Energy Savings Income Fund (ESIF), which operates as a trust and owns a number of natural gas and electricity marketers in the United States and Canada, said Monday it entered into a nonbinding letter of intent in late March to acquire Universal Energy Group (UEG), a North American energy retailer, in a stock for stock deal.
The potential transaction contemplates the acquisition of the UEG common shares in exchange for trust units of ESIF at a mutually agreed exchange ratio of 0.58 of an ESIF unit for each UEG share for an approximate value of C$7.05/share based on the C$12.16 closing price of ESIF trust units on April 9. If a definitive agreement is reached, the parties would expect to propose to UEG shareholders an exchange of their UEG common shares for shares of a subsidiary of ESIF exchangeable for ESIF trust units to provide a tax deferral for Canadian UEG shareholders.
ESIF CEO Ken Hartwick said recent “market events” necessitated his decision to publicly confirm the existence of a nonbinding letter of intent. He added that a consummated deal would offer “significant benefits” to the public holders of both companies.
“The merger of two independent contractor sales forces in Canada as well as United States customer bases which do not overlap should be positive for growth going forward,” Hartwick said. “In addition, the fact that each company has a substantial general and administrative structure which performs identical services should lead to operating synergies which will make the transaction accretive to Energy Savings distributable cash per unit.”
Because the transaction is nonbinding, each part’s obligation to move forward with the transaction is subject to the satisfaction or waiver of the following conditions by 5 p.m. EDT on April 19:
ESIF said it does not intend to make any further announcements or communications regarding this potential transaction until either a definitive agreement has been reached or discussions are terminated without such an agreement being reached.
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