Marcopolo to make $115M investment in New Flyer

Posted on January 24, 2013

New Flyer Industries Inc. announced Marcopolo S.A. will make a strategic investment of approximately $115 million to acquire 11,087,834 newly issued common shares, representing a 19.99% stake in New Flyer.

The investment is subject to customary TSX approval.

Founded in 1949, and headquartered in Caxias do Sul, Brazil, Marcopolo is one of the world’s largest bus builders and is primarily engaged in the manufacturing of buses, bus bodies and components with a product line covering a wide range of models including: coach, urban, micro-buses and mini-buses.

The two companies also signed a Memorandum of Understanding to explore opportunities to cooperate on engineering, technical, purchasing and operational matters, with a focus on reducing New Flyer’s bus manufacturing and aftermarket part costs and enhancing New Flyer’s competitiveness. The companies further agreed to assess Marcopolo’s technology and products for possible introduction into the Canadian and U.S. markets through New Flyer as well as New Flyer’s technology and products for potential distribution into global markets.

The investment agreement permits Marcopolo to nominate a member to the Board of Directors of New Flyer, while Marcopolo holds at least 10% of the outstanding common shares of New Flyer and grants Marcopolo pre-emptive rights to purchase additional securities in certain circumstances to maintain its proportionate interest in New Flyer.

Marcopolo has agreed to certain disposition and standstill restrictions including a requirement to hold the shares it acquires for a period of at least two years and a restriction on acquisitions of additional New Flyer securities and certain other actions for a period of at least two years. The agreement also provides that if New Flyer in the future enters into an agreement with a third party providing for the acquisition of all of New Flyer’s shares or assets, then Marcopolo will, subject to certain exceptions, agree to vote in favor of and to sell its shares as part of the transaction unless Marcopolo has made an alternative proposal that the Board believes is superior or that the shareholders have determined to accept.

With anticipated annual net revenues of approximately $1.9 billion in 2012, Marcopolo has a market capitalization of approximately $2.8 billion and employs more than 22,000 people around the world. Marcopolo manufactures over 32,000 buses annually — 60% are for the Brazilian market and 40% for international markets.

Bus manufacturing is carried out directly by Marcopolo and through various joint ventures with companies like Daimler, Tata Motors and others in 17 plants located in Brazil, South Africa, Argentina, Australia, Colombia, Egypt, India and Mexico. Marcopolo also has a factory for bus parts and component fabrication in China.

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