Parkland Industries Ltd
PKI
Shares issued 5,462,088
Apr 26 2002 close $16.200
Monday Apr 29 2002
News Release
Mr. Andrew Wiswell reports
PARKLAND ANNOUNCES REORGANIZATION INTO AN INCOME
FUND; STRUCT ...
Parkland Industries' board of directors has unanimously agreed to reorganize the
company into an income trust named Parkland Income Fund. The proposed
reorganization is the foundation of a plan to unlock the value of significant cash
flow generated by the company and to provide an enhanced platform for growth.
The reorganization will be accomplished by way of a plan of arrangement that is
subject to approval by holders of Parkland common shares at a meeting to be
held on June 12, 2002. The plan of arrangement will also be subject to court and
other regulatory approvals.
Under the terms of the arrangement, shareholders of Parkland can elect to
receive, for each Parkland common share, either: i) two units in the fund, or ii) if a
Canadian resident, two units (LP units) in a limited partnership controlled by the
fund, with the LP units being exchangeable for fund units on a 1:1 basis. In
connection with the arrangement, it is expected that all stock options outstanding
under the company's stock option plan will be exercised, resulting in 6,042,488
common shares being outstanding and a total of 12,084,976 fund units and LP
units being outstanding following the effective date of the arrangement. Subject to
approval of the arrangement, shareholders will also receive a one-time special
cash dividend of $1.00 for each Parkland common share.
After completion of the arrangement, the fund, together with the limited
partnership that will issue the LP units, will own, indirectly, securities which
collectively represent the right to receive all cash flow available for distribution
from the business of Parkland, after interest on debt, maintenance capital
expenditures and other cash requirements. The board of directors has set the initial
level of monthly distributions at 14 cents per fund unit, or the equivalent of 28
cents per common share.
Reasons for reorganizing
Some of the compelling reasons for converting Parkland into an income trust
include the following:
Parkland is a business that is ideally suited for an income trust structure.
Parkland has low continuing maintenance capital cash requirements relative to its
ability to generate relatively stable cash flow.
In addition, the company has reached the critical asset mass and geographic
diversification necessary to maintaining a strong and stable annual cash flow base.
The income trust structure provides an efficient model for both the support of
operations and the return of available cash flow to unitholders of the fund.
Investors in income trusts generally value units on a cash-on-cash return basis,
which is expected to result in more favourable valuation levels of the fund units
compared with the existing common shares.
Parkland expects holders of fund units will enjoy enhanced market liquidity relative
to that which currently exists for holders of Parkland common shares.
The fund units are expected to provide an enhanced ability for the fund to pursue
its growth strategy, through access to equity capital and as a form of consideration
for acquisitions.
Plan of arrangement
The reorganization will be effected pursuant to an arrangement under the Business
Corporations Act (Alberta). The arrangement is subject to approval of at least
66-2/3 per cent of the votes cast by common shareholders of Parkland. Directors
and senior officers who control approximately 33 per cent of the company's
issued and outstanding common shares, including Jack and Joan Donald, have
indicated to the board of directors that they will vote in favour of the arrangement.
Under the arrangement, shareholders will have the following options:
to receive two fund units for every one common share of Parkland; or
if a Canadian resident, to receive two LP units for every one common share of
Parkland.
Subject to approval of the arrangement, shareholders will receive a one-time
special cash dividend of $1.00 for each common share held. Parkland expects to
continue to enjoy a strong balance sheet following the conversion. Pro forma net
debt (long-term debt minus net working capital) at March 31, 2002, adjusted for
proceeds to be received on the exercise of options and payment of the
$1.00-per-share special dividend, was approximately $8-million or approximately
0.4 times the last 12 months cash flow.
The conversion of Parkland common shares into fund units will be a taxable
transaction. The alternative of receiving LP units may provide Canadian resident
shareholders who elect this option with the opportunity to defer all or part of the
income tax consequences of the arrangement until the earlier disposition of the LP
units and June 30, 2008.
LP units will be non-transferable, foreign property investments and are intended to
have the same economic rights and benefits as the fund units. In addition, in certain
circumstances, Canadian resident shareholders who hold their Parkland common
shares through holding companies may be able to realize certain tax advantages by
exchanging their holding shares for fund units or LP units. Current and potential
shareholders are encouraged to seek independent tax advice in respect of the
consequences to them of the arrangement.
RBC Capital Markets has provided advisory services to both a special committee
of the board and the board of directors of Parkland, and has provided an opinion
to the board of directors as to the fairness of the arrangement, from a financial
point of view, to the existing Parkland common shareholders.
In addition to the requirement for shareholder approval, the reorganization will be
contingent on the concurrent satisfaction of other conditions, including obtaining
regulatory and court approvals.
An information circular detailing the plan of arrangement is expected to be mailed
to securityholders during the week of May 6, 2002, and will be available on the
Internet at www.sedar.com. The meeting of Parkland shareholders to consider the
transactions will be held June 12, 2002, in Red Deer, Alta. |
