Quebecor to repurchase CDPQ’s Quebecor Media stake for $1.69B

Quebecor Inc. (TSX: QBR.A, QBR.B) has entered into an agreement with Quebecor Media Inc. and Caisse de dépôt et placement du Québec (CDPQ) to repurchase all of the share capital of Quebecor Media still held by CDPQ, 17,628,911 shares, representing an 18.47% stake in Quebecor Media, for $1.690 billion.

The agreement is to be completed in two transactions:
Quebecor Media will repurchase and cancel 16,064,215 shares held CDPQ for an aggregate purchase price of $1.540 billion payable in cash;
Quebecor will purchase 1,564,696 shares of Quebecor Media held by CDPQ in consideration of the issuance of $150 million aggregate principal amount of convertible debentures of Quebecor, which will be convertible into Quebecor Class B Subordinate Voting Shares (the Convertible Debentures).

Upon completion of these transactions, Quebecor and Quebecor Media will then have acquired the 18.47% stake in Quebecor Media that Quebecor did not yet have, with Quebecor becoming the sole owner of Quebecor Media.

The transactions are expected to be fully completed by June 22, 2018, subject to the customary closing conditions for transactions of this nature and the receipt of regulatory approvals, including that of the Toronto Stock Exchange.

TD Securities acted as financial advisor to Quebecor on the transaction.

photo credit: Quebecor

News Release

Quebecor and Caisse de dépôt et placement du Québec reach an agreement on the repurchase of the Caisse’s interest in Quebecor Media

Private Equity Montréal, May 8, 2018

Quebecor Inc. (“Quebecor”) is pleased to announce that it entered into an agreement (the “Agreement”) with Quebecor Media Inc. (“Quebecor Media”) and Caisse de dépôt et placement du Québec (the “Caisse”) to repurchase all of the share capital of Quebecor Media still held by the Caisse. The Agreement provides that Quebecor and Quebecor Media purchase 17,628,911 shares, representing a 18.47% stake in Quebecor Media, with respect to which the parties have agreed on a value of $1.690 billion.

This Agreement completes the process announced in October 2012 (and continued in September 2015 and July 2017), as part of the plan to purchase the shares of Quebecor Media held by the Caisse that was introduced by Quebecor, in accordance with its previously stated goal to ultimately own all the shares of Quebecor Media.

“Thanks to its currently very favourable financial profile and the substantial amount of cash it has on hand, Quebecor is now in a position to complete the repurchase of the share capital of Quebecor Media initiated in 2012. By gaining access to 100% of the cash flows that it generates, Quebecor will now be better equipped to seize business opportunities that arise. Ultimately, these transactions will allow us to have complete control over our destiny,” stated Pierre Karl Péladeau, President and Chief Executive Officer of Quebecor.

“The complete repurchase of the shares today reflects Quebecor’s solid financial position and allows la Caisse to reallocate this capital to new investment opportunities in Quebec companies. Through the convertible debenture, la Caisse maintains an interest in the business, while providing Quebecor with increased financial flexibility to pursue its growth plan. And our long-standing partnership with Quebecor will certainly allow us, in the future, to explore new projects or investment opportunities with the company,” said Michael Sabia, President and Chief Executive Officer of la Caisse.”

“Quebecor has always been very proud, in the wake of previous successful investments, such as the creation of Imprimeries Quebecor in 1989, to be a partner of the Caisse. By joining forces and working together on the creation of Quebecor Media, we created a major Québec group that has become a leader in the fields of telecommunications, entertainment, news media and culture. In doing so, we allowed Quebecers to retain control over their technological and cultural levers, while generating substantial benefits for our entire community,” added Pierre Karl Péladeau.

