Resolute Forest Products Commences Takeover bid of Fibrek

[SharperDingaan]

I think the point I was making is that when a company offers to buy a company for $15.00 the public shareholders get $15.00.  No more, no less.  As far as a PPA goes, how does it immediately affect working capital?

Your statement is incorrect. Working capital is just A/R - A/P & represents the outstanding short-term receipts and liabilities that are expected to convert to cash within the next 90-120 days. To ensure that an adequate collection effort will continue immediately following the sale, the seller agrees to repay the buyer whatever agreed A/R is not collected. Without the working capital adjustment process a seller has an incentive to terminate their collection staff immediately following the sale, pay them an inflated severance, & leave the buyer with a significant A/R write-off - & the need to re-hire/hire replacement collection staff at a higher average rate.

Re the PPA. Agree the PV of the PPA, Db A/R, Cr Equity. The $ amount of the A/R is the best estimate as to the PV of the power today net of all uncertainty - the same definition as for every other A/R on the books. Total A/R increases, A/P remains the same, & working capital increases. Because this specific A/R is significant, material, & unique - collection is defined as a deal signing within X days of purchase. Db long term asset, Cr A/R when the deal is signed.

The buyer will argue the uncertainty makes it impossible to value the PPA. The seller will argue no sale - we wait for the uncertainty to clear, & then value the PPA. There is no sale unless there is BOTH a willing buyer AND a willing seller, and ALL institutional shareholders have a fiduciary duty to their shareholders to maximize the value of their holdings.

The coercive transfer of FBK IV to ABH IV is also a criminal act. No different to a drug lord abducting the family's of all the major ABH shareholders - & then informing the head of each family that they will agree to transfer the IV of ABH to their worthless shell - or risk not seeing their family's again. These criminals just wear better suits, talk politely, & don't use guns - but otherwise, what is the difference in the process?

SD   

   

   

[finetrader]

Without the dilutive warrants in the way, I wonder if ABH will now reduce their minimum tender to 50%?

What makes you think they could do that?

[triedtestedand]

Finetrader:

The ABH circular states that it is a condition that they could waive.  Even though they have reserved such right, it might get into the "majority of minority shareholder" question, no?  So the possibility is there ...

That said, doing so might actually enlighten us about the (currently muzzled) lockup shareholders' influence (or lack thereof)  and/or motivations, as I would see it going against spirit of original lockup agreements. It would certainly lay to rest any notion of fair and friendly, eh?

[lessthaniv]

Without the dilutive warrants in the way, I wonder if ABH will now reduce their minimum tender to 50%?

What makes you think they could do that?

Page 28 of the Circular.


We have the right to waive the Minimum Tender Condition and, if we were to do so, there can be no assurance
that we would be able to successfully consummate a Second Step Transaction.
Under the terms of the Offer, and subject to the terms and conditions of the Lock-up Agreements, we have the
right to waive one or more of the conditions of the Offer, including the Minimum Tender Condition. In the event we
were to decide to waive the Minimum Tender Condition and were to take up and pay for more than 50% of the Fibrek
Shares, we may not be able to successfully consummate a Second Step Transaction or our ability to do so may be
delayed. In addition, the market for Fibrek Shares not tendered in the Offer may be less liquid than the current market
for Fibrek Shares and the Fibrek Shares may be potentially delisted from TSX. In such event, it is possible that Fibrek
would become a controlled but not wholly-owned subsidiary of Resolute

With Steelhead's buys and subsequent tender ...  As of the close of business on February 23, 2012 approximately 67 million common shares of Fibrek had been deposited to Resolute's offer, representing approximately 51.5% of the outstanding common shares.  If they wanted to play ball they could drop the minimum tender. Fairfax/Pabrai/Oakmont/Steelhead and anyone else that has tendered to make up the 51.5% would exit gracefully (Note: all are big holders of ABH already) and everyone else would be left scratching their heads. 

[alertmeipp]

They won't get the control and synergies by just being the major shareholder though.

But sooner or later, those ABH shareholders will buy enough FBK shares in the market to tender to ABH.

And that's legal?

