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Prudential Steel and Maverick Tube agree to merge
Prudential Steel Ltd PTS
Shares issued 30,235,572 Jun 9 close $16.00
Mon 12 Jun 2000 News Release
Mr. J. Donald Wilson reports
The company and Maverick Tube Corp. have agreed to combine their businesses
in a transaction that will create the largest North American producer of
welded oil country tubular goods and line pipe for the energy industry and
a major supplier of hollow structural sections for industrial markets. The
combined company will operate 10 tube mills at five locations in the U.S.
and Canada with the capacity to produce approximately 1.5 million tons of
tubular products annually.
Under the terms of the definitive agreement, Prudential shareholders will
receive Maverick common equivalent shares, known as exchangeable shares,
based on a fixed exchange ratio of 0.52 exchangeable shares for each
Prudential share held. The shares will be exchangeable, at each holder's
option, for Maverick common shares on a one-for-one basis. The agreement
was unanimously approved by the boards of directors of both companies.
The combination will result in approximately 34.6 million diluted shares of
Maverick to be outstanding, with a market capitalization of approximately
$1.1-billion based on the June 9, 2000, closing price. Maverick
shareholders will own approximately 53 per cent of the combined company and
Prudential shareholders will own approximately 47 per cent. Maverick will
apply to list its shares for trading on the New York Stock Exchange,
effective simultaneously with the closing of the transaction.
The combined company will be called Maverick Tube Corporation and will be
headquartered in Chesterfield, Missouri. The company's Canadian operations
will continue to be headquartered in Calgary, Alta., and operate under the
Prudential Steel name. Gregg Eisenberg will continue to serve as chairman,
chief executive officer and president of Maverick. J. Donald Wilson,
president and CEO of Prudential will continue in his current role and also
become a director of Maverick after the combination. Barry R. Pearl,
vice-president, finance and chief financial officer of Maverick, will
continue in the same role at the combined company. The 11-member board of
directors of the combined company will include six members from the
Maverick board of directors and five members from the Prudential board of
directors, including the current chairman of Prudential, Norman W.
Robertson. As of June 1, 2000, the combined company would have
approximately 2,000 employees.
The transaction, which is structured as an arrangement under Alberta law,
is expected to be accounted for as a pooling of interest and to qualify as
a tax deferred reorganization. Completion of the transaction is subject to
the approval of the shareholders of both companies and by the Alberta
courts, as well as customary closing conditions, including regulatory and
government approvals in the U.S. and Canada. It is anticipated that the
shareholder meetings and the closing of the transaction would occur during
the third calendar quarter of 2000.
Mr. Eisenberg commented, "We are very excited about combining the U.S. and
Canadian operations of Maverick and Prudential to create a leading
manufacturer that will service and supply the entire North American
customer base. We expect the combined company to realize numerous benefits
from expanded manufacturing and marketing opportunities, as well as the
sharing of 'best practices' among our respective disciplines. Excluding the
impact of any transaction-related charges, we expect that the transaction
will be immediately accretive to both earnings and cash flow, and believe
both companies' shareholders will benefit from the combination and future
growth initiatives. We believe the transaction will add substantial value
for our combined shareholder base."
Mr. Wilson added, "Maverick and Prudential are uniquely matched to create
long-term shareholder value. With only limited geographical overlap between
the two companies' operations, there is a compelling rationale for
combining the strengths of Prudential's Canadian presence with Maverick's
U.S. market position. The large, financially strong company created from
this transaction will be solidly positioned to pursue a broad array of
growth initiatives. We believe we have structured a combination that will
benefit all of our core constituencies -- customers, employees and
shareholders."
Maverick is being advised by Deutsche Banc Alex. Brown and Raymond James &
Associates, and Prudential is being advised by RBC Dominion Securities.
A joint conference call will be held on Monday morning, June 12, at 11 a.m.
Eastern Standard Time (10 a.m., Central Standard Time and 9 a.m, Mountain
Standard Time). The number for the call is (800) 946-0712 for parties in
both the United States and Canada. Participants should use the
identification code 855957. A conference call replay will be available
starting at 1:00 p.m. Central time on Monday, June 12, through midnight on
Monday, June 26, by dialing (888) 203-1112 and using identification code
940297.
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