First Asset PowerGen Fund and Sprott Power Corp Announce Proposed Merger
October 26 2010 - 8:00AM
Marketwired Canada
First Asset PowerGen Fund (TSX:PGT.UN) ("PowerGen") and Sprott Power Corp.
("Sprott Power") announced today that they have entered into a memorandum of
understanding that provides for a merger (the "Merger") of PowerGen and Sprott
Power by way of a plan of arrangement. The entering into of a definitive
agreement (the "Definitive Agreement") providing for the Merger remains subject
to satisfactory completion of due diligence and the execution of an agreement in
form satisfactory to both parties. PowerGen has agreed not to solicit
alternative transactions and to an exclusivity period until November 25, 2010 in
order to enter into the Definitive Agreement.
Pursuant to the memorandum of understanding, it is proposed that the merged
entity will purchase all of the outstanding units of PowerGen (the "Units") on a
tax-deferred roll-over basis, in consideration of the issuance of approximately
23 million shares (subject to certain adjustments) (the "Shares") being an
exchange ratio of approximately 5.34 Shares for each Unit outstanding, which
would constitute approximately 51% of the total Shares outstanding in the merged
company.
It is intended that, pursuant to the Definitive Agreement, the Merger would
remain subject to standard conditions including, among other things, third party
approvals and consents, including approval by the unitholders of PowerGen
("Unitholders") and the shareholders of Sprott Power, as well as any necessary
regulatory approvals.
The Definitive Agreement will also contain covenants, representations and
warranties, indemnities and other terms and conditions typical of transactions
of the nature and size of the proposed Merger, including that the Unitholders
and Sprott Power shareholders will receive "freely tradable" Shares that are
listed on either the TSX or the TSX-V and that holders of not more than 2.5% of
the units of the Fund and shares of Sprott Power in aggregate have exercised
rights of dissent in respect of the proposed Merger.
Barry Gordon, President and Chief Executive Officer of First Asset, said: "We
think that, by combining the assets of PowerGen with those of Sprott Power,
Unitholders will acquire exposure to a well capitalized, strategically
positioned participant in the space. Jeff Jenner and the Sprott Power management
team are proven, successful veterans of the energy industry. This team's track
record, integrity, knowledge and deep industry understanding makes this an
exciting opportunity for Unitholders. The transaction is intended to be
completed as early as possible in the first quarter of 2011."
Upon the execution of the Definitive Agreement, PowerGen will cease payment of
any further monthly distributions, and will suspend the annual redemption of
Units in January, 2011, both pending the outcome of the meeting of Unitholders.
If the Merger is approved, the board of directors of the merged company will
make all decisions regarding the payment of dividends, if any, in the future.
The combined enterprise will have approximately $40 million in cash, over 20 MW
of operational wind assets, another 37 MW of capacity accepted for PPAs, and a
coast-to-coast development portfolio of wind and hydro assets exceeding 1,500
MW.
PowerGen has approximately 4.3 million units outstanding. Based on the 60 day
volume weighted average trading price of PowerGen of $9.13 per Unit, the
transaction implies an equity value for Sprott Power of approximately
$38,500,000, or $1.71 per share, and a corresponding value for PowerGen of
approximately $39,300,000. Following completion of the Merger, there will not be
a net asset value calculated for Sprott Power.
Jeff Jenner, the President and Chief Executive Officer of Sprott Power said:
"Given the combination of these strategic assets and additional capital
position, we believe that the combined business would be well positioned to
capitalize on near-term opportunities to the benefit of all shareholders. In
addition, we believe that, by acquiring these assets on a tax-efficient basis,
and in a way that preserves losses, we will help shelter future growth and
income."
A joint management information circular outlining the details of the transaction
and certain other matters which provides prospectus level disclosure of the
combined business will be mailed to Unitholders and to the Sprott Power
shareholders. To be implemented, it is anticipated that the proposed transaction
will require approval by two-thirds of the votes cast by Unitholders and Sprott
Power shareholders.
About Sprott Power Corp.
Sprott Power is a privately-held Canadian-based company dedicated to the
development and financing of renewable energy projects. Through acquisitions,
partnerships and joint ventures, Sprott Power seeks to provide its shareholders
with exposure to the power generation sector. Sprott Power is managed by Sprott
Power Consulting LP, of which Sprott Consulting LP, a business unit of Sprott
Inc. (TSX:SII), is the sole limited partner.
Sprott Power has approximately 1,000 megawatts of wind power development in
Eastern Canada. These assets are ideally located within provinces that have
announced or are expected to announce requests for proposals ("RFPs"). These
RFPs, totalling almost 1,000 megawatts of wind energy generation, will represent
over $2 billion in potential investment. Sprott Power intends to actively
participate in these RFPs.
Forward-Looking Statements
This release contains "forward-looking statements" which reflect the current
expectations of PowerGen and Sprott Power. These statements reflect management's
current beliefs with respect to future events and are based on information
currently available to management. Forward-looking statements in this press
release include, but are not limited to, statements with respect to the
negotiation of the Definitive Agreement, the terms of such Definitive Agreement,
the value of the units of the Fund and the shares of Sprott Power, the closing
of the transaction and the anticipated benefits from the transaction.
Forward-looking statements involve significant known and unknown risks,
uncertainties and assumptions, including with respect to the anticipated
completion of the negotiation of the Definitive Agreement, the value of the
units of the Fund and the shares of Sprott Power, the closing of the
transaction, the timing and receipt of all applicable regulatory approvals and
securityholder consents, the anticipated benefits from the transaction and the
satisfaction of other conditions to the completion of the transaction. Many
factors could cause actual results, performance or achievements to be materially
different from any future results, performance or achievements that may be
expressed or implied by such forward-looking statements including, without
limitation, those listed under the heading "Risk Factors" in PowerGen's annual
information form dated March 31, 2010 as well as that the closing of the
transaction could be delayed if the necessary regulatory approvals and
shareholder consents are not obtained on the timelines planned or the
transaction may not be completed at all if these approvals are not obtained or
any other conditions to closing are not satisfied. Should one or more of these
risks or uncertainties materialize, or should assumptions underlying the
forward-looking statements prove incorrect, actual results, performance or
achievements could vary materially from those expressed or implied by the
forward-looking statements contained in this release. Although the
forward-looking statements contained in this release are based upon what
PowerGen and Sprott Power believe to be reasonable assumptions, management
cannot assure investors that actual results, performance or achievements will be
consistent with these forward-looking statements. These forward-looking
statements are made as of the date of this release and PowerGen and Sprott Power
do not assume any obligation to update or revise them to reflect new events or
circumstances, except as required by law.