[st96dgx8]

Decision is posted (in french): http://www.bdr.gouv.qc.ca/documents/decisions/2012-012_Abitibi_c_Fibrek_GLOBAL.pdf

1) Is there a way to obtain a transcript of the BDR hearings and the evidence submitted for the case?

2) The BDR opines that the termination fee granted to Mercer is beyond the range usually granted in such circumstances... 2.9% of Enterprise Value is par for the course. But it looks like BDR is using the equity value as opposed to the enterprise value as the denominator. JetsFan--Do you have the termination fess as a % of mkt cap for prior txns in Canada?

4) How do you read paragraph 20 of the decision? My french isn't great but it appears that part of the regulators concern stems from the fact the warrants creat uncreate uncertainity for Resolute or "any new initiator." But doesn't this BDR decision discourage any new initiator? Seems illogical for the BDR to be worried about the warrants/termination fees discouraging a new initiator when their decision makes it virtually impossible for someone other than the old bidder (ABH) to purchase Fibrek.
"[20]
CONSIDÉRANT que les termes et conditions des bons de souscription créent une incertitude pour Résolu ou pour tout nouvel initiateur compte tenu que Fibrek se réserve le droit de mettre un terme ou non aux bons de souscription;"

5) What if the clock runs out on the hard lockup? Would Oakmont/Pabrai be willing to tender into a higher offer? As far as I can tell Pabrai and Oakmont aren't ABH shareholders (please correct me if I am wrong) and therefore likely to switch to the higher bid.

The longer this battle drags on, the higher the probability that the new PPA is signed before a bidder secures a sufficient # of votes.

If ABH succeeds in acquiring two-thirds of the shares at ~$1 per shares, our only recourse is to exercise dissent rights.  I will solicit interest from fellow shareholders at the appropriate time. More on this later...

[triedtestedand]

a) A columnist at the Financial Post is keeping this in the news:

    http://business.financialpost.com/2012/03/01/fight-for-fibrek-drags-on/

b) Along lines of the above, apparently a number of minority shareholders have contacted Quebec's security regulators to have their voices heard about the warrants ruling, the handling of minority shareholder rights in this case,  etc.   If you want to do similar, you'll obviously want to do it sooner than later, and I've been told that you can direct your message to the AMF.  The Autorité des marchés financiers (AMF) is the body mandated by the government of Québec to regulate the province's financial markets and provide assistance to consumers of financial products and services.   Their email is information@lautorite.qc.ca .   

[Alekbaylee]

A solution is clearly required: the neatest would be for Abitibi to up its offer to above $1.30 (Mercer secured a $8.5-million break fee) and, if successful, ensure that a majority of minority shareholders support its offer.  If not, then it should get out of the way.

+1

Will tender my shares to MERC.

[triedtestedand]

a) I noticed another article today in the Financial Post ... it looks like some minority shareholders have a channel into that route:

  http://business.financialpost.com/2012/03/02/regulators-idle-as-fibrek-shareholders-fume/


b) Anyone from Montreal area looking to check out the Quebec court system?   I've learned that the FBK appeal is scheduled for:

        Palais de justice (Court House) de Montréal
        1 Notre-Dame Est
        Montreal
        Room 14.02 or 14.06
        9:30 AM
        Monday, March 5th

Proceedings are open to the public.  Although not likely to be Law&Order material, as far as financial matters go, it might have some spice.  You probably can't bring in popcorn though.  (SD -> You're not a Montreal area person, are you?)

[st96dgx8]

a) I noticed another article today in the Financial Post ... it looks like some minority shareholders have a channel into that route:

  http://business.financialpost.com/2012/03/02/regulators-idle-as-fibrek-shareholders-fume/


b) Anyone from Montreal area looking to check out the Quebec court system?   I've learned that the FBK appeal is scheduled for:

        Palais de justice (Court House) de Montréal
        1 Notre-Dame Est
        Montreal
        Room 14.02 or 14.06
        9:30 AM
        Monday, March 5th

Proceedings are open to the public.  Although not likely to be Law&Order material, as far as financial matters go, it might have some spice.  You probably can't bring in popcorn though.  (SD -> You're not a Montreal area person, are you?)

Thanks for the update Triedtestedandtrue. Do you know if the appeal will heard in English? And is it only for one day? I might come up from NYC.