Westport Innovations Inc. (Westport), engineering the world's most advanced natural gas engines and vehicles, announced 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). All figures are in US 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 1 September 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 12 February 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 18 March 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 US$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 US$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 US$1.64 and less than US$2.37, then Fuel Systems stockholders would receive a number of Westport common shares per Fuel Systems share equal to dividing US$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 11 January 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 US$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 utilised a 2.129 conversion ratio and a US$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 1 February 2016, are entitled to vote at the meeting.
"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."
Adapted from press release by Francesca Brindle
Read the article online at: https://www.hydrocarbonengineering.com/product-news/07032016/westport-signs-amendment-to-agreement-with-fuel-systems-2687/