VLN Velan Inc

Velan Inc. (TSX: VLN) (“Velan” or the “Company”), a world-leading manufacturer of industrial valves, announced today major strategic initiatives that will significantly reduce operating and financial risks as well as strengthen its financial position. All amounts are expressed in U.S. dollars unless indicated otherwise.

“We believe these two transactions are key to unlocking Velan’s inherent value and we are delighted with an outcome that makes us a financially and operationally stronger company going forward. The divestiture of asbestos-related liabilities will allow Velan to confidently move ahead with the execution of its business plan while selling French subsidiaries to local interests also supports the protection of French sovereign interests,” stated James A. Mannebach, Chairman of the Board and CEO of Velan.

“Beyond these transactions, the Company will continue as a leader in flow control solutions for clean energy and other industrial sectors driven by its strong brand, high-quality products and a superior market positioning combined with expertise in demanding applications. Our activities will also benefit from robust momentum in the clean energy sector, including nuclear, which is undergoing a multi-year growth cycle throughout the world. We remain well-positioned in this market with our proprietary valve offerings for small modular reactors, along with our global installed base of products at existing nuclear reactors. In addition, we are firmly entrenched in other markets buoyed by global energy transition trends. Consequently, we intend to focus on executing our strategic plan and are committed to delivering sustained profitable growth. The Company continues to review options to maximize value for our shareholders,” added Mr. Mannebach.

“These transactions would meet two key financial objectives, namely the reduction of risk and resolution of our asbestos-related liabilities through the divestiture transaction and the strengthening of our balance sheet. Following their closing, Velan would be virtually debt free which would allow for greater investments in growth opportunities. Ultimately, the successful conclusion of these initiatives would offer a significantly higher value proposition to all our shareholders,” said Rishi Sharma, Chief Financial and Administrative Officer of Velan.

DIVESTITURE OF VELAN’S ASBESTOS LIABILITIES

Velan has entered into an agreement (the “Asbestos Divestiture Agreement”) with an affiliate of Global Risk Capital (the “Buyer”) to permanently divest its asbestos-related liabilities (the “Asbestos Divestiture Transaction”). Global Risk Capital is a long-term liability management company specializing in the acquisition and management of legacy corporate liabilities. The Asbestos Divestiture Transaction will be achieved by Velan selling its existing U.S. subsidiary, Velan Valve Corp., which will have been capitalized with US$143 million (subject to certain adjustments) from Velan and US$7 million from the Buyer. The Asbestos Divestiture Transaction will permanently remove all asbestos-related liabilities and obligations from Velan’s balance sheet and will indemnify Velan for all legacy asbestos liabilities. Velan plans to fund the Asbestos Divestiture Transaction by using available cash and a portion of proceeds from the sale of its French subsidiaries detailed below. The Company will retain its U.S. operations and continue to carry out its activities in the U.S. under a newly created subsidiary.

The closing of the Asbestos Divestiture Transaction is subject to securing financing and other customary closing conditions. If the France Transaction (as defined below) is not completed, the Company will be seeking alternative financing options for the Asbestos Divesture Transaction.

The Asbestos Divestiture Transaction is expected to result in a one-time non-cash charge to earnings of approximately US$67 million, before the benefit of any taxes.

SALE OF FRENCH SUBSIDIARIES

The Company’s wholly-owned subsidiary, Velan Valves Limited, has entered into a memorandum of understanding (the “Memorandum of Understanding”) relating to the sale of 100% of the share capital and voting rights of its French subsidiaries, Segault SAS (“Segault”) and Velan S.A.S. (“Velan France”), to Framatome SAS (“Framatome”), a world leader in nuclear energy, for a purchase price of US$175.2 million (€170 million), with the benefit of the transfer of an intercompany loan of US$23.2 million (€22.5 million), for total consideration to the Company of US$198.4 million (€192.5 million) (the “France Transaction”).

