BOWATER INC.
Filed
by Bowater Incorporated
Commission File No. 1-8712
Pursuant to
Rule 425 under the Securities Act of 1933
And Deemed Filed
Pursuant to Rule 14a-12
Under the Securities Exchange Act of
1934
Subject Company: Bowater Incorporated
Commission File
No. 1-8712
ABITIBI/BOWATER
Merger Announcement Press Conference Webcast Transcript
January 29, 2007
Corporate Speakers
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Frank Alessi
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Abitibi-Consolidated Inc.
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Director IR |
John Weaver
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Abitibi-Consolidated Inc.
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President, CEO |
Dave Paterson
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Bowater Inc.
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President, CEO |
Participants
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Bert Moran
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Globe and Mail
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Media |
John Philcock
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Financial Post
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Media |
Katryn Covax |
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Jim DuPlessis
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The State
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Media |
Jim Davenport
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The Associated Press
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Media |
Rudolph Bell
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The Greenville News
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Media |
PRESENTATION
Frank Alessi: [Speaking French] Welcome to this Abitibi-Bowater press conference. We have with us
Mr. John Weaver; President and CEO of Abitibi Consolidated, and we have Mr. Dave Paterson,
Chairman, President and CEO of Bowater. So well go its going to be very simple. So, Mr.
Weaver will start, after that Mr. Paterson, and it will be time for your questions from the floor
and on the telephone. Mr. Weaver?
John Weaver: Thank you. Well today is a very exciting day and an important day for both of our
companies. We think that in a merger of Abitibi and Bowater, which we announced today, as a merger
of equals has a clear strategic rationale and creates a leading global forest products company.
The industry has been facing significant challenges. Our customer needs are changing. The
competition is increasing and of course were newsprint demand is also under pressure and down.
So, in order to strengthen both of our companies this deal brings us both together and moves us to
the next plateau by generating efficiencies in terms of synergies, improved financial and operating
profiles for both companies, and a better asset and product mix for our customers to which we
provide products. The synergies of $250 million are a significant value, and represent over 60% of
the equity of the combined companies.
This transaction will enable us to improve our product offering all the way from newsprint to
lightweight coated grades, and the efficiencies will make AbitibiBowater a company better
positioned for the years ahead. The head office will be located here in Montreal. Well have
regional sales and manufacturing offices in Greenville.
And with that, Ill turn it over to Dave Paterson who will become the new President and CEO of the
company.
Dave Paterson: Good morning, and thank you for being here. Its an exciting day for the employees
and shareholders of Bowater. I think John touched on many of the key elements, but its really a
transformational merger for both companies. This is a tough marketplace that weve operating in
and we need to create a more viable, stronger financial company. This is the format weve chosen.
Weve both looked at many options, and this is the one I think creates the most value. Well be a
large company.
Were going to have over 20,000 employees, 32 paper mills, 35 wood products facilities, significant
presence both in Canada and the United States. We both currently operate in both countries as you
know. The $250 million of synergies is the compelling reason for this transaction. Those synergies
are based on reductions in costs across the system but not predicated in any mill closures. We
look forward to working together and taking your questions.
So with that, Ill turn it back to .
QUESTION AND ANSWER SESSION
Frank Alessi: Thats right thank you, Dave. So well take we have people on telephone, so
well take three questions from the floor [speaking French]. Please introduce yourself.
Bert Moran : Hi, [Bert Moran], Globe and Mail. I wonder if either Mr. Weaver or Mr. Paterson could
address the anti-trust questions. Have you looked at it in any detail? Are there any areas that
you feel might be of concern, or are you satisfied that this there really are no major
anti-trust issues?
Dave Paterson: Okay, Ill start. We spent a lot of time as far as this discussion looking [at].
We feel confident that we can comply with the anti-trust regulations of both countries. We are in
the process of contacting regulators and starting that process, and we look forward to the
discussion. We think this deal makes a lot of sense and will pass regulatory rules.
Frank Alessi: Monsieur?
