Shawcor Ltd. entered into an agreement to acquire ZCL Composites Inc. for approximately CAD 310 million.
January 19, 2019
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Shawcor Ltd. (TSX:SCL) entered into an agreement to acquire ZCL Composites Inc. (TSX:ZCL) for approximately CAD 310 million on January 20, 2019. Under the terms of the agreement, Shawcor will pay CAD 10 for each share of ZCL Composites. The arrangement values ZCL at an enterprise value of approximately CAD 312 million, including CAD 4 million of net debt outstanding as at September 30, 2018. Shawcor will finance the transaction with a combination of cash on hand and drawing on its new credit facility. Shawcor entered into a commitment letter with The Toronto-Dominion Bank and National Bank of Canada as co-lead arrangers providing a CAD 662.7 million, four-year senior unsecured revolving credit facility. The credit facility will be used to fund the transaction and replace Shawcor’s existing senior credit facility. In case of termination, ZCL will pay a termination fee of CAD 9 million.
The transaction is subject to number of other customary conditions, including court approval, regulatory approvals, HSR approval, ZCL shareholders’ approval and Directors approval. The agreement will be considered by ZCL shareholders at a special meeting expected to be held in March 2019, and will require the approval of at least 66 2/3% of the votes cast by ZCL shareholders at the meeting. The Board of Directors of ZCL approved the transaction and recommends its shareholders to vote in favor of the agreement. Institutional Shareholder Services Inc. and Glass, Lewis & Co. recommended that shareholders of ZCL to vote in favor of the agreement. The special meeting of ZCL Composites shareholders to approve the transaction will be held on March 26, 2019. On February 11, 2019, the transaction received early termination notice from FTC. As of March 26, 2019, ZCL Composites shareholders approved the transaction. ZCL expects to apply for a final order of the Court of Queen's Bench of Alberta approving the Arrangement on March 29, 2019. The transaction is expected to close early in the second quarter of 2019. As of March 7, 2019, the transaction is expected to close on April 2, 2019. The transaction is will generate meaningful accretion to the shareholders of Shawcor without any dilution and add further stability to earnings and is anticipated to be low double-digit accretive to 2019 adjusted EPS, based on CAD 4 million of annualized cost savings. National Bank Financial, Inc. acted as financial advisor and Simon Romano of Stikeman Elliott LLP acted as legal advisor to Shawcor. Raymond James Ltd. acted as financial advisor and David Spencer, Drew Broughton, Bruce Hibbard, Kevin Lynch, Anu Nijhawan, Beth Riley, and James McClary of Bennett Jones LLP acted as legal advisors to ZCL Composites. Richard Raymer, James Guttman, Sudeep Simkhada, John Hollinrake and Michael Lindsay of Dorsey & Whitney LLP acted as legal advisors to Shawcor Ltd. Thomas Lovett, Mark Salsbury, Edward Wegerson and Jason Leckerman of Ballard Spahr LLP acted as legal advisors for ZCL. John Lorito, Michael Kilby, Dennis Langen, Michael Mestinsek, Myriam Fortin and John O’Connor of Ballard Spahr LLP acted as legal advisors for Shawcor.
Mattr Corp., formerly Shawcor Ltd., is a global material technology company serving critical infrastructure markets, including electrification, transportation, communication, water management and energy. The Company operates through a network of fixed and mobile manufacturing and service facilities. The Company operates through two business segments: Composite Technologies and Connection Technologies. Composite Technologies segment consist of two operating units: the Xerxes business, which manufactures fiberglass reinforced plastic underground storage tanks primarily for the retail fuel, storm water and wastewater markets; and the FlexPipe business, which manufactures flexible fiberglass reinforced composite pipe used for oil and gas gathering and water disposal lines and carbon dioxide injection lines. Connection Technologies segment supplies specialty wire and cable and integrated heat shrink solutions.