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st96dgx8

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  1. If you are interested in dissenting and would like to request a judicial appraisal of fair value please contact fibrekdissent@gmail.com. In your email please state the number of FBK shares you currently own. Given the $1.40/share bid by Mercer, and the Canaccord independent appraisal report (which if adjusted for the new HyrdoQuebec PPA should increase fair value to ~$1.6 per share) there's a good chance that a judge will force Resolute to pay dissenting FBK shareholders a materially higher amount.
  2. Georgeson has misled FBK investors into believing that you can get the $1 cash option so long as the cash is still available.
  3. The ball is in ABH's court and they decide to ... (drumroll) appeal. http://www.stockhouse.com/News/USReleasesDetail.aspx?n=8448975 Also worth noting the number of shares tendered to ABH has fallen to 46.5% from 50.1%. Has Steelhead changed their minds? Has the threat of an investigation into whether or not they are acting in concert with ABH spooked them? "Resolute continues to work diligently to obtain Investment Canada's approval. As of the close of business on March 9, approximately 60.5 million common shares of Fibrek had been deposited to Resolute's offer, representing approximately 46.5% of the outstanding common shares."
  4. Apparently the Quebec court agrees with Fibrek and Mercer. ABH will appeal and drag this out and enrich the lawyers. ------------------------------------------------------------------------------------- Quebec court overturns warrant cease trade order for Fibrek warrants By The Canadian Press | March 09, 2012 MONTREAL - The takeover fight for Fibrek Inc. (TSX:FBK) took a turn Friday after the company said a Quebec court has overturned a decision to halt the trading of 32.3 million special warrants issued to Mercer International making a hostile bid more difficult. Vancouver-based Mercer (TSX:MRI.UN) has signed a friendly deal to buy Fibrek, however rival bidder Resolute Forest Products (TSX:ABH) had sought the cease trade order for the special warrants. "We are pleased that the Court of Québec has preserved the fundamental right of all Fibrek shareholders to benefit from the best available offer for their investment in Fibrek," Fibrek chairman Hubert Lacroix said in a statement. "With the special warrants back in place, a level playing field is once again re-established." Fibrek repeated a call to to shareholders to accept the Mercer offer. Resolute, formerly known as AbitibiBowater, is offering $1 per share in a bid that values Fibrek at $130 million, while Mercer has made an offer that values the shares at $1.30 or about $170 million. Under its unsolicited bid, Resolute has entered into lock-up agreements with three big Fibrek shareholders, including Fairfax Financial Holdings Ltd. (TSX:FFH) and Pabrai Investment Funds, which together hold about 46 per cent of Fibrek's shares. Fibrek has approximately 500 employees and operates pulp mills in Saint-Felicien, Que., Fairmont, W.Va. and Menominee, Mich.
  5. 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.
  6. The actions of ABH/FFH are abusive and oppressive to minority shareholders, and if successful would deprive minority shareholders of a significantly higher bid. Shame on FFH and Prem Watsa for trying to screw FBK minority shareholders for a mere $30 million.
  7. 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...
