Napec to be acquired by Oaktree Capital for $320 mln

Napec Inc (TSX: NPC) has agreed to be acquired by U.S. alternative investment firm Oaktree Capital Management. The deal, expected to close in Q1 2018, is valued at about $320 million, including debt. The Fonds de solidarité FTQ, Napec’s largest investor, with about 19 percent of shares and warrants outstanding, indicated it will vote in favour. Established in 1978, Drummondville, Québec-based Napec and its affiliates build and maintain utility electrical and natural gas transmission and distribution systems and related energy infrastructure. Led by President and CEO Pierre Gauthier, it operates primarily in Québec, Ontario and the eastern United States.

PRESS RELEASE

NAPEC Inc. Announces Acquisition by Oaktree

DRUMMONDVILLE, QUEBEC–(Marketwired – Dec. 4, 2017) –

NAPEC Inc. (“NAPEC” or the “Company”) (TSX:NPC) today announced that it has entered into a definitive arrangement agreement (the “Arrangement Agreement”) pursuant to which funds managed by Oaktree Capital Management L.P. (“Oaktree”), will acquire all of the issued and outstanding common shares of NAPEC (the “Shares”) for $1.95 in cash per Share (the “Purchase Price”).

KEY TRANSACTION HIGHLIGHTS
Purchase Price of $1.95 in cash per Share representing a premium of 35.4% to the closing price on December 1, 2017 and a premium of 43.9% to the 20-day volume weighted average price on the TSX.

Total transaction value of approximately $320 million, including the assumption of indebtedness.

The Board of Directors of NAPEC (the “Board of Directors”) unanimously recommends that holders of Shares and warrants (collectively, the “Securityholders”) vote in favor of the transaction.

Oaktree’s Power Opportunities strategy partners with management teams of leading companies that provide equipment, services and/or software used in the generation, transmission, distribution, and consumption of electricity, natural gas and other utility resources.

Oaktree intends to leverage the expertise of the management team led by Pierre L. Gauthier, President and Chief Executive Officer, and intends on maintaining its head office in the Province of Quebec post-closing.

“In recent years, NAPEC has achieved significant progress and built a solid foundation through the realization of its strategic objectives via a combination of organic and acquisition-driven growth. This transaction represents a unique opportunity to provide a significant reward to our shareholders while also enabling NAPEC and its employees to enter into a new phase of growth supported by Oaktree’s capital, industry expertise, experience and insight”, said Pierre L. Gauthier.

The transaction has been unanimously approved by NAPEC’s Board of Directors following the unanimous recommendation of an independent committee of directors comprised of Luc Reny, Guy Pelletier, Denis Tremblay, Jean Rochette, Serge Chiasson and Yves Filion (the “Independent Committee”). NAPEC’s Board of Directors also unanimously recommends that Securityholders vote in favor of the transaction at the special meeting (the “Meeting”) of Securityholders to be called to approve the transaction. “We are pleased with the culmination of the independent committee’s work and are confident that this transaction is highly beneficial for both NAPEC and its shareholders. We are confident that with Oaktree as its owner and with the strong management team directed by Pierre L. Gauthier, NAPEC will continue to have the financial support and the leadership to expand its market reach in North America”, said Luc Reny, Chairman of the Board of Directors.

“We are extremely excited about the opportunity to partner with NAPEC’s management team to combine Oaktree’s significant energy sector experience, network, and financial resources to continue to drive the Company’s growth in the North American utility services market”, said Jason Lee, Managing Director and Co-Portfolio Manager of Oaktree’s Power Opportunity Strategy.

The Fonds de solidarité FTQ (the “Fonds”), NAPEC’s largest shareholder having beneficial ownership and control over approximately 19% of the total Shares and warrants outstanding, has expressed to NAPEC and Oaktree its intention, as of the date hereof, to vote all such Shares and warrants in favor of the Transaction, subject to the Fonds’ review of the final terms and conditions of the transaction.

