- All-cash consideration delivers significant value and immediate liquidity to Cervus shareholders: $19.50 purchase price represents a 37% premium to the 20-day volume-weighted average price per share for the period ending August 13, 2021
- Transaction would create one of the largest privately-held dealership groups in the world and enhance Cervus’ ability to execute on its strategy of delivering best-in-class equipment and solutions to its customers
CALGARY, Alberta -- Cervus Equipment Corporation (“Cervus” or the “Company”) (TSX: CERV) today announced that it has entered into an arrangement agreement (the “Arrangement Agreement”) pursuant to which Brandt Tractor Ltd. (“Brandt”) will acquire all of the issued and outstanding common shares of the Company, excluding those held by Brandt, for $19.50 per share in cash (the “Consideration”), valuing Cervus at approximately $302 million on an equity value basis (the “Transaction”). The Consideration represents a 37% premium to the 20-day volume-weighted average price of the Company’s shares on the Toronto Stock Exchange for the period ending August 13, 2021.
Angela Lekatsas, President and Chief Executive Officer of Cervus, said, “This Transaction delivers tremendous value for our shareholders and clearly demonstrates the successful execution of our strategy. As a private company with a committed, well-capitalized and long-term owner, Cervus will be better positioned for the next stage of evolutionary growth for our dealerships. The size and scale of the entity created by the combination of our two companies will allow for increased investment into Cervus for the benefit of our employees and customers”.
Shaun Semple, Chief Executive Officer of Brandt, said, “The Brandt team is excited about this deal as it will allow us to better serve our customer base across Canada. The addition of Cervus’ offerings will form three brand new segments at Brandt dedicated to serving the Agriculture, Transportation and Material Handling industries. These segments, in addition to our existing specializations in construction, road building, forestry and more, will further establish Brandt as a total solutions provider across our diverse customer groups.”
Transaction Highlights
Entry into the Arrangement Agreement was based on the unanimous recommendations of both the board of directors of Cervus (the “Board”) and a Special Committee of independent directors (the “Special Committee”) and followed an extensive review and analysis of what is in the best interests of Cervus and its stakeholders, including shareholders, customers, partners and employees. The conclusions and recommendations of the Special Committee and the Board have been based on a number of factors, including (without limitation) the following:
- Compelling Value to Cervus Shareholders – The Consideration represents a 37% premium to the 20-day volume-weighted average price per share for the period ending August 13, 2021.
- Certainty of Value and Liquidity – The Arrangement Agreement does not contain a financing condition and the Consideration will be paid in cash, which provides certainty and immediate liquidity to Cervus shareholders.
- Support from Major OEMs – John Deere Canada ULC and Peterbilt Motors Company have provided consent to proceed with the change of control.
- Fairness Opinion – CIBC Capital Markets has provided the Special Committee and the Board with an opinion stating that, as of the date of such opinion, and based on and subject to the assumptions, limitations and qualifications set forth therein, the Consideration to be received by holders of Cervus shares pursuant to the Arrangement Agreement is fair, from a financial point of view, to such holders, other than Brandt (the “Fairness Opinion”).
After considering, among other things, the recommendation of the Special Committee and its receipt of the Fairness Opinion, the Board (i) has unanimously determined that the Transaction is in the best interests of the Company and is fair to holders of Cervus shares (other than Brandt); and (ii) unanimously recommends that holders of Cervus shares vote in favour of the Transaction.
Transaction and Shareholder Meeting Details
The Transaction will be implemented by way of a plan of arrangement under the Canada Business Corporations Act. Completion of the Transaction will be subject to shareholder approval by two-thirds of all votes cast at a special meeting of the Company’s shareholders (the “Special Meeting”). Mr. Peter Lacey, Chairman of Cervus and the Company’s largest shareholder, who holds approximately 18% of the outstanding shares of Cervus, has entered into an irrevocable agreement to vote his Cervus shares in favour of the Transaction. All of the other directors and executive officers of Cervus, who collectively hold approximately 1% of the outstanding shares of Cervus, have entered into revocable support agreements to vote their Cervus shares in favour of the Transaction. As at August 16, 2021, Brandt and its affiliates hold approximately 9% of the outstanding shares of Cervus.
The completion of the Transaction is also subject to certain third party approvals, including from each of John Deere Canada ULC and Peterbilt Motors Company, each of which has provided consent to proceed with the change of control, as well as certain regulatory approvals and other conditions customary for a transaction of this nature. The Arrangement Agreement includes customary provisions relating to non-solicitation, subject to customary “fiduciary out” provisions that entitle Cervus to consider and accept a superior proposal if not matched by Brandt. Cervus has agreed to pay a termination fee of $10.9 million to Brandt if the Transaction is terminated in certain circumstances.
Pursuant to the Arrangement Agreement, the Company has agreed not to declare or pay any common share dividends until the completion or termination of the Transaction.
Cervus expects to hold the Special Meeting of shareholders to consider the Transaction in October 2021 and to mail the management information circular for the Special Meeting in September 2021. Subject to the conditions set forth above, the Transaction is expected to close in the fourth quarter of 2021.
Click here to see more...