Westport Signs Amendment to Merger Agreement with Fuel Systems
Updated agreement reflects current market conditions; provides greater certainty to Westport and Fuel Systems shareholders
VANCOUVER - Westport Innovations Inc. (TSX:WPT / Nasdaq:WPRT) ("Westport"), engineering the world's most advanced natural gas engines and vehicles, announced today that it has signed an Amendment to the Agreement and Plan of Merger (the "Amendment") in relation to the proposed business combination (the "Merger") between Westport and Fuel Systems Solutions, Inc. ("Fuel Systems") (Nasdaq:FSYS). All figures are in U.S. dollars unless otherwise stated.
The Amendment includes several updated changes in relation to the previously announced Agreement and Plan of Merger (the "Agreement") with Fuel Systems, dated September 1, 2015. The Amendment has been approved by the Boards of Directors of both companies. Westport will send out a supplement to its Management Information Circular and Proxy Statement, dated February 12, 2016, to shareholders that contains the Amendment information. Westport has scheduled a special meeting of its shareholders (the "Meeting") at 1750 West 75th Avenue, Suite 101, Vancouver, British Columbia for March 18 at 2:00pm (Pacific time) to consider and vote on certain items of business in connection with the proposed Merger (as set out in the Circular and supplemental letter).
Highlights of the Amendment include:
Collar-based exchange ratio: In light of current market volatility, the exchange ratio of the Agreement has been amended to include a collar mechanism. In the event that the Nasdaq volume weighted average price of Westport common shares during a specified measuring period ("VWAP") is equal to or greater than $2.37, then Fuel Systems stockholders will receive 2.129 Westport common shares per Fuel Systems share on closing of the Merger and through the exchange process. In the event that Westport's VWAP is equal to or less than $1.64, then Fuel Systems stockholders will receive approximately 3.08 Westport common shares per Fuel Systems share on closing of the Merger and through the exchange process. In the event that Westport's VWAP is greater than $1.64 and less than $2.37, then Fuel Systems stockholders would receive a number of Westport common shares per Fuel Systems share equal to dividing $5.05 by the Westport VWAP, rounded to four decimal places. The measuring period will be the ten consecutive trading days ending on and including the trading day five business days prior to the anticipated closing date. The Merger is currently anticipated to close in late March 2016.
Additional Board Member: Under the Agreement, as amended, the combined company's Board of Directors will consist of nine directors, down from ten directors currently. Three current directors of the Fuel Systems Board (the "Fuel Systems Nominees") will be nominated to join the combined Board. Once the Fuel Systems Nominees have been confirmed, existing directors will resign. Under the Amendment, the three Fuel Systems Nominees will also nominate one additional new individual who will be a Canadian citizen and an "Independent Director" whose nomination for the Westport Board shall be subject to the approval of the Nominating and Corporate Governance Committee of Westport, which shall not be unreasonably withheld. Once determined, the new director nominee shall take the place of a fourth existing Westport director, who shall resign.
Cartesian Financing Agreement: Concurrently with execution of the Amendment, Westport has also entered into an amendment to the previously announced Investment Agreement, dated as of January 11, 2016, between Westport and an affiliate of Cartesian Capital Group. Under the terms of the amendment to the Cartesian Investment Agreement, the second tranche of financing to be provided by an affiliate of Cartesian, an investment of $17.5 million in cash in exchange for a Westport convertible note, will now close simultaneously with the closing of the Merger. Reflective of the potentially new percentage of shares outstanding in the Merger, as a result of the Amendment, the convertible debenture valuation price will be equal to such amount as would provide the same percentage of fully-diluted ownership in Westport common shares as Cartesian would have been entitled to prior to the Amendment of the Merger Agreement, which utilized a 2.129 conversion ratio and a $2.31 previous valuation price. Under the amended Cartesian agreement, Cartesian must maintain at least 80% of its Westport shares represented under the convertible note as a 'minimum threshold' to maintain certain rights and provisions. In addition, the amended Investment Agreement modifies, among other things, certain covenants relating to the amount of indebtedness that the combined company may incur and the permitted sale of certain assets following the Merger to provide additional flexibility to Westport.
