Altius Renewable Royalties Corp. (TSX:ARR, Financial) (OTCQX:ATRWF) (“ARR” or the “Company”) is pleased to announce that the Company and Royal Aggregator LP (the “Purchaser”) (an affiliate of Northampton Capital Partners, LLC (“NCPL” and together with its controlled affiliates, “Northampton”)) have entered into a definitive arrangement agreement (the “Arrangement Agreement”), whereby the Purchaser will acquire all of the issued and outstanding common shares of the Company (the “ARR Shares”), other than those ARR Shares indirectly owned by Altius Minerals Corporation (“Altius Minerals”), by way of a statutory plan of arrangement under the Business Corporations Act (Alberta) (the “Transaction”). Altius Minerals currently holds 58% of the issued and outstanding ARR Shares on an undiluted basis.
The Arrangement Agreement
Under the terms of the Arrangement Agreement, each ARR shareholder (other than Altius Minerals) (the “ARR Minority Shareholders”) will receive cash consideration of C$12.00 for each ARR Share held (the “Consideration”). The Consideration represents a 28% premium to the closing price of the ARR Shares on the Toronto Stock Exchange (the “TSX”) on September 4, 2024 (being the date before the announced unusual trading activity took place in the Company’s shares) and a 29% premium to the 20-day volume weighted average price (“VWAP”) of the ARR Shares on the TSX on September 4, 2024.
Following completion of the Transaction, the Purchaser will hold 43% of the issued and outstanding and Altius Minerals will indirectly hold 57% of the issued and outstanding ARR shares. 1
Benefits to ARR’s Minority Shareholders
The Transaction has several benefits for the ARR Minority Shareholders, including:
- Premium to Unaffected Market Price. The value of the Consideration offered to ARR Minority Shareholders under the Transaction represents a 28% premium to the closing price of the ARR Shares on the TSX on September 4, 2024 (being the date before the announced unusual trading activity took place in the Company’s shares) and a 29% premium to the 20-day VWAP of the ARR Shares on the TSX on September 4, 2024.
- Compelling Value Relative to Strategic Alternatives. Prior to entering into the Arrangement Agreement, the Special Committee (as defined below), with the assistance of its financial and legal advisors, assessed the relative benefits and risks of various alternatives to the Transaction and ARR’s Board of Directors, with interested directors abstaining, determined that the Transaction was in the best interest of the Company.
- Certainty of Value and Liquidity. The Consideration being offered to ARR’s Minority Shareholdersis all cash and is not subject to any financing condition, which provides certainty of value and liquidity.
- Voting Support Agreements. There is strong support in favour of the Transaction from ARR’s significant shareholders as well as the directors and officers of ARR. The Supporting Shareholders (as defined below) holding collectively, approximately 81% of the ARR Shares (and 55% of the ARR Shares after excluding the ARR Shares held or controlled by Altius Minerals and any other persons whose votes are required to be excluded under MI 61-101 (as defined below)) have each entered into voting support agreements (the “Support Agreements”) to vote their ARR Shares in favour of the Transaction, subject to certain customary exceptions.
- Independent Valuation and Fairness Opinion. National Bank Financial Inc. (“NBF”) delivered a formal valuation and fairness opinion to the Special Committee, pursuant to which it concluded that as of September 11, 2024, the fair market value of the ARR Shares is in the range of C$10.50 to C$12.50 per ARR Share and that the Consideration to be received by the ARR Minority Shareholders under the Transactionis fair, from a financial point of view, to the ARR Minority Shareholders.
- Minority Vote and Court Approval. The Transaction must be approved by (i) 66 2/3% of the votes cast by the holders of ARR Shares; and also (ii) a simple majority of the votes cast by holders of ARR Shares after excluding any votes of Altius Minerals and any other persons required to be excluded under MI 61-101. The Court of King’s Bench of Alberta will also consider the fairness and reasonableness of the Transaction.
- Special Committee Oversight. The Special Committee, which is comprised entirely of independent directors, oversaw, reviewed and directly participated in the negotiation of the Transaction and Arrangement Agreement. The Special Committee and its legal and independent financial advisors engaged in extensive analysis and robust negotiations in an attempt to obtain the best available terms for the Company and the ARR Minority Shareholders.