John Philcock: [John Philcock] from the Financial Post. If you dont mind just a couple of small
questions to throw your way. Whats going to be your footprint Canada-US? And also, if you address
how much capacity that your two firms have taken out in the last few years, I think youve been
the leaders in taking newsprint capacity in the industry. And finally I just want to pick up on a
point, I think I heard Mr. Weaver say earlier this morning is it true that these shares will not be
part of the TSX once the firm mergers?
John Weaver: Well to make it well trade on both TSX and the New York Stock Exchange.
John Philcock: Right, [will be] part of that [composite] index?
John Weaver: We would the US company I dont think were eligible to be part of the index.
First of all the footprints we have primarily almost all of our assets are either in Eastern Canada
or the southeastern United States. And as far as our customer footprint, our customer footprint is
at least North America and for Abitibi alone we supply 70 countries around the world, and Im sure
Bowater is the same thing. So, we look at ourselves as a pretty global footprint. But primarily a
North America customer base. And I forgot the third question.
John Philcock: I asked each of you how much capacity youve taken?
John Weaver: Oh no wonder I forget. I think that go ahead, Dave.
Dave Paterson: Well from a Bowater perspective I think weve been responding to market pressures.
Its no secret whats happened in the newsprint consumption in North America. The good news about
newsprint consumption is its growing on a global basis, and were participating in more exports
primarily out of our Canadian mills, particularly Eastern Canadian mills.
John Philcock: Right but a number, how much have you taken out?
Dave Paterson: I dont think weve talked about a number. In the Bowater case weve done a
combination of some closures primarily at Thunder Bay, Ontario, and then weve done conversions of
newsprint machines to other products most notably at our Calhoun, Tennessee facility where weve
converted to hybrid products or to other mechanical grades of paper.
John Weaver: For Abitibi, I think weve closed mills in the US and Canada. And its been over a
series of time and dating back until 2000 really. And its over 1 million tons of capacity weve
closed.
Frank Alessi: Madame?
Katryn Covax: [Katryn Covax] [inaudible] Canada. What guarantee can you give us from now on for
the next year that there wont be any more closures in Canada and specifically Quebec?
John Weaver: Well I think the thing is for the next year you have to remember that for a great
portion of that until the third quarter closing well be independent companies, and so well each
have to operate as we see fit for the next year. And I think as and well be making decisions
based on the marketplace. As far as guarantees, I think the main driver in that consideration will
be market conditions, but for the synergies for this transaction and bringing these two companies
together all the $250 million of synergies are based on no changes in our operating units. Its
all based on manufacturing efficiencies, SG&A overlap and logistics and procurement efficiencies.
Katryn Covax: What about the possible layoffs, rationalizations when something like that happens?
John Weaver: Go ahead, Dave.
Dave Paterson: You know, our work at this point is really looking at the obvious overlap in terms
of executive and administrative redundancies between our Greenville office and the Montreal office,
so thats built into the $250 million. From a manufacturing point of view, we have the assumption
that well continue to run all the current manufacturing operations of both companies. You asked
about a wild card. The wild card is, if we knew what was going to happen to consumption of
newsprint in North America we could certainly plan a lot better. Thats the one wild card out
there in the marketplace.
Frank Alessi: Well go on telephone for is there any questions? For those who want to ask
questions you have to press star one.
Operator: Your first question comes from the line of Jim DuPlessis. Please proceed.
Jim DuPlessis: Yes this is Jim DuPlessis. Im a reporter with The State, a flagship paper in South
Carolina. It appears that Bowater is the majority partner in this merger. If you could have
chosen anywhere to put the headquarters, why did you choose Montreal, to move it from Greenville to
Montreal? And how many people are in Greenville now, and will be in there after the headquarters
is moved?
Dave Paterson: Yes, this is Dave Paterson from Bowater. I think the decision to locate in Montreal
was driven by a few factors. First is, this is a merger of equals and part of that is you try to
have a balanced approach to all issues including the social issues. I believe that given the
nature of these two companies together and our large presence in Canada, as well as the United
States, it was important to be in Montreal. I believe that the infrastructure here and the talent
of the people in Montreal will make a successful headquarters location. I also believe that we
have talented and capable people in Greenville.
