Fort St. John, British Columbia--(Newsfile Corp. - February 14, 2022) - MACRO ENTERPRISES INC. (TSXV: MCR) (the "Company" or "Macro") and 1325996 B.C. Ltd. ("AcquireCo"), an entity to be controlled by Frank Miles, President, Chief Executive Officer and director of Macro ("Miles"), and jointly owned by Miles, Jeff Redmond, Chief Financial Officer of Macro ("Redmond"), and Kenneth Mastre, Vice President, Pipelines of Macro ("Mastre" and together with Miles and Redmond, the "Participating Shareholders"), are pleased to announce that they have entered into an arrangement agreement (the "Arrangement Agreement") dated February 14, 2022 pursuant to which AcquireCo will acquire all of the outstanding shares in the capital of the Company (the "Macro Shares") by way of a plan of arrangement (the "Plan of Arrangement") under Division 5 Part 9 of the Business Corporations Act (British Columbia) (the "Arrangement"). In connection with the Arrangement, holders ("Macro Common Shareholders") of common shares in the capital of Macro (the "Macro Common Shares"), other than the Participating Shareholders with respect to Macro Common Shares, will receive C$4.00 per share (the "Cash Consideration") for each Macro Common Share held.
The Cash Consideration represents a premium of approximately 46% to the 20-day volume weighted average price of the Macro Common Shares as of the date immediately preceding the date of this announcement. Upon completion of the Arrangement, it is anticipated the Company will become a wholly-owned subsidiary of AcquireCo.
The aggregate consideration payable pursuant to the Arrangement is approximately C$136 million, excluding assumed debt and inclusive of approximately 32.5% of the outstanding Macro Shares held directly or indirectly by the Participating Shareholders (assuming conversion of the Macro Preferred Shares (as defined below) into Macro Common Shares). In order to complete the Arrangement, AcquireCo has obtained binding commitments for senior secured credit facilities from a syndicate of lenders for which HSBC Bank Canada has been mandated the sole lead arranger, sole bookrunner and administrative agent and for a subordinated secured credit facility from another lender (the "Financings"), which Financings are subject to customary conditions precedent. Closing of the Arrangement is not subject to completion of the Financings.
Summary of the Arrangement
Pursuant to the terms of the Arrangement Agreement:
- each Class A Convertible Preference share in the capital of Macro (the "Macro Preferred Shares") held by Miles will be redeemed by Macro and Miles will receive, in accordance with the Plan of Arrangement, an amount equal to $2,666.68 per Macro Preferred Share in respect of each Macro Preferred Share so redeemed and shall receive a dividend in an amount equal to the accrued cumulative dividends, if any, in respect of each Macro Preferred Share held by Miles as of the effective date of the Arrangement;
- each Macro Preferred Share, other than those Macro Preferred Shares held by Miles, will automatically convert into 666.67 Macro Common Shares, being the number of Macro Common Shares issuable for each Macro Preferred Share upon the conversion of such Macro Preferred Share in accordance with their terms and the holders of such Macro Preferred Shares (the "Macro Preferred Shareholders") shall receive a dividend in an amount equal to the accrued cumulative dividends, if any, in respect of each Macro Preferred Share outstanding as of the effective date of the Arrangement;
- Macro Common Shareholders (excluding the Participating Shareholders, but including certain Macro Common Shares held by Miles) will receive, for each Macro Common Share held (including the Macro Common Shares issued to Macro Preferred Shareholders on the conversion of the Macro Preferred Shares in accordance with the Plan of Arrangement), the Cash Consideration; and
- holders ("Macro Optionholders") of the outstanding stock options of Macro ("Macro Options", and together with Macro Shares, "Macro Securities"), excluding Macro Options held by the Participating Shareholders, will receive, for each Macro Option held, an amount equal to the product of: (i) the excess of the Cash Consideration over the exercise price of such Macro Option; and (ii) the number of Macro Shares that are subject to such Macro Option, and if such amount is zero or negative no amount shall be payable (the "Macro Optionholder Consideration").
