/THIS PRESS RELEASE IS INTENDED FOR
DISTRIBUTION IN CANADA ONLY AND IS
NOT INTENDED FOR DISTRIBUTION TO UNITED
STATES NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES./
PHOENIX, AZ, Jan. 19, 2016 /CNW/ - GWR Global Water Resources
Corp. (TSX: GWR) (the "Company") announced today that it has agreed
to pursue a proposed transaction with Global Water Resources, Inc.
("GWRI") that will result in, subject to the satisfaction of
shareholder approval and certain other conditions, the Company
merging with and into GWRI (the "Proposed Transaction").
Background and Summary of Proposed Transaction
The following is a summary of the background to, and certain key
elements of, the Proposed Transaction; further details will be
contained in the materials sent to the Company's shareholders in
connection with the meeting called to approve the Proposed
Transaction.
- The Company (which we refer to as "CanCo") was incorporated in
British Columbia to acquire shares
of US-based GWRI (which we refer to as "USCo"). CanCo's sole asset
consists of an equity interest in USCo. The public shareholders of
CanCo currently indirectly own, in the aggregate, an approximate
37.5% equity interest in USCo and certain private shareholders
currently directly and indirectly own, in the aggregate, an
approximate 62.5% equity interest in USCo.
- If approved by CanCo shareholders and subject to the
satisfaction of certain other conditions, the Proposed Transaction
will result in the elimination of CanCo, and shareholders of CanCo
becoming stockholders of USCo.
- Shareholders of CanCo will be asked to approve the merger of
CanCo with and into USCo. As a result of the merger, CanCo will
cease to exist as a British
Columbia corporation and USCo, governed by the corporate
laws of the State of Delaware,
will be the surviving entity.
- On the effectiveness of the merger, CanCo shareholders will
receive one share of common stock of USCo for every CanCo common
share held.
- On completion of the Proposed Transaction, without giving
effect to any stock issued in the U.S. IPO as described below, the
public shareholders of CanCo will own, in the aggregate, an
approximate 37.5% equity interest in USCo and the private
shareholders of CanCo and USCo will own, in the aggregate, an
approximate 62.5% equity interest in USCo. Accordingly,
shareholders' economic interests in respect of USCo will remain
unchanged and, instead of holding an interest in USCo indirectly
through CanCo, shareholders will hold their interests directly in
USCo.
- The merger is conditional upon the concurrent completion of a
proposed initial public offering of shares of common stock of USCo
in the United States (the "U.S.
IPO"). The number of shares to be offered and the price for the
U.S. IPO have not yet been determined.
- The merger is also conditional upon, among other things, the
shares of common stock of USCo having been approved for listing on
the Toronto Stock Exchange and the NASDAQ Global Market.
- On completion of the Proposed Transaction, USCo intends to pay
a regular monthly dividend of U.S.$0.02 per share of common stock (U.S.$0.24 per share annually), which is approximately
the U.S.$ equivalent of the current C$0.0283 monthly dividend of CanCo based on
current exchange rates. The declaration and payment of dividends by
USCo will be subject to compliance with applicable law, and depend
on, among other things, its results of operations, financial
condition, level of indebtedness, capital requirements, contractual
restrictions, restrictions in its debt agreements and in any
preferred stock, business prospects and other factors that the
board of directors of USCo may deem relevant.
Reasons for the Proposed Transaction
The Proposed Transaction is part of the Company's overall plan
to simplify the corporate structure by eliminating one level of
holding company ownership, refinance the outstanding tax-exempt
bonds of USCo on more favourable terms (as described below),
improve liquidity for shareholders over the medium to long-term and
have a single governing jurisdiction in the U.S., where all of the
assets, operations and employees of the business are located.
On completion of the Proposed Transaction, USCo will have the
right to redeem all of its outstanding tax-exempt bonds at a price
of 103% of the principal amount, plus interest accrued at the
redemption date. As of December 31,
2015, the principal balance of such bonds was
U.S.$106.7 million. Following
completion of the Proposed Transaction, USCo plans to refinance
these bonds and, based on discussions with lenders, believes it can
reduce the effective interest rate on the outstanding balance by 75
to 150 basis points. The refinancing of USCo's tax-exempt bonds at
reduced interest rates or at all will depend on a number of factors
that are beyond its control, including market conditions, and
therefore the completion of the bond refinancing cannot be
assured.
The board of directors of CanCo has determined that the Proposed
Transaction is in the best interests of CanCo and has unanimously
approved the Proposed Transaction (with interested directors
abstaining) and recommends that CanCo shareholders vote for the
Proposed Transaction.
All of the directors and the executive officers of CanCo who own
common shares, (including Mr. William S.
Levine who has control or direction over approximately 18.3%
of the outstanding CanCo common shares) have advised the board
of directors that they intend to vote their shares in favour of the
Proposed Transaction.
Timetable and Approvals
The Proposed Transaction will require approval by (i)
662/3% of the votes cast by CanCo's shareholders and
(ii) a majority of the votes cast by CanCo's shareholders, other
than certain directors and shareholders of CanCo, in each case
present at the meeting in person or by proxy, as well as approval
by the Supreme Court of British
Columbia.
The Proposed Transaction constitutes a business combination
under applicable Canadian securities laws and is therefore subject
to a formal valuation and minority shareholder approval
requirements. CanCo has applied to the applicable Canadian
securities regulators for an exemption from the formal valuation
requirement in respect of the Proposed Transaction.
The Meeting date will be set, and the materials containing
details of the Proposed Transaction will be mailed to CanCo
shareholders, as soon as practicable. Subject to the satisfaction
of all applicable conditions, including those relating to the U.S.
IPO, the Proposed Transaction is expected to close in the second
quarter of 2016.
About GWR Global Water Resources Corp.
The Company was
incorporated in British Columbia
to acquire shares of U.S. based GWRI and to actively participate in
the management, business and operations of GWRI through its
representation on the board of directors of GWRI and its shared
management of GWRI. GWRI is a water resources company located in
Phoenix, Arizona, that owns and
operates regulated water, wastewater and recycled water utilities
in the metropolitan Phoenix
area.
Cautionary Note Regarding Forward-Looking
Statements
This press release includes certain
forward-looking statements. These forward looking statements
include, but are not limited to our plans, objectives, expectations
and intentions, and other statements contained in this release
including the completion and potential effects of the transactions
described herein, the future payment of dividends by USCo, the size
and timing of the U.S. IPO, and the refinancing of USCo's
tax-exempt bonds at reduced interest rates or at all, that are not
historical facts as well as statements identified by words such as
"expects", "anticipates", "intends", "plans", "believes", "seeks",
"estimates", or the negative of these terms, or other words of
similar meaning. These statements are based on our current beliefs
or expectations and are inherently subject to significant
uncertainties and changes in circumstances, many of which are
beyond our control. Actual results may differ materially from these
expectations due to changes in global political, economic,
business, competitive, market and regulatory factors and other
factors discussed under the heading "Risk Factors" in the Company's
most recent Annual Information Form. We undertake no obligation to
publicly update any forward-looking statement, except as required
by law, whether as a result of new information, future developments
or otherwise.
SOURCE GWR Global Water Resources Corp.