Lakeside Steel, JMC Steel Group Execute Arrangement Agreement
01/26/2012 - Lakeside Steel Inc. and JMC Steel Group, Inc. have entered into a definitive agreement pursuant to which JMC Steel Group, Inc., through a wholly owned subsidiary, has agreed to acquire all of the issued and outstanding common shares of Lakeside at a price of $0.2983 per share in cash.
Lakeside Steel Inc. and JMC Steel Group, Inc. have entered into a definitive agreement pursuant to which JMC Steel Group, Inc., through a wholly owned subsidiary (JMC Steel), has agreed to acquire all of the issued and outstanding common shares of Lakeside at a price of $0.2983 per share in cash. This amount represents a premium of approximately 326% over the closing price of Lakeside's shares of $0.07 on December 15, 2011, the last trading day prior to Lakeside announcing that it was in exclusive negotiations with a potential purchaser, and a premium of approximately 130% over the volume-weighted average price of Lakeside's shares of $0.13 for the 30 trading days prior to and including December 15, 2011.
The transaction, which is subject to the satisfaction or waiver of certain customary closing conditions, is currently expected to be completed in or prior to early second quarter 2012.
Under the arrangement agreement, JMC Steel has also agreed to provide Lakeside with a secured loan in the aggregate principal amount of up to US$50,000,000. Funding under the loan agreement is subject to the satisfaction of certain conditions, including execution of an intercreditor agreement with Lakeside's existing senior lender. The loan would otherwise mature on June 29, 2012.
One of Lakeside's principal shareholders, Jaguar Financial Corp., as well as all of the directors and executive officers of Lakeside, have entered into voting support agreements with JMC Steel; the supporting shareholders have irrevocably agreed to vote their shares in favor of the arrangement. The Supporting shareholders beneficially own or exercise control or direction over, collectively, approximately 14.5% of the outstanding common shares of Lakeside.
The board of directors of Lakeside has unanimously approved (with two directors having abstained from voting) the entering into the agreement and has determined that the arrangement is in the best interests of Lakeside and its shareholders and unanimously recommends that shareholders vote in favor of it. The approval by the Board followed the unanimous recommendation of a special committee of independent directors that was formed, among other things, to review the terms and conditions of the arrangement.
The completion of the proposed arrangement is subject to a number of customary conditions, including the approval of the Ontario Superior Court of Justice and the approval of two-thirds of the votes cast by Lakeside's shareholders and a simple majority of Lakeside's disinterested shareholders. The meeting is expected to be held in March 2012.
"This strategic acquisition will dramatically increase our capabilities and presence in the energy pipe market," said Barry Zekelman, Executive Chairman of JMC Steel Group, Inc. "The energy pipe market is a very large market and has significant growth potential. Lakeside Steel is a solid platform for JMC Steel Group, Inc. to grow and expand in this area."
"Lakeside's manufacturing capabilities including the new heat treat and finishing operations in Alabama are a great complement to our existing pipe business," said Frank Riddick, Chief Executive Officer of JMC Steel Group, Inc. "We are excited about the synergies generated by this acquisition and look forward to leveraging our combined strengths in the market."
Unless otherwise indicated, all dollar amounts are in Canadian dollars.
Lakeside is the parent company of Lakeside Steel Corp., Lakeside Steel Alabama Inc., and Lakeside Steel Texas Inc. Lakeside has operating facilities located in Welland, Ont., Thomasville, Ala., and Corpus Christi, Tex., and two processing facilities currently being constructed in Thomasville. The company is a diversified steel pipe and tubing manufacturer with a focus on manufacturing and upgrading oil country tubular goods. Lakeside's customers include large oil and gas end users as well as distributors across North America.
Lakeside Steel Alabama will be a diversified steel pipe manufacturer with end-finishing and heat treat capabilities strategically situated in the southern United States on successful completion of construction of the new facilities in Thomasville, Ala. Construction of the Alabama facilities is currently under way.
JMC Steel Group, Inc. is the largest independent steel tubular manufacturer in North America, producing more than 2 million tons of pipe and tubular products a year and employing more than 1800 people. It operates 12 manufacturing facilities in the U.S. and Canada and is a market leader in steel hollow structural sections (HSS), standard pipe, and electrical conduit. The JMC Steel Group, Inc. is headquartered in Chicago, Ill.; its two largest companies, Atlas Tube and Wheatland Tube, market products under their brand names.