  8. I'm not sure that FBK has to show that the issue was truly needed for corporate reasons. The law is unsettled. http://www.moyak.com/papers/canada-business-corporations-act.html The most significant Canadian case in the past sixty years on the subject of directors' fiduciary duties in resisting a take-over bid, Teck proposed a more lenient version of the proper purpose test.(98) The facts are briefly as follows. The plaintiff Teck, a major mining company, desired to join with a junior mine, Afton Mines, in a venture to develop a promising deposit already owned by Afton. Afton's directors, however, led by Millar, chose instead to negotiate a deal with Teck's rival, Canex. In the face of Afton's continued rejection of Teck's offers, even though they were better than the terms offered by Canex, Teck decided to obtain control of Afton through share purchases. To stave off Teck's hostile bid, Afton accordingly accelerated its negotiations with Canex and ultimately reached a deal which entailed the issuance of sufficient shares to deny Teck control, one day after Teck had accumulated a fifty percent ownership in Afton.(99) Teck subsequently brought a derivative action as a shareholder of Afton against its directors, alleging that the agreement with Canex was void because it was made for an improper purpose. Concluding that it was not "sound to limit the directors' exercise of their powers to the extent required by Cramphorn," Berger J. for the British Columbia Supreme Court held that directors are entitled to resist a take-over bid if they meet a two-part test: (1) they must act in good faith in resisting the bid; and (2) they must believe, on reasonable grounds, that the take-over will cause substantial damage to the their company's interests. In this particular case he found that the directors of Afton had satisfied their fiduciary obligations. Berger J. placed the burden of proof on the plaintiff to show either that the directors' purpose in rejecting a bid was not in the best interests of the company, or that the directors did not have reasonable grounds for believing that the take-over would have caused the company substantial damage.(100) Furthermore, in assessing the best interests of the corporation, Teck provided that the directors may consider a variety of differing interests: 1) who is seeking control and why (assess the reputation of the offeror, previous experiences with the offeror, policies of the offeror, etc.); 2) the interests of employees and consequences to the community in general; and 3) the impact on the corporation and shareholders. Thus, Teck represented a clear departure from the strict proper purpose test of Cramphorn, with Berger J. concluding that the courts should only find a directors' exercise of power to be improper if their purpose was not to serve the best interests of the corporation. In Re Olympia & York Enterprises and Hiram Walker Resources Ltd, the hostile bidder, Olympia & York, tried to block financing extended by the board of the target, Hiram Walker, to Fingas, a corporation jointly owned by Hiram Walker and Allied Lyons, a white knight purchaser of a portion of Hiram Walker's business. This financing allowed Fingas to make a higher bid for Hiram Walker's shares than Olympia and York's initial offer. As a result, Olympia and York sought injunctions, arguing that the action of the Hiram Walker directors was for the purpose of entrenching themselves in the management of the corporation, and as such, a breach of their fiduciary duties. Applying the Teck formulation, Montgomery J. held that the directors of Hiram Walker had acted in the best interests of the corporation and in good faith and, that as a consequence, it was irrelevant that they had also benefitted from their actions [by becoming more entrenched in the company]. While reinforcing the existing rules of the Teck test for directors' use of anti-takeover defenses, Re Olympia & York also supplements it with the following additional principles(105) : 1) it is the duty of directors in a take-over contest to maximize the value to all shareholders; 2) directors are entitled to rely on professional advice as to the adequacy of a bid, and such reliance will constitute evidence of acting in good faith and upon reasonable grounds; and 3) self-entrenchment will not necessarily be inferred where retaining control is secondary to the primary purpose of acting in the best interests of the corporation and in good faith.
  9. Resolute Applies to Cease Trade Mercer's Offer to Acquire Fibrek MONTREAL, Feb. 13, 2012 /CNW Telbec/ - AbitibiBowater Inc., doing business as Resolute Forest Products (NYSE: ABH) (TSX: ABH), today announced that it applied to the Bureau de décision et de révision (Québec), the administrative tribunal with statutory jurisdiction in securities law and regulatory matters in Quebec, for an order to cease trade the proposed offer by Mercer International Inc. (Nasdaq: MERC) (TSX: MRI.U) to acquire all of the issued and outstanding common shares of Fibrek Inc. (Fibrek, TSX: FBK). Fibrek and Mercer announced the offer on February 10. In its application, Resolute requested that the Bureau exercise its public interest jurisdiction to cease trade the offer on the basis, among other things, that it includes an improperly discounted and dilutive private placement of warrants and an unreasonable break fee. Resolute requested that the Bureau hear its application on an expedited basis, and will argue that these measures are unlawful and inappropriate defensive measures to Resolute's offer. On February 9, the Bureau rendered an order to cease trade Fibrek's tactical poison pill effective as of 3:00 p.m. today. The offer to acquire all of the issued and outstanding shares of Fibrek made by Resolute, together with RFP Acquisition Inc., a wholly-owned subsidiary, is more fully described in the offer circular and other ancillary documentation that Resolute filed on December 15, 2011, on the Canadian Securities Administrators' website ("SEDAR"), as varied and extended. The offer will expire at 5:00 p.m. (Eastern Standard Time) on February 23, 2012, unless it is extended or withdrawn by Resolute. Resolute continues to work diligently with a view to obtaining all required approvals from the Canadian regulatory authorities. Oh the irony... So ABH is now trying to convince the regulator, Bureau de décision et de révision (Québec), that the $1 per share warrant issuance to Mercer is "improperly discounted and dilutive", when in fact ABH was trying to squeeze out minority shareholders at this very same price. ABH--If your $1 per share was a "fair" price, then how is it now dilutive and improperly discounted when someone besides yourself gets to buy at that price? Furthermore, as Jetsfan pointed out earlier, a breakup fee of 2.9% of the EV is standard. Can anyone come up with a scenario where the regulator might conclude that it is in the "public interest" to cease trade the Mercer offer?
