"This transaction maximizes the value of our investment in Canada Bread and focuses Maple Leaf on building its leadership in the consumer packaged meats business," said Michael H. McCain, president and CEO. "Grupo Bimbo is an excellent company with strong values and a global leadership position, with little overlap in our geographic markets. This makes for a highly complementary fit with our bakery operations and is expected to provide exciting opportunities for Canada Bread employees, customers and other business partners."
McCain added, "Upon completion of our prepared meats strategy at the end of 2014, Maple Leaf intends to capitalize on its state-of-the-art network, market-leading brands and a strong balance sheet to build on our position as Canada's leading consumer packaged meats company, both within and beyond our borders."
The arrangement agreement provides for the acquisition of all issued and outstanding common shares of Canada Bread pursuant to a statutory arrangement under the Business Corporations Act (Ontario). Under the terms of the arrangement agreement, Canada Bread is permitted to continue to pay quarterly dividends of up to $0.75 per share until the closing of the transaction (pro-rated for the actual number of days in the quarter in which the transaction closes). Maple Leaf has entered into a voting support agreement with Grupo Bimbo pursuant to which Maple Leaf has agreed to vote all of its common shares of Canada Bread in favor of the arrangement at a special meeting of shareholders of Canada Bread to be called to consider the transaction. Maple Leaf has also agreed to provide certain transition services at its cost to Grupo Bimbo after closing and has agreed to a non-competition covenant in favour of Grupo Bimbo in respect of the Canada Bread business.
On closing, gross proceeds to Maple Leaf from its 90% ownership, excluding any dividends received will be approximately$1.65 billion. Maple Leaf expects cash costs related to the transaction to be approximately $160 million, including make-whole and swap cost settlements on debt repayment, advisor fees and other costs.
The arrangement, which has been approved by the boards of directors of Canada Bread and Grupo Bimbo, will require the approval of at least 66 2/3% of the votes cast by the shareholders of Canada Bread at a special meeting expected to take place in early April 2014. Maple Leaf has agreed to vote its 90% interest in Canada Bread in favor of the arrangement.
The transaction is also subject to receipt of court approval, regulatory approvals (including Competition Act and Investment Canada Act approvals and Hart Scott Rodino approval in the U.S.) and other customary closing conditions. An information circular outlining details of the arrangement and special meeting is expected to be mailed to shareholders of Canada Bread in early March. Subject to the satisfaction or waiver of the conditions to the arrangement agreement, the transaction is expected to close in the second quarter, 2014.