Friday, The Westaim Corporation (WED.TO) announced the signing of a reorganization agreement to acquire closely held profitable construction industries and reported the Pro forma financial information giving effect to the reorganization.
The industries to be acquired have combined revenue of approximately C$164 million, pro forma net income of approximately C$10 million, pro forma adjusted net income of approximately C$21 million and pro forma adjusted EBITDA of approximately C$30 million for the year ended December 31, 2007. The company expects to retain the services of the previous owner-managers of the acquired businesses.
Under the reorganization, Westaim expects to issue approximately 257 million common shares to the vendors of the businesses and 25 million common shares under the private placement equity financing, assuming an offering price of C$0.60 per share, such that post closing, the current shareholders of Westaim will hold approximately 25.1 percent of the total number of issued common shares.
In case the offering is priced at C$0.50 per share, current Westaim shareholders will hold 30.1 percent of the new total common shares outstanding and conversely if the offering is priced at C$0.70 per share, shareholders will hold 21.5 percent.
The reorganization also includes a consolidation of Westaim's outstanding common shares on a 20 for 1 basis, such that, following implementation of the reorganization, Westaim will have 18.85 million common shares outstanding.
With regard to equity private placement, Westaim will issue common shares for gross proceeds of C$15 million to investors. The proceeds of the equity issue will be used for general working capital purposes and, together with a line of credit, to fund the acquisitions. A major Canadian bank has provided a commitment letter whereby it will provide credit facilities comprised of an acquisition term loan of C$30 million with a three-year term and a revolving operating loan with a C$10 million limit. New Westaim will also have access to other existing operating lines with major financial institutions of approximately C$10 million.
Also, Westaim's board will be altered by the resignation of all current Directors and the appointment of five new directors, Marco DeDominicis, Jack Lee, David Hall, Gerald Romanzin and Gerald Berkhold. Marco DeDominicis will assume the position of President and Chief Executive Officer. Westaim will be renamed as well.
The reorganization is subject to regulatory approval and approval of the shareholders of Westaim, which will be sought at a special meeting of shareholders expected to be held by the end of November. The reorganization agreement provides for payment of a non-completion fee of C$2.25 million by defaulting party in case of non-implementation of reorganization.
The board of directors of Westaim has unanimously recommended that shareholders vote in favour of the reorganization. Following the reorganization and a C$15 million private placement of Westaim common shares, the completion of which is a condition of closing the reorganization, Westaim will have pro forma working capital of approximately C$62 million, total assets of approximately C$170 million and liabilities of approximately C$95 million.
After reorganization, adjusted net income were C$9.92 million or C$0.53 per new Westaim share for the six months ended June 30, 2008.
Total revenues following reorganization were C$72.46 million for the half-year period.
Similarly, adjusted net income was C$28.94 million or C$1.54 per new Westaim share for the year ended December 31, 2007. Revenues following reorganization were C$195.73 million for the fiscal 2007.
The board of directors of Westaim have unanimously recommended that shareholders vote in favour of the reorganization.
Also, Westaim's board will be altered by the resignation of all current Directors and the appointment of five new directors who are Marco DeDominicis, Jack Lee, David Hall, Gerald Romanzin and Gerald Berkhold. Marco DeDominicis will assume the position of President and Chief Executive Officer. Westaim will be renamed as well.
Following the reorganization, the construction services business segment of New Westaim will be conducted under five operating divisions which are Con-Forte Contracting Limited Partnership, Asty Concrete Limited Partnership, Four Star Gravel Contractors Ltd., Sas-Can Masonry Ltd. and Nascor Ltd, all of which will jointly provide products and services to the construction industries in Alberta and parts of British Columbia and Saskatchewan.
Alberta has one of the strongest economies in Canada, with businesses, workers and their families continuing to migrate into the province, not only from other regions of Canada, but also from outside Canada. Nascor division will continue to owe C$18.6 million to its former parent after the reorganization. The Westaim Corporation's investments include iFire Technology Ltd., and a 74.5 percent interest in Nucryst Pharmaceuticals Corp., which will continue as a subsidiary to New Westaim.
Westaim C$0.23, up C$0.005 or 2.22% on the Toronto Stock Exchange.
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