  10. SD--what makes you think Steelhead would want the RBK plants?
  11. JetsFan--The NPV of a 25 year $16 million PPA is worth $1.11 per share (assuming an 8% discount rate) or $0.91 per share (assuming a 10% discount rate). Both numbers above assume 130 million shares oustanding. The EBITDA flows straight to the bottom line with no additional capex whatsoever. There is also an inflation escalator, which I assume will be 2%. I also assume a Canadian and Quebec cash tax rate of 27.5%. FBK meets the requirements of the Hydroquebec program and Canaccord's conversations with the Quebec Deputy Energy minister regarding Fibrek's eligibility were reassuring. Unfortunately, the new PPA may not be signed until April, which is why I was hoping that the poison pill would have been in effect longer. A rushed sale is likely depriving FBK shareholders of significant value.
  12. I would also note that: 1) Canaccord's DCF valuation used a dubious 6.4% size premium to arrive at a cost of equity of 13.6%!! 2) Canaccord uses a 15 year DCF for the potential new $16 mm PPA with Hydroquebec, when in fact Hydro is accepting proposals of up to 25 years. 3) The RBK mills are valued at ~2X the 5 yr avg historical EBITDA! Factor in the new $7 million take or pay contract and the implied Canaccord RBK mill "fair value" is closer to 1X EBITDA! You can always count on the sell side/investment banking lemmings to alter their assumptions to bring their "fair value" estimate close to the current market price. With regards to the $16 million PPA--it looks like time is not in our favor. The new PPA is unlikely to be signed until mid-March at the earliest. Unfortunately, the Quebec regulators may not allow the rights plans to remain in effect for much longer and therefore mgmt may be forced to accept the highest offer (which in all likelihood is unlikely to reflect the full NPV of the $16 million/year cash flow.) Note to Quebec residents: Please express your concerns with the Bureau de décision et de révision or the Autorité des marchés financiers within the next 24 hours. I'm in the US so they might not consider my complaint. The 46% hard lock-up was entered into before the largest shareholders knew about the $16 million PPA contract. This is potentially a very material change and minority/majority shareholders must not be rushed in to a sale. I am looking into legal options... Is it fair to rush the sale of the company when there could be a contract that could nearly double the fair value of the equity? $16 million in free cash flow discounted for 25 years at 10%, with a 2% inflation escalator results in an NPV of $119 mm or $0.91 per share. (A spin-off of the green-energy cash flows in a partnerhip structure could garner a lower discount rate of 8%, that values this cash flow stream at $144 mm or $1.11 per share.) Why not keep the poison pill for another month or so to see if this contract comes to fruition? Alternatively, I would urge shareholders to pressure mgmt to negotiate for Contingent Value Rights with any sale of the company or the St Felicien NBSK mill that assigns little or no value to a potential $16 million cash flow contact . CVRs are a type of right given to shareholders of an acquired company (or a company facing major restructuring) that ensures they receive additional benefit if a specified event occurs. A contingent value right is similar to an option because it often has an expiration date that relates to the time the contingent event must occur.
  13. I don't have a problem selling or being acquired at fair value. But what if the best offer from third parties is in the $1.25-$1.45 range? I believe in such a scenario, the value maximizing alternative for FBK shareholders would be to start returning cash to shareholders in the form of buybacks/dividends. If FBK earns trend EBITDA ($49 million=>average over the past 5 years plus $6.3 mill for IFRS reclassification of major maint expense as capex) and then tack on the green energy EBITDA ($6 mm from 9.5MW cogen, $16 mm from new PPA= $22 million) and the new RBK take or pay contract ($7 million) we are looking at 30%+ dividend yield. The stock could easily double if there was an ironclad proposal to return cash to shareholders.
