Armtec Infrastructure Inc (TSX: ARF) has agreed to sell substantially all of its assets to the private equity group of Brookfield Asset Management for an undisclosed amount. The deal follows the completion of a sale and investment solicitation process commenced in February by Armtec, a Guelph, Ontario-based manufacturer of infrastructure products and engineered construction solutions. Armtec also announced that it has obtained a court order giving it protection pursuant to the Companies Creditors Arrangement Act in order to facilitate approval of the Brookfield deal, which is expected to close in June. Armtec’s on-going operations will be funded by a $30 million debtor-in-possession facility provided by Brookfield.
Armtec Announces Agreement for the Sale of Substantially All Assets to Brookfield and Initial Order under the Companies’ Creditors Arrangement Act to Implement the Brookfield Transaction
CONCORD, ON, April 29, 2015 /CNW/ – Armtec Infrastructure Inc. (“Armtec” or the “company”) (TSX: ARF) today announces that the company has entered into a definitive asset purchase agreement in respect of the sale of substantially all of its assets to Armtec Operating LP (“New Armtec”), an affiliate of Brookfield Capital Partners Fund III LP (“Brookfield”) as previously contemplated and disclosed in Armtec’s news release dated February 25, 2015 (the “Brookfield Transaction”). The entering into of the definitive agreement with respect to the Brookfield Transaction (the “Brookfield Purchase Agreement”) follows the completion of the sale and investment solicitation process (the “Sale and Investment Process”) commenced in February 2015. The company also announces that it has obtained an order from the Ontario Superior Court of Justice (the “Court”) protecting Armtec and its subsidiaries pursuant to the Companies Creditors Arrangement Act in order to permit the company to seek the Court’s approval of the Brookfield Transaction. While under CCAA protection, the company’s management remains responsible for day-to-day operations. During this time period, the business is to be funded by a $30 million debtor-in-possession financing facility to be provided by Brookfield.
As disclosed in Armtec’s news release dated February 25, 2015, the company conducted the Sale and Investment Process which required binding offers be submitted by April 22, 2015. Armtec received non-binding expressions of interest from a number of interested parties but did not receive any binding offers that would result in a transaction that is superior to the Brookfield Transaction. Accordingly, Armtec has determined that the Brookfield Transaction represents the best transaction available and it is in the best interests of Armtec to proceed with the Brookfield Transaction.
The Brookfield Transaction is the result of an extensive exploration of strategic alternatives, including the comprehensive Sale and Investment Process, carried out by the company with a view to maximizing value for the benefit of all stakeholders of Armtec and its subsidiaries. Pursuant to the Brookfield Purchase Agreement, New Armtec has agreed to acquire substantially all of Armtec’s assets on a going-concern basis, assume substantially all of Armtec’s obligations to trade creditors and all employee obligations, and assume or repay the obligations to Armtec’s operating lenders, subject to the approval of the Court. New Armtec will not assume any of Armtec’s obligations under its 8.875% senior notes due 2017 (the “Senior Notes”) or its 6.50% convertible unsecured subordinated debentures due 2017 (the “Convertible Debentures”). Ernst & Young Inc. will serve as the Court-appointed Monitor as part of the CCAA proceedings. Documents relating to the CCAA proceedings will be available on the Monitor’s website: www.ey.com/ca/armtec. A copy of the Brookfield Purchase Agreement will be available at www.sedar.com.
“We have completed a thorough review of our strategic alternatives culminating with a decision by our Board of Directors to proceed with the Brookfield Transaction,” said Mark Anderson, President and Chief Executive Officer of Armtec. “With an improved balance sheet and strong sponsorship, our management team and employees will be able to focus their efforts on strengthening the company’s leading position in precast concrete and drainage solutions across Canada.”
“We are pleased to support Armtec as it pursues court approval of the Brookfield Transaction,” said David Nowak, Managing Partner of Brookfield, a global asset manager with over a 100-year history of owning and operating assets. “Upon a successful completion of this transaction, we look forward to working with management to build on Armtec’s long and successful history in Canada’s infrastructure markets.”