Now currently, we have approximately 200 employees at our corporate offices in Greenville. Theres
been no determination of what that number will be though there will not be the executive office.
So, we said it will be manufacturing, customer service and sales related to our US southeast
operations which are quite significant. So, we will keep you appraised as we go through the
process, particularly once we get regulatory approval of the scale of Greenville. And I know
thats an important issue both to the community of Greenville, the State of South Carolina, as well
as our employees in Greenville. But theres been no predetermined number.
Jim DuPlessis: Its safe to say 199?
Dave Paterson: No, remember Greenville already has a large or the actual corporate part of
Greenville is much less than the 200. We have sales, customer service, production planning,
manufacturing, engineering, all in Greenville, tech support. So theres a big component of
Greenville, certainly more than 50% of Greenville currently is not what I would say is related to
corporate jobs like mine or CFO or things of that nature.
Frank Alessi: Thank you, another question? [Speaking French]. Is there another question?
Operator: Your next question comes from the line of Jim Davenport with The Associated Press.
Jim Davenport: Can you gentlemen explain a little bit the details of how you came together to
approach this deal? What got you interested in looking at each other?
Dave Paterson: Ill start, and then John why dont you chime in. I think it started really as I
entered the position of CEO of Bowater in May of last year and new to the newsprint sector. I was
not new to the industry. Ive spent my entire working career in the forest products industry. But
John reached out to me as the new CEO and introduced himself.
We had a brief meeting and touched on many subjects, and then sort of separated for quite a while.
We came back together in the fall. In my case, I had spent a lot of that time doing strategic
review of both Bowater and the industry, and weve looked at many options and part of that
discussion and process and internal Bowater process we kept coming back to this merger as the most
value-creating opportunity available to us in the marketplace. I think independently John reached
the same conclusion, so we started an earnest discussion in the fall.
John Weaver: As you look at the landscape of various transactions and possibilities theres no
other probably no companies so similar as our two companies, and no other transaction that
generates the same significant level of synergies that this one does. And its those synergies
that drive the financial reward to the bottom line and thats really what were after, how to lower
our cost, improve our operational and financial flexibility, and improve shareholder value at the
end of the day.
Frank Alessi: Thank you.
Unidentified Audience Member: [inaudible] my question is for Mr. Paterson. You explained very
clearly why the head office stays in Montreal. You intend to move to Montreal?
Dave Paterson: Yes, Im moving to Montreal.
Unidentified Audience Member: So, [next time] Ill ask the question in French?
Dave Paterson: Yes my French will need to improve a lot. The good news is, my wife is studying
French, and my daughter is actually going to France this summer to study. So, I have some French
speakers in my family.
Unidentified Audience Member: Id like to know if youre continuing the Board story you say that
there will be seven from Abitibi and from Bowater. Will there be seven Canadian, seven American?
John Weaver: Its sort of up to our Board to decide that. It will be a mixture. There certainly
will be Canadians and certainly will be US representations. I dont to say how many will be
American and how many US, I cant say right now.
Dave Paterson: And from a Bowater, if you look at our Board we have strong Canadian presence on our
board today, certainly some Montreal people on our Board.
Unidentified Audience Member: Okay the last question again, Mr. Paterson, continuing the mills in
[St. Tilisien], north of Quebec what will happen to that mill? Theres a problem you ask
concessions, workers, they refuse, what will you do with that mill? You intend to close it or
what?
Dave Paterson: Well were looking at our operations and were working across Canada, not just in
Quebec, to try to find with our unions a more competitive structure to operate in. I think its
I guess the way I view it is we are in this together. It is not a company versus employee issue.
Our competitors are many and becoming more global and I think we have to have an honest dialogue
with each other.