  14. SD: 1) Under the new foresty law slated to begin April 1 2013, FBK will be able to directly bid for harvesting rights in Qubec, substantially reducing their reliance on ABH for woodchips. 3) You seem to have a lot of faith in value creation through acquisitions. The vast majority of acquisitions are value destructive and I have no reason to believe that FBK can create value for shareholders through acquistions either. Just return cash to shareholders and pay down debt. I'll take the 20-35% dividend yield. We don't need acquisitions or FBK to empire build to unlock value for shareholders.
  15. I'm assuming this valuation range gives no credit to the possibility of a new $16 million contract with Hydo-Quebec. Given that this cash flow stream could be worth an additonal $1 per share, any sale agreement that does not assign any value to the $16 million potential PPA should include contingent variable rights that would pay FBK shareholders an additional amount if the contract is signed. Alternatively, I would prefer that FBK remained independent under the following condition: 90-100% of free cashflow must be paid to shareholders. This could result in a 35% dividend yield and a significantly higher stock price than is implied by this valuation range. See math below. NBSK/RBK EBITDA ($49 million including $6.3 mill for IFRS reclassification of major maint expense as capex) over the past 5 years. Then add incremental EBITDA of $29 million ($6 mm from 9.5MW cogen, $16 mmm from new PPA, $7 million from new RBK take or pay). FBK has tax NOLs that should last for at least 4 years. Subtract capex of $20 million and interest of $10 million, then you get equity free cash flow of $48 million or $0.37 per share, which is a 35% yield on current share price.
  16. I will not "go quietly" at $1.40, but instead will likely exercise dissent rights. The NPV of a new PPA agreement with HyrdoQuebec and the 9.5MW contract alone could be worth $1.4 per share.
  17. If you are indeed tendering, that would make you an irrational investor. Any competent person would sell their shares at the current $0.05 premium to the offer. The people holding are not tendering but waiting for a bump in the bid. That would be irrational, unless, of course, Cardboard owns such a large number of shares relative to the trading volume that s/he is unable to exit at the quoted price. :) The independent formal valuation is likely a 6-8 week mandate and should be out in mid to late February. SharperDingaan--couple of questions if I may--1) Why would there be "significant damages accruing to FBK, FFH included" if this is an insider bid? 2) You state that ABH needs to "steps aside to let FFH make one (a bid)." What makes you think FFH is interested in making a bid? JetsFan--Do you have an excel spreadsheet listing the intial and final offer prices for takeover transactions in Canada? And would you be so kind as to attach the file to your next message?
  18. I concur. ABH's cash flow generation track record is terrible and a significant chunk of ABH shareholder equity, is in the form of intangible deferred tax assets that could be impaired in the next few years. That being said, FBK mgmt needs to be put on a tight(er) leash and we should put forth a proposal to be voted on at the AGM regarding the return of of cash to shareholders, if it comes to it.
  19. I have at least 150K that will not be tendering plus significantly more if the fund purchases. If the new PPA is signed, intrinsic value is north of $2.50/share. I believe that FFH, Pabrai and Oakmont tendered b'cos FBK was on the verge of making a dilutive equity financed acquistion. ALL THOSE OPPOSED TO THE TENDER SHOULD CONTACT FBK MGMT AND CONVEY THAT IF THE TENDER FAILS, FBK SHOULD RETURN >90% OF CASHFLOWS TO SHAREHOLDERS (VIA DIVIDENDS/BUYBACKS) AND/OR PAY DOWN DEBT. FBK SHOULD NOT MAKE AN ACQUISITION WITHOUT SHAREHOLDER APPROVAL. Their acquisition track record and that of most management teams is abysmal
  20. Qubec--Thanks so much for looking into this. With regards to your question "what happens to those that don't tender in the event that abh gets 70%" Answer: FBK's recently adopted shareholder rights plan will make it harder for ABH to acquire the 66 2/3% shares necessary to take FBK private. But assuming that ABH does indeed obtain the sufficent # of shares, the bidder (ABH) will be able to effect a transaction that squeezes out the remaining minority shareholders (at the same price as was offered under the bid.) However, target (FBK) shareholders who object to a going private transaction are entitled to appraisal/dissent rights – that is, they are entitled to apply to a court for an appraisal of the value of their shares. The appraised “fair value” will be paid by the surviving company to objecting shareholders who satisfy all the requirements of the relevant corporate law. Sharper Dingaan: For the sake of fellow FBK shareholders and your credibility, do you mind citing the name of the publication, date, and page # of the article that says a new PPA "was signed yesterday"? If it's just something you heard though the grapevine, then just say so.
