Radian/Wheel
Overview
Radian, a listed Delaware corporation, is proposing that the Purchaser, a ULC subsidiary, acquire all of the shares of Wheels Group for cash or Radian shares under an OBCA Plan of Arrangement. No rollover treatment is offered. However, the Wheels majority shareholders (i.e., shareholders, including some of the individual company founders, holding 78% of the Wheels shares, who entered into a lock-up agreement with Radian) will agree to be subject to whatever proration will be necessary to ensure that those minority Wheels shareholders who validly elect for cash or Radian shares will not have their choice subject to proration.
Wheels
Wheels is an OBCA corporation trading on the TSXV with 89.6M common shares (the "Wheels Shares") outstanding. It is a supply chain logistics provider.
Purchaser/Radiant
The Purchaser is a wholly-owned subsidiary of Radiant, which is a Delaware corporation trading on the NYSE MKT.
Lock-up Shareholders
They hold 77.7% of the Wheels Shares, and include the "Company Founders" comprising Doug Tozer, Denise Messier and Peter Jamieson holding 39.9%, 10.4% and 5.0% of the Wheels Shares, respectively.
Share/cash election
Under the Arrangement, each Wheels Shareholder may elect to receive, for each Wheels Share, either (i) Cash Consideration of CDN$0.77 per Wheels Share, (ii) Share Consideration of 0.151384 Radiant Shares per Wheels Share, or (iii) a combination thereof. However, the number of Radiant Shares to be transferred to Wheels Shareholders must fall in the range of 4,540,254 to 6,900,000 shares. Any Wheels Shareholder other than a Locked-up Shareholder who makes a timely election will not be subject to proration, so that proration will only apply to the other shareholders. If the Wheels Shareholders elect to receive more than 6,900,000 Radiant Shares, the number of Radiant Shares to be received by the Locked-up Shareholders and all other (minority) shareholders who timely elected to receive Wheels Shares will be subject to proration in order to ensure that only 6,900,000 Radiant Shares are transferred to Wheels Shareholders. Conversely, if Wheels Shareholders elect to receive fewer than 4,540,254 Radiant Shares, the number of Radiant Shares to be received by the Locked-up Shareholders will be prorated to ensure that at least 4,540,254 shares are transferred to Wheels Shareholders.
Lock-up Agreement
Pursuant to the Lock-up Agreements, the Locked-up Shareholders who are Company Founders will elect to receive Share Consideration for 20% of their Wheels Shares and will refrain from transferring the Radiant Shares that they receive for one year following the Effective Date of the Arrangement. The remaining Locked-up Shareholders will elect to receive Share Consideration for 100% of their Wheels Shares and will refrain from transferring 20% of the Radiant Shares that they receive for 90 days following the Effective Date and for one year following the Effective Date as to the remaining 80% of the Radiant Shares.
Plan of Arrangement
Under the Plan of Arrangement:
- Unexercised Wheels options (and the Wheels Purchase Plan) will be cancelled.
- Each Wheels Share held by a dissenting shareholder will be transferred to the Purchaser.
- Each Wheels Share (other of a Dissenting Shareholder) will be transferred to the Purchaser by the holder thereof in exchange for the Cash Consideration, Share Consideration or Combined Consideration elected or deemed to be elected by such former Shareholder, subject to proration of the Share Consideration elected by the Locked-up Shareholders (and any other Wheels Shareholders who did not make a valid election).
Canadian tax considerations
The exchange will occur on a taxable basis.
U.S. tax considerations
The disposition of Wheels Shares for consideration in the Arrangement will be a taxable transaction to U.S. Holders. Wheels believes that likely it was not a PFIC for its tax year ended December 31, 2014.