We are
prepared as Bowater, weve been discussing investments in Quebec to modernize and make us more
competitive here. Pierre Monahan who is here today, has led a lot of those discussions. So as
Bowater, we feel good about Quebec and want to stay here and invest here, but we have to get a
lower cost platform to do it. And certainly labor is part of that but it needs to be an open
dialogue.
Frank Alessi: Thank you, Madame?
Unidentified Audience Member: [Ellen], CBC Radio. Theres been a lot of talk recently in the past
year in Quebec specifically about the so called crisis in the forestry sector. Weve seen
thousands of layoffs. Youve talked about the wild card. Can you expand a little bit more on that
as to the impact of your merger, and where this could lead given the unknown, and given the fact
that our own premier has said that he expects further sawmill closures in the future?
John Weaver: Well, I think the sawmill issue is really predicated by the reduction in the allowable
cut. Weve reduced the available forest to the Quebec industry and that has put additional
pressure on [sawmillers] if you have 20 or 30% less trees to harvest or available to the forest
products industry you have to have a significant reduction in sawmills. So, I think the two are
independent.
The reason that puts pressure on the industry financially and then companies have to look out
for ways to improve their financial flexibility, and synergies are a good driver of that ways to
lower costs and improve the overall operating efficiency of our company. And so although even
though theres a disconnect between the two they actually do come together in that we as companies
have to look for ways to lower our costs in order to move forward.
Unidentified Audience Member: And in October the government, the provincial government, announced
millions of dollars to help pulp and paper companies do this. Was this a motivating factor in
todays merger, the $433 million offered by the Canadian the Quebec government?
John Weaver: Certainly in every jurisdiction where we operate theres we need certain things to
improve our overall performance, and certainly we thank the Quebec government for the
considerations. But I think that that was independent of this transaction. Really it adds to the
profitability of Quebec operations, but it wasnt really part of our considering this transaction.
Dave Paterson: And Ill echo Johns comments. I think weve been encouraged by provincial response
across Canada in terms of the issues facing the forest products sector. Weve gotten energy relief
in Ontario which was very helpful. Certainly weve had other provincial interventions to help
improve the cost structure. One thing we havent touched on you talk about another wild card,
is the exchange rate. I mean a lot of the issues weve faced over the last three or four years has
been the fluctuating or changing exchange rate between the US and Canadian dollars. So, thats a
significant issue as well.
Unidentified Audience Member: Thank you.
Frank Alessi: Lets go to [Mr. Gibbons].
Unidentified Audience Member: Both Mr. Paterson and Mr. Weaver, in the long term will you keep your
lumber interests, because Mr. Weaver you have negotiated before with the prospect of perhaps
selling them?
John Weaver: So will in the long run we keep our ?
Dave Paterson: We couldnt hear.
Unidentified Audience Member: In the long term will you keep your lumber interests?
John Weaver: I think that one of the big advantages of the new company is that we do have a
diversified portfolio and certainly strengthens our overall lumber business. The housing market is
not that great right now but in the long term we believe the lumber business and the forest part of
the business will be good for the company.
Unidentified Audience Member: And for Mr. Paterson have Donnacona, Dolbeau and Mersey are they
permanently in your future plans, or are any of those part of the operations that youre looking
very carefully at?
Dave Paterson: Well the three mills you mention are all mills that weve worked very hard to
improve the profitability. We have plans in place for each. I think the new labor contract that
weve reached at Donnacona is very helpful and I think that was done in a cooperative manner with
the unions there. Its significantly improved the position of that mill in terms of competing in
the future. Dolbeau similarly has some initiatives underway there to improve its performance.
Its really about getting these mills back to making profits. We shouldnt forget that whether
its the mills youve mentioned or other mills, I think neither company has been in the profits for quite a
while. And as representatives of our shareholders thats our ultimate goal.
And Mersey actually has done quite well. Im very pleased with the performance in our Mersey
operation. Of course thats a joint venture with the Washington Post. Its been a long-term joint
venture. That mill has been very aggressive in addressing its cost issues. Im proud to say Mersey
is performing very well, and my expectation is that we keep challenging ourselves, each of those
mills, to keep them competitive and in the marketplace.