In accordance with the Plan of Arrangement, the Participating Shareholders are expected to receive either 0.004 of a Class A Preferred share in the capital of AcquireCo ("AcquireCo Class A Shares") or 0.004 of a Class B Preferred share in the capital of AcquireCo ("AcquireCo Class B Shares", and together with the AcquireCo Class A Shares, the "AcquireCo Shares"), as the case may be, for each Macro Common Share held (excluding certain Macro Common Shares held by Miles). It is anticipated that all of the AcquireCo Shares will be held by the Participating Shareholders at closing of the Arrangement. Each class of AcquireCo Shares will be entitled to certain rights and restrictions and will be subject to a customary shareholders' agreement among the Participating Shareholders.
Each Participating Shareholder, all other directors and officers of Macro, and certain other holders ("Macro Securityholders") of Macro Securities, who collectively exercise control or direction over approximately 31.9% of the Macro Common Shares, 97.3% of the Macro Preferred Shares and 34.9% of the Macro Options, have entered into support agreements with AcquireCo pursuant to which, and subject to the terms thereof, they have agreed to vote all their Macro Securities in favour of the special resolution authorizing Macro to complete the Arrangement (the "Arrangement Resolution").
Recommendation of the Board of Directors and the Special Committee
In connection with the Arrangement, the board of directors of Macro (the "Macro Board") formed a special committee of independent directors (the "Special Committee") to, among other things, evaluate and consider whether the Arrangement is in the best interests of Macro, including to consider the effects of the Arrangement on Macro Shareholders and other stakeholders of Macro, and to negotiate the terms and conditions of the Arrangement Agreement. In order to fulfill its mandate, the Special Committee engaged Deloitte LLP to prepare an independent formal valuation of the Macro Common Shares (the "Formal Valuation") in the manner prescribed by Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Formal Valuation will be provided to Macro Securityholders in a management information circular (the "Circular") expected to be mailed to Macro Securityholders in the coming weeks.
The Special Committee has unanimously recommended, and the Macro Board, upon the recommendation of the Special Committee, subject to abstention by Miles, has unanimously determined that the Arrangement is fair to Macro Common Shareholders (excluding the Participating Shareholders), Macro Preferred Shareholders (excluding the Participating Shareholders) and Macro Optionholders (excluding the Participating Shareholders) and is in the best interests of Macro.
The Macro Board, subject to abstention by Miles, unanimously recommends that Macro Shareholders (other than the Participating Shareholders) and Macro Optionholders (other than Participating Shareholders) vote in favour of the Arrangement Resolution.
Additional Terms of the Arrangement Agreement
Completion of the Arrangement is subject to receipt of TSX Venture Exchange ("TSXV") and court approvals, as well as the approval of the Arrangement Resolution by: (i) (A) two-thirds of the votes cast on the Arrangement Resolution by holders of Macro Shares, voting as a single class, present or represented by proxy at the Macro Meeting (as defined below); (B) two-thirds of the votes cast on the Arrangement Resolution by holders of Macro Shares and Macro Options, voting as a single class, present or represented by proxy at the Macro Meeting; (C) two-thirds of the votes cast on the Arrangement Resolution by holders of Macro Common Shares, voting as a separate class, present or represented by proxy at the Macro Meeting; and (D) two-thirds of the votes cast on the Arrangement Resolution by holders of Macro Preferred Shares, voting as a separate class, present or represented by proxy at the Macro Meeting; and (ii) a majority of the votes cast on the Arrangement Resolution by: (A) Macro Common Shareholders, present or represented by proxy at the Macro Meeting, and (B) Macro Preferred Shareholders, present or represented by proxy at the Macro Meeting, in each case voting as a separate class and excluding any votes in respect of Macro Shares that are required to be excluded pursuant to MI 61-101.
