Offer to purchase CLEARNET.pdf - About TELUS
Offer to purchase CLEARNET.pdf - About TELUS
Offer to purchase CLEARNET.pdf - About TELUS
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<strong>TELUS</strong> intends <strong>to</strong> integrate Clearnet with its existing mobile wireless business and operate them<br />
nationwide. <strong>TELUS</strong> further intends Clearnet <strong>to</strong> continue <strong>to</strong> build out its Mike iDEN network in Canada <strong>to</strong> the<br />
extent economically feasible and <strong>to</strong> increase its population coverage by four million by the end of 2003. Given<br />
the compatibility in technology (<strong>TELUS</strong> and Clearnet both use CDMA technology for their PCS networks), and<br />
the complementarity of geography in which <strong>TELUS</strong> and Clearnet currently provide mobile wireless services,<br />
<strong>TELUS</strong> expects the business of Clearnet <strong>to</strong> complement its existing mobile wireless business.<br />
The integration is expected <strong>to</strong> enhance <strong>TELUS</strong>’ ability <strong>to</strong> (i) offer bundled or packaged wireless and<br />
wireline telecommunications services on a national basis, thereby increasing cus<strong>to</strong>mer choice, (ii) develop<br />
and sell new applications, such as data and Internet, for wireless services and develop future technologies, and<br />
(iii) achieve economies of scale, thereby reducing capital and operating expenditures.<br />
In addition, <strong>TELUS</strong> management has identified significant operating synergies and tax synergies. The<br />
operating synergies include the elimination of overlapping branding and advertising expenses, conversion of<br />
roaming traffic <strong>to</strong> each other’s networks, increasing efficiency in network operations and rationalization of<br />
corporate and back-office expenses.<br />
If <strong>TELUS</strong> is successful and acquires control of Clearnet as a result thereof, it is further expected that<br />
certain changes will be effected with respect <strong>to</strong> the composition of the board of direc<strong>to</strong>rs of Clearnet <strong>to</strong> allow<br />
nominees of <strong>TELUS</strong> <strong>to</strong> become members of the board of direc<strong>to</strong>rs of Clearnet. In addition <strong>TELUS</strong> and<br />
Clearnet may, subject <strong>to</strong> Clearnet’s agreement, effect an internal reorganization prior <strong>to</strong> the Take-up Date in<br />
order <strong>to</strong> realize certain efficiencies. See ‘‘Background <strong>to</strong> the <strong>Offer</strong>s — Support Agreement’’.<br />
<strong>TELUS</strong> intends <strong>to</strong> liquidate Clearnet in<strong>to</strong>, or amalgamate Clearnet with one or more affiliates of <strong>TELUS</strong> or<br />
<strong>to</strong> otherwise combine the business operations of Clearnet and <strong>TELUS</strong> <strong>to</strong> achieve the objectives set out above.<br />
If permitted by applicable law, subject <strong>to</strong> the completion of the <strong>Offer</strong>s, if all of the issued and outstanding<br />
Clearnet Shares are acquired as a result of the <strong>Offer</strong>s, a Compulsory Acquisition or a Subsequent Acquisition<br />
Transaction, if any, the <strong>Offer</strong>ors intend <strong>to</strong> delist the Clearnet Non-Voting Shares from the TSE and NASDAQ.<br />
See ‘‘Price Range and Trading Summary of Clearnet Non-Voting Shares’’.<br />
SOURCE OF FUNDS<br />
<strong>TELUS</strong> has entered in<strong>to</strong> the Commitment Letter for the provision of senior credit facilities in an aggregate<br />
amount of up <strong>to</strong> $7.7 billion through The Toron<strong>to</strong>-Dominion Bank and Morgan Guaranty Trust Company of<br />
New York (collectively the ‘‘Banks’’). The credit facilities (the ‘‘Credit Facilities’’) will be available in three<br />
tranches, in the amounts of $5 billion (‘‘Tranche A’’), $1.25 billion (‘‘Tranche B’’) and $1.45 billion<br />
(‘‘Tranche C’’), respectively. The purposes of the Credit Facilities will be <strong>to</strong> finance the <strong>Offer</strong>s, finance existing<br />
and acquired indebtedness and <strong>to</strong> provide funds which may be required <strong>to</strong> make the required offers <strong>to</strong> <strong>purchase</strong><br />
outstanding notes of Clearnet. The Banks have committed <strong>to</strong> fully underwrite the Credit Facilities and will act as<br />
agents in a planned syndication of a portion of the commitment <strong>to</strong> a group of financial institutions. Tranche A<br />
will be comprised of a 364 day non-revolving bridge facility, Tranche B will be comprised of a 364 day revolving<br />
line of credit and Tranche C will be comprised of a 364 day non-revolving liquidity backs<strong>to</strong>p facility. Security for<br />
repayment of the Credit Facilities includes the pledge of certain shares of specified subsidiaries of <strong>TELUS</strong>,<br />
including those of Acquisition Co.; the assignment of demand intercompany loans made by <strong>TELUS</strong> <strong>to</strong> effect the<br />
<strong>Offer</strong>s; the assignment of any secured or unsecured intercompany debt owed by Clearnet <strong>to</strong> <strong>TELUS</strong>; and the<br />
unlimited joint and several guarantees of certain specified subsidiaries of <strong>TELUS</strong> and Acquisition Co. <strong>TELUS</strong><br />
has agreed, pursuant <strong>to</strong> a fee letter with the Banks, <strong>to</strong> pay an underwriting and structure fee equal <strong>to</strong> 1.5% of<br />
Tranche A and B and 0.25% on Tranche C, 35% of which was paid on signing the Committment Letter and the<br />
balance <strong>to</strong> be paid on the Take-up Date. In addition <strong>TELUS</strong> will pay an amount equal <strong>to</strong> 2.25% of any amount<br />
drawn down under Tranche C from time <strong>to</strong> time. <strong>TELUS</strong> will be obligated <strong>to</strong> pay an annual agency fee <strong>to</strong> be<br />
negotiated.<br />
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