Intertape files prospectus covering rights offering
2007-08-10 04:26 MT - News Release
Mr. Melbourne Yull reports
INTERTAPE POLYMER GROUP FILES FINAL PROSPECTUS FOR MAXIMUM US$88 MILLION RIGHTS OFFERING TO SHAREHOLDERS
Intertape Polymer Group Inc. has filed a final short-form prospectus in each of the provinces of Canada for its previously announced rights offering to shareholders. If all of the rights are exercised, the company will receive gross proceeds of approximately $88-million (U.S.). The net proceeds from the rights offering will be used by the company to reduce its long-term debt.
As set out in the final prospectus, each shareholder of record at the close of business on Aug. 23, 2007, will be entitled to one right for every common share then held. A total of 1.6 rights will entitle the holder to purchase one common share at a price of $3.61 (Canadian) or, for subscribers resident in the United States, $3.44 (U.S.), prior to 5 p.m. (Montreal time) on Sept. 17, 2007. The subscription price for the rights offering is equal to the simple average of the closing price of Intertape's common shares on the Toronto Stock Exchange during the 20 trading days immediately preceding the day on which Intertape filed its final prospectus. Under an additional subscription privilege, holders of rights who fully exercise them will be entitled to subscribe for additional common shares, if available, that were not otherwise subscribed for in the rights offering.
The final prospectus will be mailed to shareholders of record on Aug. 23, 2007, and will be available on SEDAR.
If all of the rights are exercised, Intertape will issue 25,616,837 shares, representing an amount equal to 62.5 per cent of the 40,986,940 currently issued and outstanding shares.
In connection with the rights offering, Intertape has filed a registration statement with the United States Securities and Exchange Commission relating to the common shares to be issued pursuant to the rights offering.
Toronto Stock Exchange listing
The TSX has conditionally approved the listing of the rights. On Aug. 21, 2007, the rights will commence trading on the TSX under the trading symbol "ITP.RT" and the company's common shares will commence trading on an "ex rights" basis, meaning that persons purchasing common shares on or following that date will not be entitled to receive the related rights. The rights will remain listed and posted for trading until noon (Montreal time) on Sept. 17, 2007.
Standby purchase agreements
As previously announced, Intertape has entered into standby purchase agreements with each of Letko, Brosseau & Associates Inc., Wells Capital Management Inc. and Brandes Investment Partners LP, its three principal shareholders. Under these agreements, each has agreed to exercise rights and to purchase certain of the shares that are not otherwise subscribed for in the rights offering. The total commitment from the three principal shareholders to Intertape is $56.6-million (U.S.).
In addition, four of the company's current senior officers and one former senior officer have entered into a standby purchase agreement with the company pursuant to which they have agreed to exercise all of their rights, and to purchase certain of the shares that are not otherwise subscribed for in the rights offering. The total commitment from the five to Intertape is $6.0-million (U.S.). The five senior officers are Eric E. Baker, chairman of the board of directors, Melbourne F. Yull, executive director, Gregory A. Yull, president, distribution products, Andrew Archibald, CA, former chief financial officer, and Christopher J. Winn, secretary.
The commitments from the three principal shareholders and five senior officers of the company, which in the total amount to $62.6-million (U.S.), are subject to standard conditions.
To Intertape's knowledge, Letko, Brosseau & Associates Inc. exercises control or direction over 7,444,242 Intertape shares (18.16 per cent), Wells Capital Management, Inc. exercises control or direction over 6,807,041 shares (16.61 per cent), and Brandes Investment Partners LP exercises control or direction over 4,483,971 shares (10.94 per cent). The purchase of shares by the three principal shareholders pursuant to the rights offering may have a material effect on the control of Intertape, although to the company's knowledge, the three principal shareholders do not act in concert with respect to the company. If only the three principal shareholders and five senior officers acquire shares in the rights offering, as referred to above, the three principal shareholders will exercise control or direction over an aggregate of approximately 57.4 million shares, or 59.45 per cent of the then-outstanding shares of the company. The five senior officers do not own a material number of shares.
Pricing of rights offering
Staff Notice 2006-0004 of the TSX sets out that the TSX expects that securities offered by way of a rights offering be offered at a "substantial discount" to the "market price" of a listed company's shares on the TSX. The term "market price" is defined, in effect, as the closing price of the listed company's shares on the TSX on the day before the transaction. According to the TSX staff notice, in the absence of a significant discount and the presence of a "backstop" party (such as the company's three standby purchasers), the TSX is concerned that a listed issuer may be using a rights offering as a means to allow a backstop party to gain a significant interest in the listed issuer without obtaining shareholder approval. In the case of the company's rights offering, the TSX staff notice would require that the subscription price be similar to the closing price of the company's common shares on the TSX on the day preceding the day on which the final prospectus was filed ($2.52), less a discount of 15 per cent.
Under the TSX company manual, there is an exemption from the foregoing requirement, upon written application to the TSX, if the board of directors of a listed company adopts a resolution stating that: (i) the listed company is in serious financial difficulty; (ii) the application is made upon the recommendation of a committee of the board of directors whose members are free from any interest in the transaction and unrelated to the parties involved in the transaction; (iii) the transaction is designed to improve the financial situation of the listed company; and (iv) based on the determination of the committee of the board of directors, the transaction is reasonable for the listed company in the circumstances. The board of directors of the company has used this exemption, so as to avoid issuing shares at a significant discount to market price, which the board feels would be unduly dilutive for the company. The board of directors believes that the subscription price is reasonable and fair to all shareholders, as it is equal to the simple average of the closing price of Intertape's common shares on the TSX during the 20 trading days immediately preceding the day on which Intertape filed its final prospectus.
Accordingly, the board of directors has determined that the company is in serious financial difficulty, the rights offering is designed to improve the company's financial situation and, based upon the determination of a committee whose members are free from any interest in the rights offering, the rights offering is reasonable for the company in the circumstances.
We seek Safe Harbor.