The Arrangement Agreement provides for, among other things, non-solicitation covenants, with "fiduciary out" provisions that allow Macro to consider and accept a superior proposal, subject to a "right to match" period in favour of AcquireCo. The Arrangement Agreement also provides for a reciprocal expense reimbursement of up to $1.5 million if the Arrangement Agreement is terminated by Macro or AcquireCo, as the case may be, in certain specified circumstances.
A special meeting (the "Macro Meeting") of holders of Macro Securities ("Macro Securityholders") to consider the Arrangement and to vote on the Arrangement Resolution is expected to be held in April 2022. Completion of the Arrangement is expected to occur in April 2022. For additional information concerning the Arrangement, please refer to the Arrangement Agreement, a copy of which will be filed Macro's SEDAR profile at www.sedar.com.
Advisors
CIBC Capital Markets was retained by the Special Committee as its financial advisor and has provided the Special Committee with: (a) a verbal fairness opinion to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications set forth therein, the Cash Consideration to be received by the Macro Common Shareholders under the Arrangement is fair, from a financial point of view, to the Macro Common Shareholders (excluding the Participating Shareholders) (the "CIBC Common Share Fairness Opinion"); and (b) a verbal fairness opinion to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications set forth therein, the Cash Consideration to be received by Macro Preferred Shareholders per Macro Common Share issued upon conversion of the Macro Preferred Shares into Macro Common Shares under the Arrangement is fair, from a financial point of view, to the Macro Preferred Shareholders (excluding the Participating Shareholders) (the "CIBC Preferred Share Fairness Opinion" and together with the CIBC Common Share Fairness Opinion, the "CIBC Fairness Opinions").
Deloitte LLP was retained by the Special Committee to provide the Formal Valuation in accordance with MI 61-101. In addition, Deloitte LLP has also provided the Special Committee with an independent verbal fairness opinion (the "Deloitte Fairness Opinion") to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications set forth therein, the Cash Consideration to be received by Macro Common Shareholders and Macro Preferred Shareholders in respect of Macro Common Shares issued upon conversion of the Macro Preferred Shares into Macro Common Shares under the Arrangement is fair, from a financial point of view, to the Macro Shareholders (excluding the Participating Shareholders).
Copies of the CIBC Fairness Opinions and the Deloitte Fairness Opinion will be provided to Macro Securityholders in the Circular, a copy of which will be filed under Macro's SEDAR profile at www.sedar.com.
Norton Rose Fulbright Canada LLP was retained by Macro as its legal advisor and Burnet, Duckworth & Palmer LLP was retained by the Special Committee as its legal advisor.
Cormark Securities Inc. was retained by AcquireCo as its financial advisor. Fasken Martineau DuMoulin LLP was retained by AcquireCo. as its legal advisor.
Early Warning Disclosure
Prior to the Arrangement, Miles, with an address of PO Box 6781, Fort St. John, British Columbia, V1J 4J2, owns or controls 9,253,428 Macro Common Shares, 2,100 Macro Preferred Shares, and 70,000 Macro Options to acquire Macro Common Shares representing approximately 29.4% of the issued and outstanding Macro Common Shares on a undiluted basis and 32.3% of the Macro Common Shares on a partially diluted basis.
Prior to the Arrangement, Redmond, with an address of PO Box 6781, Fort St. John, British Columbia, V1J 4J2, owns or controls 115,000 Macro Common Shares and 30,000 Macro Options to acquire Macro Common Shares representing approximately 0.4% of the issued and outstanding Macro Common Shares on a undiluted basis and 0.5% of the Macro Common Shares on a partially diluted basis.
Prior to the Arrangement, Mastre, with an address of PO Box 6781, Fort St. John, British Columbia, V1J 4J2, owns or controls 35,000 Macro Common Shares and 100,000 Macro Options to acquire Macro Common Shares representing approximately 0.1% of the issued and outstanding Macro Common Shares on a undiluted basis and 0.4% of the Macro Common Shares on a partially diluted basis.
