Noranda Income Fund completed its going-private transaction with Glencore Canada Corporation, a subsidiary of Glencore PLC. The Fund was an income trust that owned an electrolytic zinc processing facility located in Salaberry-de-Valleyfield, Québec, which is the second-largest zinc processing facility in North America and the largest zinc processing facility in eastern North America.
The Independent Committee, mandated to conduct a strategic review of the sustainability of the Fund model, completed an analysis of the Fund’s status quo, long-term prospects and lack of viable alternatives, throughout the course of which Fasken provided legal advice to the Independent Committee.
On November 24, 2022, during the course of the strategic review process, a group of unitholders, who in the aggregate beneficially owned or had control or direction over approximately 22% of the priority units of the Fund, sent the Fund a Requisition for a special meeting of unitholders in order to reconstitute the Board of Trustees of Noranda Operating Trust. This Requisition created additional pressure to arrive at the ultimate outcome of the strategic review in a timely manner. Fasken assisted the Independent Committee in responding to the Requisition and navigating communications with the requisitioning unitholders prior to the announcement of the culmination of the strategic review process.
On January 8, 2023, the extensive strategic review, which had lasted just under two years, culminated in the entering into of an Arrangement Agreement between the Fund and Glencore Canada pursuant to which Glencore Canada acquired all of the issued and outstanding priority units of the Fund for C$1.42 per unit, by way of a court approved Plan of Arrangement.
Following the announcement of the Arrangement Agreement, the Parties entered into discussions with the requisitioning unitholders to seek their support of the Arrangement. After almost two months of negotiations, on February 23, 2023, Glencore entered into lock-up and support agreements with the such unitholders. On the same day, Glencore and the Fund entered into an amending agreement to the Arrangement Agreement, by which Glencore agreed to increase the purchase price for the acquisition of all issued and outstanding priority units of the Fund from $1.42 to $1.98. The increased purchase price of $1.98 per unit exceeds the top-end of the independent valuation range received by the Independent Committee on January 8, 2023.
On February 28, 2023, the Fund’s unitholders approved the Arrangement.
The transaction was particularly complex due to the Fund’s unique structure, as well as the foundational arrangements in the Fund’s constating documents and the material contracts between the Fund and Glencore Canada, in place since the Fund’s inception in 2002. Notably, prior to completion of the transaction, Glencore Canada held 100% of the Fund’s special fund units, representing 25% of all then issued and outstanding units of the Fund, and had nomination rights for three of the seven members of the Board of Trustees.
Fasken assisted the Independent Committee to put in place a number of procedural safeguards from the outset of the transaction evaluation and negotiation process to ensure that Glencore’s various relationships with the Fund would not interfere with the ability of the Independent Committee to represent effectively the interests of the Fund and the priority unitholders.
Based on their review, the Independent Committee concluded that the privatization transaction was the most compelling value proposition reasonably available to priority unitholders and was in the best interests of both the Fund and its priority unitholders. The transaction presented several benefits for the Fund’s priority unitholders such as an attractive premium, an all-cash transaction not subject to a financing condition, and the removal of any future dilution, commodity and execution risk for the priority unitholders.
The transaction closed on March 15, 2023.
A Fasken team composed of Marie-Josée Neveu, Monica Dingle, Laura Fabi (Governance and M&A), Alain Ranger (Tax), Antonio Di Domenico, Chris Margison (Regulatory and Competition) and Alain Riendeau and Brandon Farber (Commercial Litigation) advised the Independent Committee of the Board of Trustees of Noranda Operating Trust in connection with the transaction.
Jurisdictions
- Ontario
- Québec