David Bronicheski, Chair of the Special Committee, commented “The decision to re-privatize ARR comes largely as a result of several successive years of generally declining valuations in the renewable energy sector of the North American public markets. As a result, we have concluded that the current limited availability and high implied cost of public equity capital does not support ARR’s expected investment opportunities in a manner that allows for shareholder value accretion. We believe that Northampton, including its institutional investor base, provides the Company with a partner that matches well with our anticipated opportunity set, while also providing our minority shareholders with an attractive premium and liquidity.”
Geoffrey Strong, Chief Executive Officer of Northampton commented “We are excited to announce this transaction today and to the beginning of a long-term partnership. We are greatly impressed with the accomplishments to-date of ARR and the underlying Great Bay Renewables joint venture team and look forward to contributing to the support and resources required for the business to reach its full potential.”
Voting Support Agreements
Altius Minerals, the directors and officers of the Company and Altius Minerals, and certain shareholders of the Company (collectively, the “Supporting Shareholders”) have each entered into Support Agreements to vote their ARR Shares in favour of the Transaction, subject to certain customary exceptions.
The Supporting Shareholders hold, collectively, approximately 81% of the ARR Shares (and 55% of the ARR Shares after excluding the ARR Shares held or controlled by Altius Minerals and any other persons whose votes are required to be excluded under MI 61-101).
Special Committee and Board of Directors Recommendations
A special committee (the “Special Committee”) of ARR’s Board of Directors comprised solely of independent directors, being David Bronicheski (Chair), Karen Clarke-Whistler and Earl Ludlow was constituted to consider the Transaction. The Special Committee, on behalf of ARR’s Board of Directors, obtained a formal valuation (the “Valuation”) from NBF as required by Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Valuation was prepared under the supervision of the Special Committee and determined that in NBF’s opinion, and based upon and subject to the assumptions, limitations and qualifications set forth therein, the fair market value of the ARR Shares, as at September 11, 2024 is in the range of C$10.50 to C$12.50 per ARR Share. In addition, NBF has provided a fairness opinion to the Special Committee (the “Fairness Opinion”), stating that in its opinion, and based upon and subject to the assumptions, limitations and qualifications set forth therein, the Consideration to be received by the ARR Minority Shareholders pursuant to the Transaction is fair, from a financial point of view, to the ARR Minority Shareholders.
The Board of Directors (excluding Mrs. Anna El-Erian and Mr. André Gaumond, who recused themselves from voting on the Transaction as a result of their potential conflict of interest in the Transaction as Mrs. Anna El-Erian and Mr. André Gaumond are also directors of Altius Minerals), following due consideration and receipt of the recommendation of the Special Committee who received the Fairness Opinion and the Valuation, unanimously approved the Transaction and recommend that ARR Minority Shareholders vote in favour of the Transaction.
Transaction Conditions and Timing
The Transaction will be implemented by way of a court-approved plan of arrangement under the Business Corporations Act (Alberta) and will require the approval of: (i) 66 2/3% of the votes cast by the holders of ARR Shares; and (ii) a simple majority of the votes cast by holders of ARR Shares after excluding any votes of Altius Minerals and any other persons required to be excluded under MI 61-101, all at a special meeting of ARR shareholders (the “Special Meeting”) to consider the Transaction.
The completion of the Transaction will also be subject to obtaining required court and other approvals and satisfaction of closing conditions customary for a transaction of this nature. The Arrangement Agreement provides for customary deal-protection provisions, including a non-solicitation covenant on the part of ARR and a right for Northampton to match any Superior Proposal (as defined in the Arrangement Agreement). The Arrangement Agreement includes a termination fee of US$6.75 million, payable by ARR, under certain circumstances (including if the Arrangement Agreement is terminated in connection with ARR pursuing a Superior Proposal). A reverse termination fee of US$6.75 million is payable by the Purchaser to ARR if the Arrangement Agreement is terminated as a result of the Purchaser failing to deposit the Consideration with the depositary.
It is anticipated that the Special Meeting to consider the Transaction will be held in November 2024. The terms and conditions of the Transaction will be disclosed in greater detail in a management information circular for the Special Meeting that will be mailed to the ARR Shareholders.
