Listing: TSX Venture Exchange
Symbol: DNX
Dynex Announces Strategic Transaction
Signs Non-
Binding Letter of Intent to Sell Control to Chinese Firm
TORONTO, Canada (March 31, 2008) The Board of Dynex Power Inc.
(TSX VENTURE: DNX) ("Dynex") is pleased to announce that the company has
entered into a non-binding letter of intent dated March 28, 2008 related
to the proposed acquisition of control of Dynex by Zhuzhou CSR Times
Electric Co., Ltd. (“Times Electric”), a leading Chinese manufacturer of
mass transit electrical systems, based in Hunan Province, People’s
Republic of China (“PRC”).
Times Electric, at its
option, will acquire either 80% or 100% of the outstanding common equity
shares of Dynex for cash at a price of Cdn$0.55 per share. This price is
non-binding on Times Electric, except as explained below. The
transaction is subject to a definitive agreement being entered into by
Dynex and Times Electric. There can be no assurances that this
transaction will close. Times Electric has, however, agreed to use its
reasonable efforts to reaffirm the price within sixty days of March 28,
2008. The structure to be used for the proposed transaction remains to
be determined and will be the subject of further negotiation between
Dynex and Times Electric, as will the terms to be contained in the
definitive agreement.
If the proposed transaction proceeds, the
entry into the definitive documentation and the closing of the
transaction will be subject to conditions including the following:
satisfactory completion of due diligence by Times Electric, the
execution of the definitive support agreement and the replacement
irrevocable lock-up agreements (referred to below), approvals by the
board of directors and shareholders of Times Electric, approvals from
certain Chinese regulators and the TSX Venture Exchange, as well as the
approval of the board of directors of Dynex and the approval or
acceptance of the transaction by the shareholders of Dynex.
The
letter of intent includes binding exclusivity whereby Dynex agrees not
to solicit, either actively or passively, offers to acquire all or part
of Dynex, or accept or entertain offers from any party other than Times
Electric to acquire all or part of Dynex for a period of 100 days from
the date a letter of credit is opened for the Dynex Break Fee (as
defined below). This exclusivity period may be extended by up to 25
days. The exclusivity provision does not preclude the directors of Dynex
from exercising their fiduciary duties in the context of an unsolicited
offer, subject to Dynex immediately making Times Electric aware of such
offer. During the exclusivity period, Times Electric will conduct its
due diligence and the parties will engage in negotiation towards
concluding the definitive agreement.
In exchange for granting the
exclusivity period, Times Electric has agreed to deliver to Dynex within
fifteen business days from March 28, 2008, an irrevocable letter of
credit on a reputable PRC bank advised by a reputable Canadian bank, in
favour of Dynex’s legal counsel, LaBarge Weinstein Professional
Corporation in the amount of Cdn$715,777 (the “Dynex Break Fee”).
The
Dynex Break Fee will be paid to Dynex if the proposed transaction does
not close by reason of Times Electric refusing to proceed, save where
(a) such failure to proceed is due to a force majeure event or by reason
of Dynex, both of which exempting circumstances are defined in greater
detail in the letter of intent; or (b) Times Electric decides after
conducting its due diligence that the price of Cdn$0.55 per share is too
high, because it is not within the current range of market multiples
that an investment bank experienced in Canadian merger and acquisition
transactions would normally apply to the annual revenue, EBITDA and
pre-tax profits in establishing the enterprise value of a company.
A
break fee of 5.0% of the purchase price for 80% of the common equity
shares of Dynex (or 100% if Times Electric has provided prior written
notice of its intention to proceed with 100%) will be payable to Times
Electric by Dynex if Dynex closes an offer from another party to acquire
Dynex during the exclusivity period, if Dynex refuses to execute a
mutually agreed support agreement or Dynex otherwise fails to proceed
with closing after the execution of the support agreement.
