we serve."
Vi Konkle,
President and CEO of The Brick, said, "We welcome this opportunity
to partner with this iconic corporation. By joining forces, we can
strengthen both of our businesses, enhancing everything that has
made Leon's and The Brick two of Canada's best-known retailers and preserving
The Brick's roots in Edmonton."
Added Mr. Leon: "During these economic times
where we have seen multiple American corporations make inroads in
our country through acquisitions, it is a pleasure to see two
successful Canadian retailers reach such an agreement that will
better serve Canadian consumers."
As indicated, under the Arrangement, Leon's will
acquire all of the outstanding common shares and common share
purchase warrants of The Brick. For each common share held by a
Brick shareholder, the shareholder can elect to receive as
consideration $5.40 in cash per
common share or 0.0054 convertible debentures of Leon's (the
"Convertible Debentures"), described below, subject to the
terms and conditions of the Arrangement Agreement. For each
warrant, the holder of such warrant can elect to receive as
consideration $4.40 in cash per
warrant or 0.0044 Convertible Debentures per warrant, subject to
the terms and conditions of the Arrangement Agreement.
Each of William
Comrie, the founder of The Brick, Fairfax Financial Holdings
Limited ("Fairfax"), Chou RRSP Fund, and Bill Gregson, the Executive Chair of The Brick's
Board of Directors, who together hold approximately 66.6% of the
outstanding common shares and warrants of The Brick, have entered
into irrevocable voting support agreements and agreed to vote their
common shares in favour of the Arrangement.
The transaction is expected to close in the
first quarter of 2013, subject to certain customary conditions,
including court approval, relevant regulatory approvals and the
absence of any material adverse change with respect to The
Brick. The Arrangement will also be subject to (i) the
approval of at least 66 2/3% of the votes cast at a special meeting
of Brick shareholders and warrantholders, voting as a single class,
to be called to consider the Arrangement, and (ii) the approval of
at least a majority of the votes cast by Brick shareholders at such
meeting.
Under the terms of the Arrangement Agreement,
there will be no dividends or other distributions declared on Brick
Shares pending closing.
Transaction Details
The Brick's Board of Directors, after
consultation with its financial and legal advisors, and on the
recommendation of the Special Committee of The Brick's Board of
Directors, has determined that the Arrangement is fair to holders
of common shares and warrants, respectively, and that the
Arrangement is in the best interests of The Brick and recommends
that shareholders and warrantholders vote in favour of the
Arrangement.
The Brick's Board of Directors is not making a
recommendation as to whether shareholders or warrantholders of The
Brick should elect to receive Convertible Debentures as Fairfax,
which currently owns approximately 37% of the outstanding common
shares of The Brick, has agreed to accept as partial consideration
for its shares all Convertible Debentures not otherwise elected to
be received by other shareholders or warrantholders of The
Brick. The Board of Directors of The Brick has not concluded
whether or not the Arrangement is fair to Fairfax, and accordingly
it is not recommending whether or not Fairfax should vote in favour
of the Arrangement.
Scotia Capital Inc. has provided an opinion to
the Special Committee of the Board of Directors of The Brick that
the Arrangement is fair, from a financial point of view, to
shareholders and warrantholders of The Brick. For the
purposes of rendering the opinion, Scotia Capital Inc. has relied
on certain assumptions, including the fact that all shareholders
and all warrantholders, other than Fairfax, are entitled to receive
100% cash consideration. At the Company's direction, Scotia Capital
Inc. has not been asked to offer, nor has it offered, any opinion
as to the value of the Convertible Debentures and certain other
matters, and it expresses no opinion as to whether or not the
Transaction is fair from a financial point of view to
Fairfax. Scotia Capital Inc.'s opinion will be included in
the Information Circular (as defined below).
The Convertible Debentures will have a 3% coupon
and a 10-year term, and will be convertible beginning 90 days prior
to the fourth anniversary of their issuance, at a conversion rate
based on $12.6379 per Leon's common
share. Leon's will have the right to redeem the Convertible
Debentures after the fourth anniversary of their issuance, subject
to the holder's right to convert rather than have their Convertible
Debentures redeemed. A maximum of $100
million of Convertible Debentures will be issued. Leon's has
applied to list the Convertible Debentures and the underlying
Leon's common shares on the TSX.