The Transaction is expected to close in the fourth quarter of 2024, subject to obtaining the required approvals and other customary closing conditions. Following completion of the Transaction, the Company expects to be delisted from the TSX and to cease to be a reporting issuer in all provinces and territories of Canada.
Advisors and Counsel
National Bank Financial Inc. is acting as the independent valuator and financial advisor to the Special Committee in connection with the Transaction.
McCarthy Tétrault LLP and Pierce Atwood LLP are acting as counsel to ARR.
Kirkland & Ellis LLP and Mintz LLP are acting as counsel to Northampton.
Additional Information about the Proposed Transaction
Copies of the Fairness Opinion, the Valuation, and a description of the various factors considered by the Special Committee and the Board of Directors of the Company in their determination to approve the Transaction, as well as other relevant background information, will be included in the management information circular to be mailed to the Company’s Shareholders in advance of the Special Meeting.
Copies of the management information circular for the Special Meeting, the Arrangement Agreement, the plan of arrangement, the Support Agreements and other related documents will be filed with Canadian securities regulators and will be available on the SEDAR+ profile of ARR at www.sedarplus.ca. ARR’s Shareholders are urged to read those and other relevant materials when they become available.
1 Due to dilution resulting from issuance of additional ARR Shares upon the settlement of the RSUs, DSUs and options in connection with the Transaction which ARR Shares will be acquired by the Purchaser pursuant to the Transaction.
About Altius Renewable Royalties Corp.
ARR is a renewable energy royalty company whose business is to provide long-term, royalty level investment capital to renewable power developers, operators, and originators. ARR has 35 renewable energy royalties representing approximately 2.6 GW of renewable power on operating projects and an additional approximate 5.6 GW on projects in construction and development phase, across several regional power pools in the U.S. The Company also expects future royalties from indirect investments in Bluestar Energy Capital, Hodson Energy and Hexagon Energy, which increase the total project pipeline to approximately 18.7 GW. The Company combines industry expertise with innovative, partner-focused solutions to further the growth of the renewable energy sector as it fulfills its critical role in enabling the global energy transition.
Forward-Looking Information
This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking information”) within the meaning of applicable securities laws. This information includes, but is not limited to, statements concerning our objectives, our strategies to achieve those objectives, as well as statements made with respect to management's beliefs, plans, estimates, projections and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as “expects”, “estimates”, “outlook”, “forecasts”, “projection”, “prospects”, “intends”, “anticipates”, “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might”, “will”, “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Forward-looking information in this news release includes, among other things, statements relating to the Transaction, management’s assessment of the anticipated benefits to ARR Minority Shareholders of the proposed Transaction, anticipated meeting date, timing for completion of the Transaction, delisting from the TSX and ceasing to be a reporting issuer. Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that the Company considered appropriate and reasonable as of the date such statements are made in light of its experience, current conditions and expected future developments, including assumptions: that any conditions precedent to the closing of the Transaction can be satisfied, and that there will be no undue delays with respect to the Transaction.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of ARR to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others: failure to obtain the required shareholder and court approvals or satisfying other closing conditions to effect the Transaction; the risk that the Transaction may involve unexpected costs, liabilities or delays; risks related to the diversion of management's attention from ARR’s ongoing business operations; the risk that the Transaction may not close when planned or at all or on the terms and conditions set forth in the Arrangement Agreement; the risk of the expected benefits from the Transaction not being realized; and general business, economic and competitive uncertainties, as well as those factors discussed in the section entitled “Risk Factors” in the Company’s Annual Information Form for the year ended December 31, 2023, Management’s Discussion and Analysis for the year ended December 31, 2023, as well as Management’s Discussion and Analysis for the interim period ended June 30, 2024.
Although the Company has attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to management of the Company or that it presently believes are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. No forward-looking statement is a guarantee of future results. Accordingly, shareholders should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this news release represents the Company’s expectations as of the date of this news release (or as the date they are otherwise stated to be made) and is subject to change after such date. However, the Company disclaims any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws in Canada. All of the forward-looking information contained in this news release is expressly qualified by the foregoing cautionary statements.
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