The Brookfield Purchase Agreement provides for closing to occur on June 1, 2015. Under the Brookfield Purchase Agreement, the company has the ability to repay all of the obligations under the Brookfield credit facility in full prior to closing, which would result in the termination of the Brookfield Purchase Agreement.
The Brookfield Transaction will not provide any recovery for the holders of the Senior Notes, Convertible Debentures or common shares.
In Armtec’s news release dated March 2, 2015, the company confirmed that the Toronto Stock Exchange (the “TSX”) had commenced a review of the continued listing of Armtec’s securities on the TSX. Under this process the company was granted until May 1, 2015 to comply with all TSX requirements for continued listing. Armtec will not be able to meet the continued listing criteria for the TSX by this date and has been advised by the TSX that Armtec’s securities will be suspended from trading effective immediately and delisted effective on May 29, 2015.
The company also announces that Keith Wettlaufer resigned as a director of Armtec on April 28, 2015.
The following information constitutes “forward-looking statements”; see “Caution Concerning Forward-Looking Statements” below.
In Armtec’s news release dated February 25, 2015, the company provided guidance on expected revenue, EBITDA (excluding the impact of costs associated with exploring strategic alternatives and certain non-recurring expenses, “Adjusted EBITDA”) and capital expenditures for the 2015 fiscal year. While Armtec has not undertaken a full review of such amounts, for purposes of the sale process, based on market factors and a delay of certain parts of the UP Express Soundwall project, Armtec provided guidance to potential buyers with respect to Adjusted EBITDA of $24 million which is lower than the Company’s forecasted range of Adjusted EBITDA at the time of the February 25, 2015 news release.
References to EBITDA are to earnings before finance (income) expense – net, income taxes, depreciation and amortization, certain non-recurring expenses and certain other non-cash amounts. Management believes that in addition to net earnings, EBITDA is a useful supplemental measure of cash available prior to debt service, changes in working capital, capital expenditures and income taxes. However, EBITDA is not a recognized measure under GAAP. Investors are cautioned that EBITDA should not be construed as an alternative to net and comprehensive earnings determined in accordance with GAAP as an indicator of Armtec’s performance or as an alternative to cash flows from operating, investing and financing activities as a measure of Armtec’s liquidity and cash flows. Armtec’s method of calculating EBITDA may differ from the methods used by other issuers and, accordingly, Armtec’s EBITDA may not be comparable to similarly named measures used by other issuers.
Armtec is a manufacturer and marketer of a comprehensive range of infrastructure products and engineered construction solutions for customers in a diverse cross-section of industries that are located in every region of Canada, as well as in selected markets globally. These markets include Canada’s national and regional public infrastructure markets and private sector markets in agricultural drainage, commercial building, residential construction and natural resources. Armtec operates through a network of offices and production facilities across the country. Armtec operates in two business units: Drainage Solutions manufactures and markets corrugated high-density polyethylene pipe, corrugated steel pipe and other drainage related products including small bridge structures. Precast Concrete Solutions manufactures and markets highly engineered precast systems such as parking garages, bridges, sport venues and building envelopes as well as standard precast products such as steps, paving stones and utility vault.
Caution Concerning Forward-Looking Statements
This news release includes “forward-looking statements” within the meaning of securities laws. Such statements relate to the company’s or management’s objectives, projections, estimates, expectations, or predictions of the future and can be identified by words such as “will”, “anticipate”, “estimate”, “expect” and “project” or variations of such words. These statements are based on certain assumptions and analyses by the company that reflect its experience and its understanding of future developments. Such statements are subject to a number of uncertainties, including, but not limited to, and receipt of the approvals necessary to implement the Brookfield Transaction, and other factors identified in the company’s periodic filings with securities regulatory authorities in Canada. Many of these uncertainties are beyond the company’s control and, therefore, may cause actual actions or results to differ from those expressed or implied herein. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The implementation of the Brookfield Transaction is subject to court approval.
SOURCE Armtec Infrastructure Inc.
Photo courtesy of Armtec Infrastructure Inc