Toronto, Ontario and Edmonton, Alberta – February 2, 2009: Aecon Group Inc. ("Aecon") (TSX:ARE) and Lockerbie & Hole Inc. ("Lockerbie") (TSX:LH) today announced that they have entered into an agreement which contemplates that Aecon will acquire, by plan of arrangement, all of the issued and outstanding common shares of Lockerbie for total consideration, on a fully diluted basis, of approximately $220 million.
Under the terms of the proposed transaction, Lockerbie shareholders will receive $8.00 in value for each Lockerbie common share, comprised of, at the election of each shareholder, cash or common shares of Aecon or a combination thereof, subject to proration such that 75% of the total consideration will be paid in cash and 25% of the total consideration will be paid in Aecon common shares.
The value of Aecon common shares for purposes of determining the exchange ratio for the transaction will be based on the 20-day volume weighted average price of Aecon common shares in the period prior to closing of the transaction, subject to a collar which provides a ceiling and floor for the exchange ratio at 10% above and 10% below, respectively, Aecon's closing trading price on January 30 of $10.25 with the exchange ratio free to float within this collar. Aecon and Lockerbie will announce the exchange ratio prior to the meeting of Lockerbie’s shareholders to vote on the transaction.
The transaction represents a 30% premium to Lockerbie’s closing trading price of $6.15 on January 30, 2009, the last day of trading prior to announcement of the transaction, and a 33% premium over the volume-weighted average trading price of the shares over the last 20 trading days.
"We are attracted by the strength and depth of Lockerbie's management team, their strong market position and their best in class capabilities. The opportunity to add their impressive and respected management team is a key component of this transaction," said Scott Balfour, President and CFO of Aecon. “We believe this is a unique opportunity for Aecon to secure a leading position in the mechanical/electrical and water/wastewater markets in Western Canada, and to further build on our strength in Western Canada’s industrial markets, including the ongoing maintenance requirements of existing oil sands infrastructure, all of which we believe have significant long term growth potential."
“This transaction also brings significant opportunities to leverage the complementary skills and client relationships of both companies, including bringing Aecon's civil and utilities capabilities to augment Lockerbie's water/wastewater and mining operations, as well as applying Aecon's power generation experience to Lockerbie's market strength in the west,” Mr. Balfour said.
"We quickly saw that the Aecon and Lockerbie management teams share a common set of values, and that the increased scale and breadth of the combined company will provide a great environment for the continued growth and development of the Lockerbie team," said Gordon L. Panas, Lockerbie's President and CEO. "The complementary skills and experience of Aecon and Lockerbie mean that we will be able to offer more integrated services to our clients, and thus provide an even stronger platform for the continued growth of our business. I believe the combination of Lockerbie and Aecon is a compelling strategy."
The transaction is expected by Aecon’s management to be accretive to earnings per share in the first year, excluding the temporary impact of the amortization of the "intangible" value of Lockerbie's backlog that will be recorded as part of the transaction.
Upon completion of the transaction, J.D. Hole, Chairman of Lockerbie & Hole, will join Aecon’s Board of Directors. Mr. Hole is a former CEO of Lockerbie & Hole, and is credited with leading the company into new territories and markets, including the industrial and municipal market sectors.
Also upon completion of the transaction, Gordon Panas will join Aecon as Executive Vice President and Chief Financial Officer.
The combined company will employ approximately 9,000 people during peak construction, including approximately 1,500 full time salaried employees (1,100 from Aecon and 400 from Lockerbie) and approximately 7,500 hourly employees (5,000 Aecon and 2,500 Lockerbie).
The Boards of Directors of both Aecon and Lockerbie have unanimously approved the transaction. Lockerbie’s Board of Directors has concluded that the transaction is in the best interests of its shareholders, and has resolved to recommend that Lockerbie’s shareholders vote their shares in favour of the transaction.
Closing is expected to occur in early April 2009, subject to regulatory approval, approval of Lockerbie’s shareholders, court approval and certain other conditions. An information circular outlining the transaction is expected to be mailed to Lockerbie’s shareholders in late February 2009 in connection with a meeting of shareholders expected to be held at the end of March 2009 to consider the transaction. The transaction will require the approval of not less than 66 2/3 per cent of the votes cast by the shareholders of Lockerbie.
Certain Lockerbie shareholders, including the Board of Directors and all executive officers, as well as L&H Holdings Corp., a significant shareholder of Lockerbie, representing in aggregate approximately 29% of the outstanding shares, have entered into support agreements to vote their shares in favour of the transaction, subject to certain exceptions. Lockerbie has agreed that it will not solicit or initiate discussions regarding any other business combination or sale of material assets. Lockerbie has also granted Aecon a right to match competing unsolicited proposals. A $7.2 million termination fee is payable to Aecon by Lockerbie or to Lockerbie by Aecon in certain circumstances if the transaction is not completed.
The transaction will be financed by Aecon without any debt through the payment of cash and the issuance of approximately $55 million of Aecon shares, which subject to adjustment at closing will involve the issuance of approximate 5.4 million shares from treasury representing approximately 9% of Aecon’s pro-forma fully diluted shares.
GMP Securities L.P., as exclusive financial advisor to Lockerbie, has advised Lockerbie’s Independent Committee and Board of Directors that it is of the opinion that, as of the date hereof, the consideration to be received under the transaction is fair, from a financial point of view, to Lockerbie shareholders. TD Securities Inc. is acting as exclusive financial advisor to Aecon with respect to the transaction.
Copies of the arrangement agreement and certain other documents will be filed with the Canadian securities regulators and will be available at the Canadian SEDAR website at www.sedar.com.
A conference call has been scheduled for Monday, February 2, 2009 at 4:00 p.m. ET. Participants should dial 1-877-871-4106 or 416-620-2408 at least 10 minutes prior to the conference time of 4:00 p.m.
A replay will be available after 6:00 p.m. at 1-800-558-5253 or 416-626-4100 until midnight, February 11, 2009. The pass code is 21414097.
Lockerbie was founded in 1898 and is one of the largest mechanical construction contractors in. Lockerbie is a multi-disciplined contractor providing mechanical, electrical, instrumentation, pipe fabrication, module assembly, boiler erection, insulation and civil construction services primarily to the oilsands, mining, institutional, municipal and commercial market sectors. Lockerbie is headquartered in .