Toronto, Ontario, Canada, 13 November 2009 -- (Marketwire) -- Acadian Timber Income Fund (TSX:ADN.UN
) today announced it has signed definitive documents in relation to a proposed transaction that would allow for the conversion of the Fund from an income trust to a corporation.
This signing is in advance of Canadian federal income tax legislation relating to specified investment flow through trusts, which was announced on 31 October 2006, and is to be implemented in January 2011. Full details of the proposed conversion will be provided in an information circular expected to be prepared, mailed, and filed by the Fund in the coming weeks for use at a special meeting of Fund unitholders at which unitholders will be invited to consider, and if deemed advisable, approve the proposed conversion. Unitholders will be asked to consider a proposed plan of arrangement under the provisions of the Canada Business Corporations Act (CBCA) involving, among others, the Fund and CellFor Inc. CellFor is the world's leading independent supplier of high technology seedlings to the global forest industry, based in Vancouver, British Columbia.
The arrangement has been unanimously approved by Acadian's board of trustees and by CellFor's board of directors, and if approved by the unitholders of the Fund and the securityholders of CellFor, will allow the Fund to convert into a corporation. It is expected that New Acadian's dividend policy will be similar to the current distribution policy of the Fund. Concurrent with the signing of the definitive documents, Acadian has agreed to make a loan of up to CAD 4 million to CellFor (the CellFor loan).
Pursuant to the Arrangement, the Fund's unitholders will receive one common share of CellFor (New Acadian Common Shares) for each Fund unit held on the effective date, and CellFor will change its name to Acadian Timber Corp. (New Acadian). Upon completion of the Arrangement, New Acadian will indirectly own and operate the existing business of Acadian and its subsidiaries, and the existing trustees of the Fund and management of the business will become the directors of New Acadian and management of the business. New Acadian will retain and license certain business assets of CellFor related to the development of superior spruce stock (the retained assets).
Under the plan of arrangement, CellFor will transfer all of its assets (other than the retained assets) to a newly-formed subsidiary (New Cellfor) and all of Cellfor's liabilities (other than the liability relating to the CellFor loan) will be assumed by New CellFor for consideration to be satisfied by the issuance by New CellFor to CellFor of additional securities in the capital of New CellFor. All of the securities of New CellFor will then be distributed to the existing CellFor securityholders. New Acadian will retain the retained assets and retained liabilities and will maintain its tax attributes, which are equivalent to approximately CAD 95 million in the aggregate. Subject to certain conditions and limitations, New CellFor has agreed to indemnify New Acadian for losses or damages that may have resulted from the activities of CellFor before the conversion. Other than the foregoing, none of the Fund unitholders or New Acadian will retain any interest in the businesses carried on by CellFor or New CellFor prior to the completion of the arrangement. Upon completion of the arrangement, New CellFor will receive a CAD 1.0 million equity interest in New Acadian, estimated to be less than 1% of the outstanding shares based on the closing trading price of Fund units on 12 November 2009.
The arrangement is subject to customary commercial conditions, including the receipt of certain approvals and consents (eg. the Toronto Stock Exchange). As an arrangement governed by the CBCA, it is also subject to court approval, and the approvals of not less than 66.5% of the votes cast at a meeting of Acadian unitholders to be held to consider the arrangement and approvals by CellFor's securityholders. The mailing to Fund unitholders of an information circular in respect of the meeting is expected to occur on or around 01 December 2009. The Fund's objective is to complete the arrangement effective 01 January 2010. There can be no assurance at this time that all approvals, consents, and conditions required to effect the proposed conversion will be obtained or satisfied (as applicable) within that timeframe, or at all and, accordingly, there can be no assurance that the proposed conversion will be completed.
The key benefits of the arrangement to the Fund and its unitholders include the following:
- The arrangement offers an effective and efficient method of converting the Fund from a mutual fund trust to a corporation consistent with existing legislation.
- Retention and license (as applicable) by New Acadian of the retained assets will offer opportunities to increase the long-term productivity of New Acadian's timberlands.
- With the CAD 0.01667 monthly (CAD 0.20 annual) dividend anticipated to be paid on the New Acadian Common Shares following the conversion, Canadian taxable Fund unitholders should benefit from lower income taxes paid on dividends compared to taxes paid on current distributions of income of the Fund.
- "Normal growth" and "undue expansion" restrictions in the normal growth guidelines that limit the Fund's ability to consider strategic acquisitions will be removed and might result in greater access to capital.
- Fund unitholders should be able to exchange Fund units for New Acadian Common Shares on a tax-deferred basis for Canadian income tax purposes.
- New Acadian will have estimated aggregate tax attributes equivalent to approximately CAD 95 million following the arrangement.
Complete details of the terms of the plan of arrangement are set out in the arrangement agreement that will be filed by Acadian on SEDAR (www.sedar.com).
Acadian Timber Income Fund will hold a conference call and webcast for investors and analysts on 13 November to discuss with members of senior management the Fund's proposed conversion to a corporation. A taped rebroadcast will be available until midnight on 13 December 2009. To access this rebroadcast, call 1-800-319-6413 or +1-604-638-9010 (code: 4995).
Acadian Timber Income Fund is a leading supplier of primary forest products in Eastern Canada and the northeastern United States. With a total of 2.4 million acres of land under management, Acadian is the second largest timberland operator in New Brunswick and Maine. Acadian owns and manages approximately 1.1 million acres of freehold timberlands in New Brunswick and Maine, and provides management services relating to approximately 1.3 million acres of Crown licensed timberlands. Acadian also owns and operates a forest nursery in Second Falls, New Brunswick. Acadian's products include softwood and hardwood sawlogs, pulpwood, and biomass by-products, sold to over 110 regional customers. Acadian's units are listed for trading on the Toronto Stock Exchange under the symbol ADN.UN.
CellFor is the world's leading commercial-scale supplier of high yielding, varietal conifer seedlings for reforestation. The company's proven and patented propagation technology and its high performing germplasm produce uniform, fast-growing varieties with highly desirable characteristics. CellFor supplies naturally selected, varietal pine seedlings. The company's initial markets are pine plantations in the southern United States and South America. CellFor's customers include 16 of the 20 largest timberland owners in the United States and mid-size companies, consultants, and private landowners. CellFor seedlings allow forest landowners to grow more and better wood on less land. CellFor has offices in Vancouver and Victoria, British Columbia, in Canada, and in Atlanta, Georgia; Arkansas; and South Carolina in the United States.
For further information, visit www.acadiantimber.com.