The terms and conditions of the Arrangement will
be summarized in The Brick's management information and proxy
circular, which will be filed and mailed to The Brick's
shareholders in late November 2012
(the "Information Circular").
Leon's intends to finance the cash portion of
the consideration from existing cash resources and $500 million in committed bank facilities
fully-underwritten by CIBC and Desjardins Capital Markets. These
committed bank facilities are comprised of a $400 million four-year term credit facility, and
a new $100 million revolving credit
facility which, if required, will be used to finance the
transaction and otherwise will be available for general corporate
purposes.
Advisors and Legal Counsel
CIBC World Markets Inc. is acting as financial
advisor and McCarthy Tétrault LLP is acting as legal advisor to
Leon's. Blake, Cassels & Graydon LLP is acting as legal counsel
to The Brick and its Board of Directors. Scotia Capital Inc. is
acting as financial advisor to the Special Committee of the Board
of Directors of The Brick. Torys LLP is acting as legal counsel to
Fairfax.
Press Conference - November 12, 2012 at 10:00am ET
The CEOs and Board Chairs from both companies
will host a joint press conference tomorrow, Monday November 12th, at 10:00am Eastern.
Location: |
Leon's Furniture Toronto Downtown (at the Roundhouse) |
|
255 Bremner Boulevard (Parking available on Bremner Blvd. or
underground in the Toronto Convention Centre parking) |
About Leon's
Leon's was founded in 1909 and is one of
Canada's best-known home
furnishings retailers offering great value on furniture, major
appliances and home electronics. Leon's has 76 stores in
Newfoundland and Labrador, Quebec, Ontario, Manitoba, Saskatchewan, Alberta, Nova
Scotia, New Brunswick, and
Prince Edward Island.
About The Brick
The Brick, which opened its first store in
Edmonton, Alberta in 1971, has
grown over the last 40 years to become one of Canada's leading retailers of household
furniture, mattresses, appliances and home electronics. The
Brick has 230 stores operating under The Brick, United Furniture
Warehouse, The Brick Mattress Store and Urban Brick banners.
Forward-Looking Statements
This news release contains "forward-looking
statements" within the meaning of applicable Canadian securities
laws, including (but not limited to) statements about: completion
of the proposed transaction and expected timing; financing of the
transaction; strengthening the combined companies' position in the
marketplace; application of best practices of both companies and
offering of greater value to customers and creation of
opportunities for associates; access to national buying
opportunities in merchandising and marketing; enhanced online
shopping capabilities; Mr. Gregson joining the Leon's Board; more
competitive businesses; enhancing the businesses; preserving The
Brick's roots in Edmonton; better
serving Canadian consumers; and similar statements concerning
anticipated future events, results, circumstances, performance or
expectations, that reflect management's current expectations and
are based on information currently available to management of
Leon's, The Brick and their respective subsidiaries. The words
"may", "will", "should", "believe", "expect", "plan", "anticipate",
"intend", "estimate", "predict", "potential", "continue" or the
negative of these terms, or other expressions which are predictions
of or indicate future events and trends and which do not relate to
historical matters, identify forward-looking matters. The following
factors could cause actual results to differ materially from those
discussed in the forward looking statements: failure to satisfy the
conditions to complete the Arrangement, including the receipt of
the required securityholder, court or regulatory approvals; the
failure of Leon's to satisfy conditions to its acquisition
financing; the occurrence of any event, change or other
circumstance that could give rise to the termination of the
Arrangement Agreement; retention of customers, suppliers and
personnel being adversely affected by the uncertainty surrounding
the Arrangement; inability to successfully integrate the operations
of the two companies following completion of the transaction; and
other factors discussed in documents filed with the securities
commissions across Canada by
Leon's and The Brick. Reliance should not be placed on
forward-looking statements because they involve known and unknown
risks, uncertainties and other factors, which may cause the actual
results, performance or achievements of Leon's or The Brick to
differ materially from anticipated future results, performance or
achievements expressed or implied by such forward-looking
statements. Leon's and The Brick undertake no obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, other
than as required by applicable law.
SOURCE Leon's Furniture Limited