In
addition, Times Electric has obtained from Messrs. David Banks and
Daniel Owen, who collectively own approximately 40.95% of Dynex’s
outstanding common equity shares, irrevocable voting and lock-up
undertakings to vote their shares in favour of the proposed transaction
and (depending on the transaction structure) to tender their shares to
the transaction at a price of Cdn$0.55 per share. Times Electric’s
purpose in obtaining these voting and lock-up undertakings is to seek to
ensure a successful transaction. The voting and lock-up undertakings
would be superseded by replacement irrevocable lock-up agreements to be
entered into contemporaneously with the execution of a definitive
agreement once the form of the transaction is determined.
A
separate and potentially additional break fee of 2.5% of the purchase
price for 80% of the common equity shares of Dynex (or 100% if Times
Electric has provided prior written notice of its intention to proceed
with 100%), shall be payable by Dynex upon either of David Banks or
Daniel Owen (a) refusing to execute and deliver the related replacement
irrevocable lock-up agreements concurrently with the definitive support
agreement between Dynex and Times Electric; (b) materially breaching his
irrevocable voting and lock-up undertakings; or (c) otherwise failing to
proceed with closing.
There can be no assurance that any
definitive agreement will be entered into, that any proposed transaction
will be accepted or approved by the shareholders of Dynex or that any
transaction will be completed as a result of the execution of the letter
of intent. Investors are cautioned against trading in Dynex common
equity shares based on the fact of this non-binding letter of intent.
Times
Electric has stated its intention to retain the services of the senior
management team as well as retain Dynex’s manufacturing plant in
Lincoln, England.
Dr. Paul Taylor, President and Chief Executive
Officer of Dynex, said, “I am very satisfied with this proposed
transaction. The firm that is proposing to acquire Dynex is large,
highly regarded and has a bright future. We have worked diligently with
them over the past five months to achieve this result. We are optimistic
the transaction will close on schedule, starting a long and productive
working relationship with a company and a management team we greatly
admire. We are also pleased with the potential of larger and more
reliable capital resources to fund our future developments.”
David
Banks, Chairman of Dynex, also commented, “The Board is delighted with
this transaction. We are satisfied that the price is fair and we are
delighted to have our company in the hands of owners who will help it
achieve the great destiny we know it can enjoy as well as look after our
people. Our counterparty is made up of people with impressive commercial
skill and integrity. We will be very pleased to present this proposed
transaction to our shareholders in due course. We are also pleased that
some shareholders may remain invested in what we believe will be a
strategically exciting firm that will grow in value and importance.”
About
Zhuzhou CSR Times Electric Co., Ltd
Times Electric is a limited
liability company established in Hunan Province, PRC whose shares are
listed and traded on the Hong Kong Stock Exchange. It is a leading
supplier of on-board electric systems in the PRC rail-transport
industry, and its principal business activities include research and
development, design, manufacture and sale of a wide range of mass
transit electric drive converters and control systems. The company also
produces electrical components including semiconductor devices, sensors
and other related products.
About Dynex
Dynex is one of
the world’s leading independent suppliers of specialist, high power
semiconductor products. Dynex Semiconductor Ltd is its operating
business and is based in Lincoln, England in a facility housing the
fully integrated silicon wafer fabrication, assembly and test, sales,
design and development operations. Dynex designs and manufactures high
power bipolar discrete semiconductors, power modules, including
insulated-gate bipolar transistors (IGBTs), and high power electronic
assemblies. Dynex products are used world wide in power electronic
applications including electric power generation, transmission and
distribution, marine and rail traction drives, aircraft, electric
vehicles, industrial automation and controls. The company continues to
produce and sell certain high reliability integrated circuits (ICs) for
use in specialist applications led by its proven radiation hard
Silicon-on-Sapphire products for space and nuclear applications.
Forward
Looking Statements
This news release contains forward-looking
information. These statements relate to future events or future
performance and reflect management's current expectations and
assumptions. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. There are a number of
factors beyond the control of Dynex that could result in the termination
of the proposed transaction or negotiations between Dynex and Times
Electric could result in transaction terms that differ significantly
from those described above.
The TSX-Venture Exchange does not
accept responsibility for the adequacy or accuracy of this release.
For
more information:
Dr. Paul Taylor
President and Chief
Executive Officer
or
Bob Lockwood
Finance Director and
Chief Financial Officer
Dynex Power Inc.
Tel: UK +44 1522 500
500
Email: investorrelations@dynexsemi.com
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