Unidentified Audience Member: And one last one. Would you give us some idea of the tonnage coming
in from Asia, particularly China? Because weve been reporting since the beginning of 2006 some
publishers have been trying it, been very satisfied not only with the price but the quality.
John Weaver: Well, I think the big change in the last five years is that China went from a net
importing nation to an exporting nation. Certainly our customers have run some trials and theyve
talked about the use of that product and to date the actual imports to North America have not been
recorded. But there continues to be a lot of conversation among our customers about the
possibility of bringing imports in from China.
Dave Paterson: And Id just add that the other factor on China is that on the waste paper side
China is having a big impact on the price of OMP. I think if you look at the exports of waste
paper of all types particularly OMP to China its escalating rapidly which changed our cost
structure here in North America which is another concern and another reason that we need to do this
deal to drive our costs back down. Abitibi has a large and successful waste paper business. Were
a large waste paper consumer. So thats a natural fit as well.
Frank Alessi: Lets go on the phone for the last time. Is there any questions?
Operator: Your next question comes from the line of Rudolph Bell with Greenville News. Please
proceed.
Rudolph Bell: Good morning.
John Weaver: Good morning.
Rudolph Bell: This question is for Mr. Paterson I guess would be most appropriate. Can you rule
out layoffs in Greenville or would you say there definitely will be layoffs in Greenville, you just
dont know how many?
Dave Paterson: Well, we do not know how many. We should assume given that were moving the
corporate headquarters to Montreal that there will be some layoffs in Greenville.
Rudolph Bell: Another question, Bowater has been a good supporter of the community here, supported
for example the Chamber of Commerce, the Peace Center for the Performing Arts. Mr. Paterson, can
you tell me whether that support will continue in the future?
Dave Paterson: I intend that it will. Im on the board of the Peace Center. I intend to stay on
the board of the Peace Center. We will have a significant presence in Greenville in terms of
employees, and I think that our participation in the community will continue. Its not only my
participation, but the participation of a number of Bowater employees and being good citizens in
Greenville, and that will continue.
John Weaver: I think a tradition of the forest product companies are that weve been long-time
supporters of the communities in which we operate, especially some of the rural communities. But
well continue Im sure to support the communities in which we do business.
Frank Alessi: Okay, thank you. [Mr. Leveran], youre the lucky last.
Unidentified Audience Member: Yes okay, including Mr. Paterson, including the synergy would the
new company make some profit at the current markets condition?
Dave
Paterson: I think if the synergies on top of our 06 numbers were profitable. So, the future
is unknown to me. So .
Unidentified Audience Member: But [it is] slim it would be slim.
Dave Paterson: Well if we fully implement the $250 million of synergies across our systems, yes I
believe were back in the black. I think thats the numbers.
John Weaver: And slim is a step in the right direction wouldnt you say?
Unidentified Audience Member: Yes. How much money were both companies losing this year?
Dave Paterson: We havent disclosed our fourth quarter or year-end earnings but .
John Weaver: A good try anyway.
Dave Paterson: In about a week.
John Weaver: Next week.
Frank Alessi: Thank you, very much. Mr. Weaver to conclude Mr. Weaver has something to say in
conclusion.
John Weaver: We have a little sort of as Dave, by the way, Dave says have no realtors call him,
but anyway welcome to Montreal. We have something that you probably, he doesnt have in his
present location and thats a Montreal Canadians jersey.
