Here is the release:
CANADA 3000 Inc. and Royal Aviation Inc. announced an agreement whereby CANADA 3000 will offer to acquire 100% of the shares of Royal. The combined company is Canada's second largest passenger airline, with annual revenues last year of over $1 billion and serving over 5 million passengers a year. The company will employ 4,000 people from across Canada and around the world.
Under the terms of the agreement, CANADA 3000 will offer one common share for every 2.5 common shares of Royal. The total value of the transaction is approximately $84 million. The Offer has been recommended by the Board of Directors of both companies.
The Offer will be subject to various conditions, including the valid deposit of not less than 66 2/3% of the common shares of Royal on a fully- diluted basis, and the obtaining of all necessary approvals from regulatory authorities.
John M. S. Lecky, Chairman of CANADA 3000, said: "We are delighted that Royal and CANADA 3000 have agreed to come together. The combined airline represents an excellent fit and brings together CANADA 3000's long haul, international services with Royal's short-haul domestic capabilities. This will be a truly national and international airline, offering frequency, the lowest fares and broad-based excellent service."
Michel Leblanc, Chairman, President and Chief Executive Officer of Royal Aviation, said: "Royal is very pleased to be joining forces with an outstanding carrier like CANADA 3000. The combined company represents an excellent platform for dynamic growth in the business market."
Mr. Leblanc joins the CANADA 3000 senior executive team as Vice Chairman and Managing Director, Canadian Scheduled Services. He will continue to be based in Montreal.
"This deal is also good news for all of Royal's employees. We expect that the combined company will create additional jobs and open new opportunities for the professional growth of our people. I look forward to working with my current colleagues at Royal and my new colleagues at CANADA 3000 as we vigorously pursue our combined growth objectives," said Mr. Leblanc.
Angus Kinnear, President of CANADA 3000, said: "The creation of a larger alternative airline should also be welcome news for Canada's traveling public. The enhanced organization will have a fleet of 34 aircraft, with a further 10 aircraft on order. The current 30 domestic city pairs served by the combined airline is expected to grow to over 40 domestic city pairs by this summer."
CANADA 3000 will be mailing its Offer to shareholders of Royal Aviation within the next 30 days. The Offer will be open for 21 days following the mailing.
An irrevocable lock-up agreement for approximately 45% of Royal's fully- diluted shares has been signed by the company's largest shareholder. A support agreement was entered into by CANADA 3000 and Royal on January 28, 2001 providing for the payment of a breakup fee of $3 million by Royal in certain circumstances, including the Board of Directors changing its recommendations to accept the Offer and for the payment of a walk-away fee of $2 million by CANADA 3000 if it does not make the Offer on or before February 28, 2001.
It will be interesting to see what happends to the fleet as Canada 3000 prides itself on having a young fleet as it beleives the cost of financing new aircraft is cheaper than maintaining and fueling older aircraft. Royal's fleet is quite old especially with the addition of the 732's.
Very interesing times indeed!