Catalyst Paper Rejects Third Avenue's Unsolicited Offer
Aug. 28, 2006 - The Board of Directors of Catalyst Paper Corporation has unanimously recommended that shareholders reject the unsolicited offer made on August 11th, 2006 by Third Avenue Management ("Third Avenue" or "TAM"), through CTOE LLC, for up to 39 million shares of Catalyst for Cnd$3.30 per share.
The Board's recommendation is contained in a Directors' Circular filed today with Canadian securities regulators. The Circular contains opinions from Catalyst's financial advisors, CIBC World Markets and UBS Securities Canada Inc., that the consideration offered under the Third Avenue offer is inadequate, from a financial point of view, to shareholders of Catalyst.
"The Board's concerns with Third Avenue's offer relate to the price they are offering to pay for effective control of the Company, which we believe is inadequate, the coercive nature of the bid, and the fact that they have failed to provide a clear indication of their plans for the Company should they gain control," said Keith Purchase, Chairman of the Catalyst Board of Directors. "Third Avenue's actions and statements regarding its intentions for Catalyst have been unclear and inconsistent. Given the partial nature of Third Avenue's offer, shareholders need to understand what Third Avenue's plans are before they can make a proper evaluation.
"We respect Third Avenue's reputation as a deep value investor and share their view that Catalyst is significantly undervalued. The Board is confident in management's ability to continue delivering significant productivity gains in the years ahead, but we do not believe that value is reflected in the Third Avenue offer. For this and the other reasons outlined in the Directors' Circular, we are recommending that shareholders reject the Third Avenue offer and not tender their shares," Purchase added.
Russell J. Horner, president and CEO, said, "Catalyst has delivered strong operating performance in a very difficult industry environment, and we have a clear plan in place for creating significant additional value this year and in the years ahead. The Board and management are committed to serving the best interests of all Catalyst shareholders, and continuing to meet the needs of our customers."
Reasons for the Recommendation
After careful consideration of the Third Avenue offer, the Catalyst Board of Directors has determined that the Third Avenue offer is inadequate and not in the best interests of Catalyst shareholders (other than certain parties related to CTOE LLC). The Board unanimously recommends that shareholders reject the Third Avenue offer and not tender their shares to it. The Board cited a number of reasons for its recommendation, including that:
- The TAM offer reflects neither the value of effective control that
TAM would acquire the ability to exercise, nor the long-term value of
- The timing of the TAM offer is opportunistic and would deprive
shareholders whose shares are taken up under the TAM offer the
benefit of any future improvement in Catalyst performance and/or
- In a difficult industry environment, Catalyst has demonstrated
superior performance relative to its peers.
- As a partial bid the TAM offer is, by its very nature, coercive.
- The TAM offer, and TAM's public statements and positions taken in
respect of Catalyst, make TAM's intentions for Catalyst unclear.
- If successful, the TAM offer would reduce Catalyst's public float,
which could adversely affect the market for, and trading price of,
- In the opinion of both of Catalyst's financial advisors, the TAM
offer is financially inadequate.
- If the TAM offer is successful, TAM could sell its stake in Catalyst
in a subsequent transaction in which it would receive a premium that
may not be available to other shareholders.
- There may be alternatives to the TAM offer that could potentially
provide shareholders with greater value.
The Catalyst Board of Directors and Special Committee are considering alternatives to the Third Avenue offer, and discussions have commenced with several parties who have expressed interest in a potential alternative transaction. Shareholders are reminded that, particularly in this difficult industry environment, there can be no assurance that any alternative transaction will result from these discussions.
Catalyst is a leading producer of mechanical printing papers in North America. The company also produces market kraft pulp and owns Western Canada's largest paper recycling facility. With five mills employing 3,800 people at sites within a 160-kilometre radius on the south coast of British Columbia, Catalyst has a combined annual capacity of 2.4 million tonnes of product. Catalyst Paper Corporation common shares trade on the Toronto Stock Exchange under the symbol CTL. The company is headquartered in Vancouver, BC.
New York, NY-based Third Avenue Management is an investment advisory firm that offers its services to mutual funds, private and
SOURCE: Catalyst Corp.