Resolute/Fibrek

Documents
(SEDAR filing: 26 June 2012) Circular of Fibrek Inc. ("Fibrek") respecting it and RFP Acquisition Inc. ("RFP Acquisition"), an indirect subsidiary of Resolute Forest Products Inc. ("Resolute") (2333 K). Norton Rose
Summaries
Summary Under
Tax Topics - Public Transactions - Mergers & Acquisitions - Subsequent Acquisition Transactions - Amalgamations - Cash or shares
Second stage acquisition of Fibrek by Resolute: amalgamation followed by payment of cash or Resolute shares on Amalco preferred share redemption

The Circular proposes a second-stage acquisition transaction following the acquisition of 74.6% of the common shares of Fibrek by RFP Acquisition. RFP Acquisition is an indirect wholly-owned subsidiary of Resolute (formerly named AbitibiBowater Inc.), which is a Delaware corporation. Under a Quebec Plan of Arrangement, Fibrek will amalgamate with RFP Acquisition with: the shares of Fibrek held by RFP Acquisition being cancelled; the shares in the capital of RFP Acquisition being converted into Amalco common shares; and the shares of the other shareholders of Fibrek being converted into Series 1, 2 or 3 shares depending upon their choice as to what mix of cash and Resolute common shares they wish to receive (but subject to the aggregate cash and Resolute common share consideration not exceeding Cdn$18,199,250 and 939,744, respectively). The Amalco preferred shares then are immediately and automatically redeemed.

The Plan of Arrangement also provides that the Fibrek shares of those who have validly exercised their dissent right will be deemed to have transferred to Amalco in consideration for a debt claim against Amalco to be paid the fair value of those shares.

Canadian income taxation

No capital gain or loss will be realized by a Fibrek shareholder on the amalgamation. Redemption of the preferred shares will give rise to a deemed dividend (subject to the potential application of s. 55(2) for a resident corporate holder).

No factual guidance is given to non-resident holders of the preferred shares as to whether their shares are taxable Canadian property or treaty-protected property, and they generally will be subject to Part XIII tax on the deemed dividend. It appears to be contemplated that Amalco also will withhold 25% under s. 116 if no s. 116 clearance certificate is obtained by the non-resident. Dissenters also may be subject to s. 116 withholding.

US income taxation

The disposition of the Fibrek shares occurring under the Plan of Arrangment for US tax purposes generally will occur for proceeds equal to the sum of the cash and the fair market value of the Resolute shares received.