  21. you make some good points. but some pundits argue that it is especially the "tissue" segment of the pulp/paper market that is poised for growth: <<When I was in China this summer, I was a bit disturbed by the bathroom facilities in the rural areas—the communal poo rag had not yet been replaced by toilet paper. Even in tourist locations like the Great Wall, the restrooms had a rag attached to the wall to be used for wiping your ass. I had to ask our tour guide for confirmation that I wasn’t just imagining this—unfortunately I wasn’t. At the time, I just shrugged my shoulders and thought about it as little as possible. That was until I was alerted to the investment implications of this. Put simply, the average westerner uses over 25 lbs of tissue and toilet paper a year (hereafter simply called tissue). In most of the undeveloped world, the usage is a tiny fraction of that number, but it is growing rapidly....>> http://adventuresincapitalism.com/post/2011/01/09/What-Happens-When-4-Billion-People-Decide-To-Wipe-Their-Ass.aspx never the less, this mngt hasnt exaclty distinguished itself to date & should discounted with a skeptical eye, imo. Managers chasing "growth" through acquisitions generally wind up overpaying. Furthermore, areas commonly perceived to be growing at fast rates tend to attract competitors/new supply that compete away excess returns (if any.) If tissue demand in China grows by leaps and bounds then that will be reflected in the NBSK pulp prices which should benefit FBK. WE DON"T NEED FBK TO MAKE NO STINKING ACQUISITIONS. :) Just return cash to shareholders. If this PPA for $16 million comes to fruition and FBK would pay out all cash flows to shareholders, that would translate to a dividend yield of >35%!
  22. So do you see anything on the PPA? Google translate doesn't seem to work on this site.
  23. Thanks. So how many years is the PPA for? Does it make any mention of the number of MW being sold and the EBITDA? Let's assume the tender fails, how do we know FBK isn't going to squander the cashflows on value destructive acquisitions? FBK overpaid for the NBSK and RBK mills and they were on the verge of acquiring a "tissue" company in the US? If FBK's stock is so cheap, mgmt should buy back stock instead of issuing new equity to fund acquisitions. If the stock is not cheap, then reduce debt and pay dividends. Doing so will ensure a stock price >$2.5. I hope shareholders convey this to mgmt. Perhaps we need to pass a resolution at the AGM or EGM that forbids FBK from making acquistions without prior shareholder approval.
  24. Thanks for the link SD. Unfortunately my French and Google translate aren't that great. What makes you think the PPA was signed yesterday? Is it the last sentence "Un projet à l'image du parc agrothermique de Saint-Félicien qui progresse lentement?" Do you mind translating that? Here's how google translates it..."A project like the park of Saint-Félicien agrothermique slowly progressive."
  25. I am no fan of FBK mgmt's capital allocation skills either, but if FBK shareholders propose that any acquisitions be put to a vote and that cashflows be used solely to de-lever, buyback stock or pay dividends, I estimate the fair value of FBK to be north of $2.7 per share if the new PPA is signed in "early 2012." Dazel & others planning to tender--I am looking for quantifiable counter arguments to my estimate of intrinsic value. Consequently, I would appreciate your thoughts on the following questions: 1) What is your estimate of Fibrek's intrinsic value? (Assumptions regarding cost of capital, normalized cash flows/EBITDA, or multiples would be much appreciated.) 2) Does the IV estimate above take into consideration the $6 million in EBITDA from the announced 9.5 MW cogen and the $7 million EBITDA from the RBK take or pay contract? 3) Do you assign any value to the potential for an incremental $16 million in EBITDA (with no additional capex) from a new PPA with Hydro Quebec? 4) How do you think about the free cash flow generation at ABH (or lack thereof going back to 1991) and the fact that a significant amount of ABH's equity comes from deferred tax assets? Thanks!
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