These benefits include, in particular, more than 4,000 jobs created at Videotron in the past 15 years, and some $2 billion invested in wireless in order to offer more choices and better prices to Québec consumers. Further benefits include the exceptional contribution of Quebecor and its subsidiaries to Québec audiovisual content and local journalism, as well as its philanthropic contribution to 400 organizations in fields as varied as culture, health, education, the environment and entrepreneurship.
Agreement Overview

The Agreement provides for the completion of the following two transactions:
the repurchase for cancellation by Quebecor Media of 16,064,215 shares of Quebecor Media held by the Caisse, representing approximately 91.1% of the Caisse’s interest before closing, for an aggregate purchase price of $1.540 billion, payable in cash; and
the purchase by Quebecor of 1,564,696 shares of Quebecor Media held by the Caisse, representing approximately 8.9% of the Caisse’s interest before closing, in consideration of the issuance of $150-million aggregate principal amount of convertible debentures of Quebecor, which will be convertible into Quebecor Class B Subordinate Voting Shares (the Convertible Debentures), the whole subject to required approvals, including that of the Toronto Stock Exchange.

Upon completion of these transactions, Quebecor and Quebecor Media will then have acquired the 18.47% stake in Quebecor Media that Quebecor did not yet have, with Quebecor becoming the sole owner of Quebecor Media.

Issuance of Convertible Debentures by Quebecor

Subject to the approval of the Toronto Stock Exchange, the Convertible Debentures will have a six-year term maturing in 2024 and will bear interest at an annual rate of 4.0%, payable in accordance with the terms of the trust indenture to be entered into at the time of their issuance. The Convertible Debentures will be convertible into Quebecor Class B Subordinate Voting Shares in accordance with the terms of the trust indenture, subject to a floor price of $26.85 per share (that is, a maximum number of approximately 5,586,592 Quebecor Class B Subordinate Voting Shares corresponding to a ratio of $150 million to the floor price) and a ceiling price of $33.5625 per share (that is, a minimum number of approximately 4,469,274 Quebecor Class B Subordinate Voting Shares corresponding to a ratio of $150 million to the ceiling price), subject to adjustments in accordance with the terms of the trust indenture. The other terms and conditions of the Convertible Debentures are expected to be substantially consistent with the terms of the Convertible Debentures issued under Quebecor’s trust agreement dated October 11, 2012, as amended.

Exit Rights and Quebecor Media Shareholders’ Agreement

As a result of the completion of the transactions provided for in the Agreement, the exit rights granted to the Caisse under the agreement entered into at the beginning of the process introduced in 2012, including, the right to require that Quebecor Media carry out an initial public offering (IPO), or the right to sell its remaining interest in Quebecor Media to a financial third party, without providing any right of first refusal or first offer to Quebecor or Quebecor Media, will extinguish at the closing of the operation.

The parties have also agreed to terminate the shareholders’ agreement between Quebecor, CDP Capital d’Amérique investissements inc. (formerly Capital Communications CDPQ inc.) and Quebecor Media dated October 23, 2000, as consolidated and amended from time to time.

Closing

The transactions contemplated in the Agreement are currently expected to be fully completed by June 22, 2018, subject to the customary closing conditions for transactions of this nature and the receipt of regulatory approvals, including that of the Toronto Stock Exchange.

TD Securities acted as financial advisor to Quebecor on the transaction.

This press release does not constitute an offer to sell or the solicitation of an offer to buy or sell securities in any jurisdiction. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933 or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. The securities referred to herein have not been and will not be qualified for distribution to the public under applicable Canadian securities legislation.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

About Québecor

Quebecor, a Canadian leader in telecommunications, entertainment, news media and culture, is one of the best-performing integrated communications companies in the industry. Driven by their determination to deliver the best possible customer experience, all of Quebecor’s subsidiaries and brands are differentiated by their high-quality, multiplatform, convergent products and services.

Quebecor (TSX: QBR.A, QBR.B) is headquartered in Québec and employs more than 10,000 people in Canada.

A family business founded in 1950, Quebecor is strongly committed to the community. Every year, it actively supports more than 400 organizations in the vital fields of culture, health, education, the environment and entrepreneurship.

Visit our website: www.quebecor.com
Follow us on Twitter: twitter.com/Quebecor

Ted Liu

Ted Liu, M.Sc. (Mining), MBA (Finance), is the Editor of Private Capital Journal and CanadaMetals.ca, and former Editor of Canadian Private Equity. Ted has been passionately tracking Canadian private capital industry since 1992, most recently served as Research Director for The Canadian Venture Capital and Private Equity Association (CVCA). Ted was the architect of CVCA infobase, and is the architect of CPE Media's Financings.ca, the most sophisticated and advanced all private capital and public market financing database.