In accordance with French laws, Segault, Velan France, and Framatome will inform and consult their employee representative bodies before any definitive agreement is entered into between the parties.

The completion of the France Transaction under the definitive agreement would be subject to the approval of Velan’s shareholders. Velan Holding Co Ltd. (“Velan Holding”), the controlling shareholder of Velan, has entered into a voting and support agreement with Velan in respect of the approval of the France Transaction.

If, and once a definitive agreement has been signed, a meeting of Velan’s shareholders (the “Meeting”) will be called to consider and approve the France Transaction. Additional information related to the France Transaction would be contained in the management information circular to be distributed in connection with the Meeting.

ADVISORS

In connection with the Asbestos Divestiture Transaction, Ducera Partners LLC is acting as exclusive financial advisor to the Company. Legal counsel was provided by Latham & Watkins LLP in connection with the Asbestos Divestiture Transaction and related corporate matters. Davies Ward Phillips & Vineberg LLP is also acting as legal advisor to the Company. Jones Day is acting as legal advisor to Global Risk Capital.

In connection with the France Transaction, BMO Capital Markets is acting as financial advisor to the Company, and Davies Ward Phillips & Vineberg LLP and Bredin Prat are acting as legal advisors to the Company. McCarthy Tétrault LLP is acting as legal advisor to Velan Holding, and Jones Day is acting as legal advisor to Framatome.

ABOUT VELAN

Founded in Montreal in 1950, Velan Inc. (www.velan.com) is one of the world’s leading manufacturers of industrial valves, with sales of US$346.8 million in its last reported fiscal year. The Company employs 1,617 people and has manufacturing plants in 9 countries. Velan Inc. is a public company with its shares listed on the Toronto Stock Exchange under the symbol VLN.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Certain statements made in this news release are forward-looking statements within the meaning of applicable securities laws, including, but not limited to, statements related to the rationale of the Board of Directors for approving the entering into the Asbestos Divestiture Agreement and the Memorandum of Understanding, the expected benefits of the Transactions, the timing of various steps to be completed in connection with the Transactions, the prospect of the Company following the completion of the Transactions as a company in the nuclear valve space in North America and the rest of the world, other than France, and other statements that are not material facts. Often, but not always, forward-looking statements can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “believe”, “estimate”, “plan”, “could”, “should”, “would”, “outlook”, “forecast”, “anticipate”, “foresee”, “continue” or the negative of these terms or variations of them or similar terminology.

Although the Company believes that the forward-looking statements in this news release are based on information and assumptions that are current, reasonable and complete, these statements are by their nature subject to a number of factors that could cause actual results to differ materially from management’s expectations and plans as set forth in such forward-looking statements, including, without limitation, the following factors, many of which are beyond the Company’s control and the effects of which can be difficult to predict: (a) the possibility that the Transactions will not be completed on the terms and conditions, or on the timing, currently contemplated, and that it may not be completed at all, due to a failure to obtain or satisfy, in a timely manner or otherwise, required shareholder approval or for other reasons; (b) risks related to tax matters; (c) the possibility of adverse reactions or changes in business relationships resulting from the announcement or completion of the Transactions; (d) the possibility of litigation relating to the Transactions; (e) credit, market, currency, operational, liquidity and funding risks generally and relating specifically to the Transactions, including changes in economic conditions, interest rates or tax rates; and (f) other risks inherent to the Company’s business and/or factors beyond its control which could have a material adverse effect on the Company or the ability to consummate the Transactions.

Readers are cautioned not to place undue reliance on the forward-looking statements and information contained in this news release. Velan disclaims any obligation to update any forward-looking statements contained herein, whether as a result of new information, future events or otherwise, except as required by law.

Contact:
Rishi Sharma, Chief Financial and Administrative Officer	Martin Goulet, M.Sc., CFA
Velan Inc.	MBC Capital Markets Advisors
Tel: (438) 817-4430	Tel.: (514) 731-0000, ext. 229