FAIRNESS OPINIONS
National Bank Financial Inc., acting as financial advisor to NAPEC, has provided an opinion to the Independent Committee, and Richter LLP, retained by the Independent Committee as independent financial advisor, has also provided an opinion, each to the effect that, subject to the assumptions, limitations and qualifications set out in such opinions, the consideration to be received by the shareholders in connection with the transaction is fair, from a financial point of view, to such shareholders.

The fairness opinions will be included in the management information circular to be mailed to Securityholders in connection with the approval of the transaction.

TRANSACTION DETAILS
The transaction will be implemented by way of a statutory plan of arrangement under the Canada Business Corporations Act and is subject to court approval and to the approval of at least 66 2/3% of the votes cast by Securityholders present in person or represented by proxy at the Meeting.

The Arrangement Agreement provides that NAPEC is subject to a non-solicitation covenant with customary “fiduciary out” provisions allowing the Board of Directors to accept an unsolicited superior proposal in certain circumstances. The Arrangement Agreement also provides Oaktree with a right to match any such unsolicited proposal. A termination fee of $7.0 million would be payable by NAPEC to Oaktree in certain circumstances, including if it fails to exercise its right to match in the context of a superior proposal supported by NAPEC. Oaktree has agreed to pay the Company a termination fee of $7.0 million if the transaction is not completed in certain circumstances. The transaction is subject to customary closing conditions, including the expiration or early termination of waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, receipt of court approval pursuant to the Canada Business Corporation Act and receipt of Securityholder approval. The transaction is supported by a waiver from the Company’s existing bank group and is not subject to any financing condition and is expected to close by the end of the first quarter of 2018.

NAPEC intends to mail a management information circular in the upcoming weeks to its Securityholders for the Meeting expected to be held before February 16, 2018. Details of the transaction as well as the rationale for the Board of Directors’ support of the transaction will be set out in the management information circular.

Further details regarding the terms of the transaction are set out in the Arrangement Agreement and will be provided in the management information circular which will be available under the profile of NAPEC at www.sedar.com and on NAPEC’s website (www.napec.ca).

ADVISORS
National Bank Financial Inc. is acting as financial advisor to NAPEC and Stein Monast LLP and Stikeman Elliott LLP are acting as NAPEC’s legal counsel. Kirkland & Ellis LLP and McCarthy Tétrault LLP are acting as legal counsel to Oaktree.

OVERVIEW OF THE COMPANY
NAPEC is a company operating in the energy sector. The Company is a leading provider of construction and maintenance services to the public utility and heavy industrial markets, mainly in Quebec, Ontario and the eastern United States. NAPEC and its subsidiaries build and maintain utility electrical and natural gas transmission and distribution systems and related energy infrastructure. The Company also installs gas-powered and electric-powered heavy equipment for utilities, gas-fired industrial power plants and petrochemical facilities in North America. The Company also offers environmental construction and road matting services.

Additional information on NAPEC can be found in the SEDAR database (www.sedar.com) and on the Company’s website, at www.napec.ca.

ABOUT OAKTREE
Oaktree is a leader among global investment managers specializing in alternative investments, with US$100 billion in assets under management as of September 30, 2017. The firm emphasizes an opportunistic, value-oriented and risk-controlled approach to investments in distressed debt, corporate debt (including high yield debt and senior loans), control investing, convertible securities, real estate and listed equities. Since its inception in 1995, Oaktree’s Power Opportunities strategy has focused exclusively on providing capital to leading companies that provide equipment, services, software and infrastructure used in the electric power and natural gas industries. Headquartered in Los Angeles, Oaktree has over 900 employees and offices in 18 cities worldwide. For additional information, please visit Oaktree’s website at www.oaktreecapital.com.

CONTACT INFORMATION
Pierre L. Gauthier
President and Chief Executive Officer
819-479-7771
p.gauthier@napec.ca

Mario Trahan, CPA, CMA
Chief Financial Officer
819-479-7771
m.trahan@napec.ca

Photo courtesy of Thirau Inc