Forward-Looking Statements
Any statements made regarding the proposed transaction between Abitibi and Bowater, the
expected timetable for completing the transaction, benefits or synergies of the transaction, and
other statements contained in this transcript that are not historical fact are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995, that are
based on managements beliefs, certain assumptions and current expectations. These statements may
be identified by the use of forward-looking terminology such as the words expects, projects,
intends, believes, anticipates and other terms with similar meaning indicating possible
future events or actions or potential impact on the businesses or shareholders of Abitibi and
Bowater (separately and together the Companies). Such statements include, but are not limited
to, statements about future financial and operating results, Abitibis and Bowaters plans,
objectives, expectations and intentions, the markets for Abitibis and Bowaters products, the
future development of Abitibis and Bowaters business, and the contingencies and uncertainties to
which Abitibi and Bowater may be subject, statements regarding our ability to: generate
efficiencies and improve our financial profile; achieve significant synergies and the manner in
which we expect to achieve them, in particular an estimated $250 million of synergies within two
years, which we expect to accomplish without mill closings or significant work force reductions;
become more competitive; improve product quality and breadth; develop new products and better serve
our customers; as well as other statements that are not historical facts. There is no assurance
the transaction contemplated in this transcript will be completed at all, or completed upon the
same terms and conditions described. All forward-looking statements in this transcript are
expressly qualified by information contained in each companys filings with regulatory authorities.
The following factors, among others, could cause actual results to differ materially from
those set forth in the forward-looking statements: the ability to obtain required governmental or
third party approvals of the combination on the proposed terms and schedule and without material
concessions; the failure of Abitibi or Bowater shareholders to approve the combination; the
exercise by a material percentage of Abitibi shareholders of their dissent rights; the risk that
the businesses will not be integrated successfully or that the anticipated improved financial
performance, product quality and development will not be achieved; the risk that other combinations
within the industry or other factors may limit our ability to improve our competitive position; the
risk that the cost savings and other expected synergies from the transaction may not be fully
realized or may take longer to realize than expected; and disruption from the transaction making it
more difficult to maintain relationships with customers, employees or suppliers. Additional
factors that could cause Abitibis and Bowaters results to differ materially from those described
in the forward-looking statements can be found in the periodic reports filed by Abitibi and Bowater
with the Securities and Exchange Commission (the SEC) and available at the SECs internet site
(http://www.sec.gov). Neither Abitibi nor Bowater undertakes and each specifically disclaims, any
obligation to update or revise any forward-looking information, whether as a result of new
information, future developments or otherwise.
Additional Information and Where to Find It
In connection with the proposed transaction, AbitibiBowater Inc. will file with the SEC a
registration statement on Form S-4, which will include a proxy statement of Bowater, a prospectus
of AbitibiBowater and a management information circular of Abitibi. Shareholders are urged to read
the joint proxy statement/prospectus/management information circular regarding the proposed
transaction when it becomes available, because it will contain important information. Shareholders
will be able to obtain a free copy of the joint proxy statement/prospectus/management information
circular, as well as other filings containing information about Abitibi and Bowater, without
charge, at the SECs internet site (http://www.sec.gov). Copies of the joint proxy
statement/prospectus/management information circular and the filings with the SEC that will be
incorporated by reference in the joint proxy statement/prospectus/management information circular
can also be obtained, without charge, by directing a request to Abitibi, 1155 Metcalfe Street,
Suite 800, Montreal, Quebec Canada H3B 5H2, Attention: Investor Relations (514) 394-2341, or to
Bowater, 55 Camperdown Way, Greenville, South Carolina USA 29602, Attention: Investor Relations
(864) 271-7733.
Participants in the Solicitation
Abitibi, Bowater and their respective directors and executive officers and other persons may
be deemed to be participants in the solicitation of proxies in respect of the proposed combination.
Information regarding Abitibis directors and executive officers is available in the 2005 Annual
Report on Form 40-F filed with the SEC by Abitibi on March 31, 2006, and the management information
circular with respect to Abitibis 2006 Annual Meeting of Shareholders filed by Abitibi on SEDAR on
March 31, 2006. Information regarding Bowaters directors and executive officers is available in
the Annual Report on Form 10-K filed with the SEC by Bowater on March 13, 2006 and the Proxy
Statement with respect to Bowaters 2006 Annual Meeting of Stockholders filed by Bowater with the
SEC on April 12, 2006. Other information regarding the participants in the proxy solicitation and
a description of their direct and indirect interests, by security holdings or otherwise, will be
contained in the joint proxy statement/prospectus/management information circular and other
relevant materials to be filed with the SEC when they become available.