Fibrek plans to file appeal for cease trade decision regarding Mercer International’s proposed offer
Fibrek Inc. announced that the Bureau de décision et de révision (Québec), the administrative tribunal with statutory jurisdiction in securities law and regulatory matters in the Province of Québec, has dismissed AbitibiBowater Inc.’s (doing business as Resolute Forest Products) request to cease trade the proposed offer by Mercer International Inc. to acquire all of the issued and outstanding common shares of Fibrek.
The Bureau de décision et de révision (BDR) has however granted an order to cease trade the proposed private placement of 32,320,000 special warrants to purchase common shares of Fibrek to Mercer further to the application filed by Abitibi. As previously announced, the Mercer Offer was not conditional on the success of the private placement.
Fibrek intends to appeal the decision to cease trade the proposed private placement rendered by the BDR as it is grossly unreasonable, ignores the evidence presented before the BDR and contravenes fundamental corporate law principles.
Commenting on the BDR’s decision, President and Chief Executive Officer Pierre-Gabriel Côté stated: “Our goal remains to ensure that our shareholders are not deprived of the intrinsic value of Fibrek shares that rightfully belongs to them. No matter which roadblocks Abitibi and its locked-up shareholders put in our way, this is what we intend to keep doing. While the BDR has dismissed Abitibi’s unfounded attempt to block a legitimate and superior offer by Mercer, we are disappointed that they have cease traded the special warrants, which served to reestablish a level playing field between Abitibi and Mercer, and provided Fibrek with needed liquidity.
“The decision of the BDR could deprive our shareholders of their right to benefit from an aggregate of approximately $40 million in additional value,” continued Mr. Côté. “We intend to appeal this decision, which overrides the business judgment of the Fibrek Board and is wrong in both facts and law, and to vigorously pursue any and all recourses available to us to ensure that our shareholders are treated fairly.”
Hubert T. Lacroix, Chairman of the Board of Directors of Fibrek added: “We were surprised to learn during the hearing that in mid-November 2011, only two weeks before signing a hard lock-up agreement with Abitibi for a $1.00 offer, Fairfax Financial Holdings Limited refused to sell its common shares of Fibrek to Mercer for a superior value than that of the Abitibi bid, after having been approached by Mercer.
“We also realized that Steelhead Partners, LLC, who has indicated in writing having tendered its common shares of Fibrek to Abitibi, has accumulated 96% of its 6,479,000 common shares of Fibrek after the Abitibi bid was announced. It appears that the majority of those purchases were made at a price above the $1.00 Abitibi bid. One could ask ‘what is the business purpose of entering into such a trade?’ This is a troubling question. It seems strange that any investor would buy shares at prices above $1.00, only to tender them to a lower bid, and this when there is a superior offer by Mercer on the table, at $1.30. It is important to note that Steelhead owns 13% of the outstanding common shares of Abitibi valued at approximately $200 million, with Abitibi representing approximately 15% of the Steelhead portfolio,” concluded Mr. Lacroix.
To Fibrek’s knowledge, Abitibi has not obtained all regulatory approvals required to satisfy the conditions of its offer and has not waived its minimum tender condition of 66 2/3%. Consequently, Abitibi is not currently in a position to take up and pay for any Fibrek common shares tendered under its bid which are subject to the right of withdrawal.
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