IWG Technologies Inc (TSX-V: IWG), the holding company for Canada’s International Water-Guard Industries Inc, has agreed to be acquired for about $16.5 million. The buyer is a private Canadian affiliate of WM Capital Management and BASE Equity Partners, a U.S. private equity firm. IWG shareholders are expected to vote on the proposed deal in January 2017. Burnaby, British Columbia-based International Water-Guard is a provider of aircraft potable water treatment, water systems, water heaters and components.
IWG announces execution of Arrangement Agreement
BURNABY, BC, Nov. 28, 2016 /CNW/ – IWG Technologies Inc. (“IWG” or the “Company”) is pleased to announce that IWG has entered into a definitive arrangement agreement (the “Arrangement Agreement”) with 1096777 B.C. Ltd., a private British Columbia corporation (the “Purchaser”) and WM Capital Management, Inc. (the “Guarantor”), as guarantor. The Purchaser and the Guarantor are each directly or indirectly controlled by one or more of New York based WM Capital Management, Inc. and BASE Equity Partners, L.P. BASE Equity Partners is a New York based private investment firm that partners with management to support growth in small to medium sized companies.
Under the Arrangement Agreement, the Purchaser has agreed to acquire all of the issued and outstanding common shares of IWG (each an “IWG Share”) for consideration of $0.43 in cash per IWG Share. The cash consideration reflects a 34% premium to the closing price of the IWG Shares on the TSX Venture Exchange (the “TSX-V”) of $0.32 on November 24, 2016 and a 30% premium to the average closing price of the IWG Shares on the TSX-V of $0.33 for the 90 trading days ended on November 24, 2016. The transaction will be implemented by way of a plan of arrangement (the “Arrangement”) under the Business Corporations Act (British Columbia).
Bruce Gowan, Chairman of IWG, stated: “The success we have had is a testament to our partners, employees and management team and their endeavors to deliver superior shareholder value. We believe this transaction provides an excellent opportunity for the shareholders of IWG to realize an attractive premium to market.”
Upon completion of the transaction, the Purchaser will cause IWG to continue to operate its business in British Columbia and current management and employees of IWG will remain with the Company.
Under the terms of the Arrangement Agreement, on closing, each IWG shareholder will receive $0.43 in cash for each IWG Share held. Pursuant to the transaction, the Purchaser will pay a total of approximately $16.5 million for the IWG Shares (assuming no exercise of existing IWG options). In addition, the holders of all unexercised IWG stock options (including options which have not vested) will receive, in respect of each IWG option held, $0.43 in cash less the exercise price of such IWG option.
The proposed transaction will be carried out by way of a court-approved plan of arrangement and will require the approval of at least 66 2/3% of the votes cast by the shareholders of IWG, and approval by the “majority of the minority”, being a majority of the votes cast by IWG shareholders other than Darryl Jacobs, Executive Vice President of IWG and a director of IWG’s wholly owned subsidiary, International Water-Guard Industries Inc., whose vote will not be included in determining minority approval pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions. The special meeting of shareholders of IWG is expected to take place in January 2017.
In addition to shareholder and court approvals, the transaction is subject to applicable regulatory approvals and the satisfaction of certain other closing conditions customary in transactions of this nature. IWG’s obligations are also subject to the Purchaser’s financing continuing to be in place.
The Arrangement Agreement includes customary provisions, including provisions relating to non-solicitation of alternative transactions, a “fiduciary out” provision and the Purchaser’s right to match superior proposals. In addition, the Guarantor has agreed to guarantee all of the Purchaser’s obligations under the Arrangement Agreement. IWG has agreed to pay a termination fee to the Purchaser of $577,500 in connection with termination of the Arrangement Agreement due to the occurrence of certain events. Each of IWG and the Purchaser has also agreed to pay to the other a $250,000 expense reimbursement fee upon termination of the Arrangement Agreement due to the occurrence of certain other events. If IWG is required to pay the expense reimbursement fee, the amount will be deducted from any termination fee which may become payable to the Purchaser.
The board of directors of IWG has unanimously determined that the Arrangement Agreement and the Arrangement are fair to the shareholders and optionholders of IWG and are in the best interests of IWG. The board of directors of IWG has unanimously approved the execution and delivery of the Arrangement Agreement and the transactions contemplated by the Arrangement Agreement and have unanimously resolved to recommend that IWG shareholders vote in favour of the shareholders’ resolution (the “Arrangement Resolution”) to approve the arrangement which will be included in the information circular to be mailed to IWG shareholders in connection with the Arrangement (the “Management Information Circular”).
Each of the directors and executive officers of IWG, together with certain other shareholders of IWG who hold in the aggregate approximately 22.8% of the issued and outstanding IWG Shares (assuming no exercise of existing IWG stock options) have entered into voting and support agreements with the Purchaser and the Guarantor and have agreed to vote all of their IWG Shares in favour of the Arrangement Resolution.
Working Capital Corporation has provided a fairness opinion to the board of directors of IWG in connection with the Arrangement. McCullough O’Connor Irwin LLP is acting as legal counsel to IWG and McMillan LLP is acting as legal counsel to the Purchaser.
Full details of the Arrangement Agreement will be included in a Management Information Circular to be filed with applicable regulatory authorities and mailed to IWG shareholders in accordance with applicable securities laws. IWG expects to mail the Management Information Circular in December 2016.
IWG Technologies Inc. is the public holding company for International Water-Guard Industries Inc., a Canadian aerospace company focused on aircraft potable water treatment, water systems, water heaters and components. IWG has expertise in all aspects of water treatment, has the products and know-how to provide high quality water for passengers and crew, and lightweight, space-saving solutions for the aircraft operator.
On behalf of the Board of Directors
IWG Technologies Inc.
“Bruce W. Gowan”
Chair of the Board
For further information: IWG Technologies, Inc., Unit One – 3771 North Fraser Way, Burnaby, BC V5J 5G5 Canada, Tel: (604) 255-5555, Fax: (604) 255-5685, www.iwgtech.com
Photo courtesy of Reuters/Luke MacGregor