Westport shareholders are urged to carefully review the Circular and accompanying materials (such as the supplement to the Circular), as they contain important information regarding the Merger. Westport shareholders of record, as of the close of business on February 1, 2016, are entitled to vote at the Meeting. These materials are available online on Westport's website at www.westport.com or on SEDAR at www.sedar.com.
"We have adopted a collar-based exchange ratio versus a fixed exchange ratio to provide Fuel Systems shareholders with greater certainty and to reduce any disruption caused by market volatility," said David Demers, CEO of Westport. "We continue to be optimistic about the prospects of the combined Westport and Fuel Systems business and the benefits that the Merger provides to the shareholders of both companies, and are confident about its successful completion."
Benefits of the Merger to Westport Shareholders and Westport Board Recommendation
The Westport Board of Directors believes that the Merger will provide Westport and its shareholders with a number of significant strategic and financial benefits, including but not limited to the following:
• Scale - The combined company provides the scale and expertise to compete effectively, grow, and deliver strong shareholder returns--especially when markets improve.
• Strength - The combined company is expected to benefit from a strengthened balance sheet and enhanced liquidity, and to be positioned for continued investment and long-term financial stability.
• Global reach - The combined company will have a broad global reach enabling it to best serve customers and distributors. It will offer state-of-the-art facilities on five continents and a distribution network serving 70 countries, including the world's largest and fastest-growing markets. It will also bring together strong product brands including: Emer, Prins, OMVL, BRC, IMPCO, Zavoli and more.
• Increased efficiencies - Consolidation is expected to produce cost-efficiencies. The Merger is expected to be accretive to the combined company's adjusted EBITDA and earnings in 2016, excluding one-time costs. Total annual savings and Merger synergies are expected to reach approximately $30 million by 2018, excluding one-time costs.
• Enhanced RD and product development - The Merger will combine Westport's expertise in medium- and heavy-duty, and high horsepower applications with Fuel Systems' core focus and development efforts in automotive and industrial applications. The combined technological expertise and product development will span from passenger cars to heavy-duty trucks to locomotives, and from marine applications to stationary power.
• Deep OEM relationships - The combined company is expected to have strong original equipment manufacturer (OEM) relationships. Both companies have built long-standing relationships with OEMs such as General Motors Company, Ford Motor Company, Nissan Motor Company, Kia Motors Corporation, Subaru of Fuji Heavy Industries, Mitsubishi Group, Volvo Car Group, Volkswagen, Fiat Chrysler Automobiles, Tata Motors, GAZ Group, PACCAR Inc., Weichai and Cummins.
The Board of Directors of Westport unanimously recommends that Westport Shareholders vote in favour of all items of business in connection with the Merger as set out in the Circular (as supplemented).
How to Vote and Shareholder Questions
Westport shareholders who have questions or require assistance with voting may contact Laurel Hill Advisory Group, Westport's proxy solicitation agent, toll-free at 1-877-452-7184 (416-304-0211 collect) or by email at firstname.lastname@example.org.
Westport engineers the world's most advanced natural gas engines and vehicles. More than that, we are fundamentally changing the way the world travels the roads, rails and seas. We work with original equipment manufacturers (OEMs) worldwide from design through to production, creating products to meet the growing demand for vehicle technology that will reduce both emissions and fuel costs. To learn more about our business, visit www.westport.com.
SOURCE Westport Innovations Inc.
CONTACT: Inquiries: Darren Seed, Vice President, Capital Markets Communications, Westport, T: +1 604-718-2046, email@example.com; Media Inquiries: Holly Black, Director, Communications, T: +1 604-718-2011
Web Site: http://www.westport.com