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Lakeside Steel and JMC Steel execute arrangement agreement
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Friday, 27 Jan 2012

Lakeside Steel Inc and JMC Steel Group Inc announced that they have entered into a definitive agreement pursuant to which JMC Steel Group Inc, through a wholly owned subsidiary, has agreed to acquire all of the issued and outstanding common shares of Lakeside at a price of USD 0.2983 per share in cash, which represents a premium of approximately 326% over the closing price of Lakeside's shares of USD 0.07 on December 15th 2011, being the last trading day prior to the date on which Lakeside first announced that it was in exclusive negotiations with a potential purchaser, and a premium of approximately 130% over the volume weighted average price of Lakeside's shares of USD 0.13 for the 30 trading days prior to and including December 15th 2011.

The transaction is proposed to be implemented pursuant to a court approved statutory plan of arrangement governed by the Business Corporations Act. The transaction is subject to the satisfaction or waiver of certain customary closing conditions, and is currently expected to be completed in or prior to the early second quarter of 2012.

Under the arrangement agreement, JMC Steel has also agreed to provide Lakeside with a secured loan in the aggregate principal amount of up to USD 50,000,000, such funding to be provided on, and subject to, the terms and conditions of a loan agreement between JMC Steel and Lakeside. Funding under the loan agreement is subject to the satisfaction of certain conditions precedent, including execution of an intercreditor agreement with Lakeside's existing senior lender.

If the arrangement agreement is terminated in certain circumstances, including if the Board changes its recommendation or Lakeside terminates the Arrangement Agreement to enter into a superior acquisition proposal, then Lakeside will be required to immediately repay the principal amount outstanding under the loan, together with all accrued and unpaid interest to the date of such repayment, and certain other fees and costs of JMC Steel. The loan would otherwise mature on June 29th 2012.

One of Lakeside's principal shareholders, Jaguar Financial Corporation, as well as all of the directors and executive officers of Lakeside, have entered into voting support agreements with JMC Steel pursuant to which the Supporting Shareholders have irrevocably agreed, subject to the terms thereof, to vote their shares in favor of the Arrangement. The Supporting Shareholders beneficially own or exercise control or direction over, collectively, approximately 14.5% of the outstanding common shares of Lakeside.

The board of directors of Lakeside has unanimously the entering into of the Arrangement Agreement and has determined that the Arrangement is in the best interests of Lakeside and its shareholders and unanimously recommends that shareholders vote in favor of the Arrangement. The approval by the Board followed the unanimous recommendation of a special committee of independent directors which was formed, among other things, to review the terms and conditions of the Arrangement.

In connection with its work, the Special Committee engaged Blair Franklin Capital Partners as its independent financial advisor. The recommendation of the Special Committee followed an extensive review and analysis of the proposed transaction. In addition, the Board has received a fairness opinion from Blair Franklin Capital Partners to the effect that, as of the date hereof, the consideration payable under the Arrangement is fair, from a financial point of view, to the holders of Lakeside common shares.

The completion of the proposed Arrangement is subject to a number of customary conditions, including the approval of the Ontario Superior Court of Justice and the approval of two thirds of the votes cast by Lakeside's shareholders and a simple majority of Lakeside's disinterested shareholders, in each case, present in person or represented by proxy at a special meeting to be convened for such purpose. It is currently anticipated that the Meeting will be held in March 2012 and that proxy materials providing details of the Arrangement, including Lakeside's management proxy circular, will be mailed to shareholders in February 2012. Details concerning the record date for the Meeting, the mailing date and Meeting date will be announced in the coming days.

Pursuant to the Arrangement Agreement, Lakeside is subject to customary non solicitation covenants. In addition, JMC Steel has the right to match any unsolicited superior acquisition proposal. In certain circumstances where the Arrangement Agreement is terminated, including if the Board changes its recommendation or Lakeside terminates the Arrangement Agreement to enter into a superior acquisition proposal, Lakeside has agreed to pay JMC Steel a termination fee.

Mr Barry Zekelman executive chairman of JMC Steel Group Inc said that "This strategic acquisition will dramatically increase our capabilities and presence in the energy pipe market. The energy pipe market is a very large market and has significant growth potential. Lakeside Steel is a solid platform for JMC Steel Group, Inc. to grow and expand in this area."

Mr Frank Riddick CEO of JMC Steel Group Inc said that "Lakeside's manufacturing capabilities including the new heat treat and finishing operations in Alabama are a great compliment to our existing pipe business. We are excited about the synergies generated by this acquisition and look forward to leveraging our combined strengths in the market."

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