Mercer International Tops Resolute's Take-over Bid for Fibrek

Feb. 10, 2012 - Canadian pulp producer Mercer International today said that it has entered into a support agreement with Fibrek for Mercer to acquire all of the issued and outstanding common shares of Fibrek by way of a take-over bid.

Mercer's offer represents a premium to Fibrek's shareholders of 30% over the unsolicited insider bid by AbitibiBowater Inc. (Resolute Forest Products), Mercer said.

Pursuant to the offer, Fibrek shareholders will have the ability, on an individual basis, to elect to receive:

  • C$1.30 in cash per Fibrek Share;
  • 0.1540 of a share of Mercer's common stock per Fibrek Share; or
  • C$0.54 in cash plus 0.0903 of a Mercer Share per Fibrek Share,

subject to proration necessary to effect maximum aggregate cash consideration of C$70.0 million and maximum aggregate share consideration of 11,741,496 Mercer Shares.

The board of directors of Fibrek has unanimously approved entering into the Support Agreement and unanimously recommends that Fibrek shareholders tender to the Offer.

"We are pleased to have the full support of Fibrek's board of directors for a transaction that we believe will deliver significant benefits to both companies' customers, employees and shareholders," said Jimmy S.H. Lee, Mercer's President and CEO. "The acquisition of Fibrek clearly fits within our strategy of focusing on world-class production assets that produce high quality pulp.

"Additionally, the ability of Fibrek's St. Felicien mill to produce and sell surplus renewable energy is in line with our goal of increasing our revenues from energy sales," Lee said.

"We believe that Fibrek's mills are complementary to our existing operations and we feel that, through active management, the acquisition of Fibrek will generate increased value for our shareholders," he added.

The deal comes just days after Fibrek rejected AbitibiBowater's bid of about C$130 million.

"This has been a challenging time for Fibrek ... we believe this offer meets our goal and provides a significant premium relative to Abitibi's unsolicited offer," Fibrek's chairman Hubert Lacroix said in a statement.

The Support Agreement provides for, among other things, a non-solicitation covenant on the part of Fibrek, subject to customary "fiduciary out" provisions, a right in favor of Mercer to match any superior proposal and a termination fee of C$8.5 million payable to Mercer in certain circumstances, including if Fibrek accepts a superior proposal.

Mercer's offer will be open for acceptance for a period of not less than 35 days from its commencement and may be extended from time to time.

Mercer intends to finance the cash portion of the offer by way of new credit facilities to be established with Quebec based capital providers.

Mercer plans to hold a special meeting of its shareholders in order to obtain shareholder approval of the issuance of the Mercer Shares, as required under the rules of the NASDAQ Global Market. In connection with such approval, Mercer has entered into voting support agreements with two institutional shareholders and its President and Chief Executive Officer, who collectively hold, directly or indirectly, approximately 44% of the outstanding Mercer Shares, to vote all of their Mercer Shares in favour of the Shareholder Approval.

Raymond James Ltd. is acting as financial advisor to Mercer, while TD Securities Inc. is acting as financial advisor to Fibrek. Sangra Moller LLP is acting as legal advisor to Mercer and Stikeman Elliott LLP is acting as legal advisor to Fibrek.

Mercer International Inc. is a global pulp manufacturing company. Mercer operates three NBSK pulp mills with a consolidated annual production capacity of 1.5 million tons.

SOURCE: Mercer International