TORONTO – CanWest Global is pulling the income trust it created less than two years ago to hold its newspapers and some other assets back into the fold.
In legalspeak: "CanWest Global Communications Corp. and CanWest MediaWorks Income Fund announced today that the Fund has entered into a privatization agreement with CanWest MediaWorks Limited Partnership (the "Limited Partnership"), in which CanWest MediaWorks Inc. ("CanWest MediaWorks"), a wholly-owned subsidiary of CanWest, holds an approximate 74% interest and the Fund holds an approximate 26% indirect interest, pursuant to which each of the Fund’s issued and outstanding units are to be redeemed for $9 in cash."
Whew.
The proposed price represents a premium of 28% over the closing price on the TSX for the Fund’s units on January 3, 2007 – which was the date on which CanWest MediaWorks first raised the prospect of a privatization transaction with the Fund’s Board of Trustees. The price also represents a 17% premium over the closing price on February 6, 2007, the day before the Fund announced that it had established a special committee of independent trustees to consider any proposal that CanWest MediaWorks might make in respect of a possible going private or similar transaction.
However, it’s only a 3.6% premium over yesterday’s close of $8.30. Investors have bid it up just over $9 per unit today. It began trading in late 2005 at just over $9.
"The Fund’s independent committee and the independent members of the board of trustees have unanimously determined that the proposed privatization is fair to unitholders and is in the best interests of the Fund," says the press release.
CIBC World Markets has provided an opinion saying the offer is a fair one for unitholders.
A special meeting of unitholders to consider the deal will be held on July 4, 2007. It requires the approval of 66 2/3% of the votes for approval.
If the Fund’s unitholders approve the privatization, closing is expected to occur on or about July 10, 2007, with a final redemption of the Fund’s units expected to occur on or about July 12, 2007.
"Given the changes in the income trust environment, we believe this transaction provides the best opportunity for the Fund’s unitholders to realize value," said Leonard Asper, president and CEO of CanWest, recognizing the changes to the tax rules on income trusts announced by the federal government last Halloween. "As well, CanWest’s shareholders will benefit from this transaction, which will be financed by the Limited Partnership, through the reduction of costs achieved through simplification of the organizational structure and a more appropriate capital structure going forward."
The cost of the privatization ($495 million), together with a refinancing of the Limited Partnership’s existing credit facility, will be funded through a $1.3 billion short-term loan facility to be provided by The Bank of Nova Scotia.