This disclosure is issued pursuant to Multilateral Instrument 62-104 - Take-Over Bids and Issuer Bids, which also requires an early warning report to be filed containing additional information with respect to the foregoing matters. A copy of the early warning report will be made available on SEDAR under Macro's issuer profile at www.sedar.com and may be obtained upon request from AcquireCo by contacting Frank Miles at the contact information below.
The Company
Macro's core business is providing pipeline and facilities construction and maintenance services to major companies in the oil and gas industry in northeastern British Columbia and northwestern Alberta. The Company's corporate office is in Fort St. John, British Columbia. Macro's shares are listed on the TSXV under the symbol MCR. Information on the Company's principal operations can be found at www.macroindustries.ca.
Forward-Looking Statement Cautions:
This news release contains certain forward-looking information and forward-looking statements (collectively, "forward-looking statements"), as such terms are defined under applicable securities law, regarding the Company's business and operations. Forward-looking statements are statements that relate to future, not past, events. In this context, forward-looking statements often address expected future business and financial performance and often contain words such as "anticipate", "believe", "plan", "estimate", "expect", and "intend", or other similar expressions.
Forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are beyond the Company's control, that could cause actual results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking statements (including execution risk, market risk, industry risk, market sentiment, the impact of general economic conditions and competition from other industry participants, as well as stock market volatility). In this news release, forward looking statements relate to, among other things, information regarding: (a) the terms and conditions of the Arrangement (including the Cash Consideration and the Macro Optionholder Consideration); (b) satisfaction of the conditions precedent to the Arrangement, if at all; (c) timing and consummation of, the Arrangement, if at all (on the same terms and conditions or otherwise); (d) the availability of the Financings on the terms agreed; and (e) the anticipated benefits of the Arrangement, if any, to Macro Securityholders and other stakeholders of Macro (including economic, business, competitive and other benefits). Readers are referred to the Company's public disclosure record which are available on SEDAR (www.sedar.com). While such forward-looking statements are expressed by the Company, as stated in this release, in good faith and believed by the Company to have a reasonable basis, they are subject to important risks and uncertainties including, without limitation, risks relating to stock exchange, court, regulatory and other approvals required in connection with the Arrangement, risks relating to the satisfaction or waiver of the conditions precedent to the Arrangement Agreement (if at all) and adverse changes in applicable laws or regulations, which in each case could cause actual results to differ materially from future results expressed, projected or implied by the forward-looking statements. As a result of these risks and uncertainties, the proposed transaction could be modified, restructured or not be completed, and the results or events predicted in these forward-looking statements may differ materially from actual results or events. These forward-looking statements are not guarantees of future performance, given that they involve risks and uncertainties. The Company is not affirming or adopting any statements made by any other person in respect of the proposed transaction and expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except in accordance with applicable securities or to comment on expectations of, or statements made by any other person in respect of the proposed transaction. Investors should not assume that any lack of update to a previously issued forward-looking statement constitutes a reaffirmation of that statement. Reliance on forward-looking statements is at investors' own risk. Although the Company believes that the assumptions and factors used in preparing the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this news release, and no assurance can be given that such events will occur in the disclosed timeframes or at all. In addition, this news release contains future-oriented financial information and financial outlook, as such terms are defined under applicable securities laws. The future-oriented financial information and financial outlook contained herein are made solely based on information available to the Company as of the date hereof and are subject to the same assumptions, risk factors and other qualifications as all other forward-looking statements, and are presented solely for the purpose of conveying the current anticipated expectations of the Company and may not be appropriate for any other purposes. The forward-looking statements contained in this news release are made as of the date of this news release and, except as required by applicable laws and the policies of the TSXV, the Company disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement. Trading in the securities of the Company should be considered highly speculative. There can be no assurance that Company will be able to achieve all or any of its proposed objectives.
For further information please contact:
Frank Miles
President and C.E.O.
Phone: (250) 785-0033
Bob Fedderly
Special Committee
Phone: (250) 787-0398
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
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