Altius Renewable Royalties Announces Supplementary Information to ARR-Northampton Transaction

September 12, 2024

ST. JOHN’S, Newfoundland–(BUSINESS WIRE)– Altius Renewable Royalties Corp. announced that the Company and Royal Aggregator LP (the “Purchaser”) (an affiliate of Northampton Capital Partners, LLC (“NCPL” and together with its controlled affiliates, “Northampton”)) have entered into a definitive arrangement agreement (the “Arrangement Agreement”), whereby the Purchaser will acquire all of the issued and outstanding common shares of the Company (the “ARR Shares”), other than those ARR Shares indirectly owned by Altius Minerals Corporation (“Altius Minerals”), by way of a statutory plan of arrangement under the Business Corporations Act (Alberta) (the “Transaction”). Altius Minerals currently holds 58% of the issued and outstanding ARR Shares on an undiluted basis.

The Arrangement Agreement

Under the terms of the Arrangement Agreement, each ARR shareholder (other than Altius Minerals) (the “ARR Minority Shareholders”) will receive cash consideration of C$12.00 for each ARR Share held (the “Consideration”). The Consideration represents a 28% premium to the closing price of the ARR Shares on the Toronto Stock Exchange (the “TSX”) on September 4, 2024 (being the date before the announced unusual trading activity took place in the Company’s shares) and a 29% premium to the 20-day volume weighted average price (“VWAP”) of the ARR Shares on the TSX on September 4, 2024.

Following completion of the Transaction, the Purchaser will hold 43% of the issued and outstanding and Altius Minerals will indirectly hold 57% of the issued and outstanding ARR shares. ¹

Benefits to ARR’s Minority Shareholders

The Transaction has several benefits for the ARR Minority Shareholders, including:

Premium to Unaffected Market Price. The value of the Consideration offered to ARR Minority Shareholders under the Transaction represents a 28% premium to the closing price of the ARR Shares on the TSX on September 4, 2024 (being the date before the announced unusual trading activity took place in the Company’s shares) and a 29% premium to the 20-day VWAP of the ARR Shares on the TSX on September 4, 2024.
Compelling Value Relative to Strategic Alternatives. Prior to entering into the Arrangement Agreement, the Special Committee (as defined below), with the assistance of its financial and legal advisors, assessed the relative benefits and risks of various alternatives to the Transaction and ARR’s Board of Directors, with interested directors abstaining, determined that the Transaction was in the best interest of the Company.
Certainty of Value and Liquidity. The Consideration being offered to ARR’s Minority Shareholders is all cash and is not subject to any financing condition, which provides certainty of value and liquidity.
Voting Support Agreements. There is strong support in favour of the Transaction from ARR’s significant shareholders as well as the directors and officers of ARR. The Supporting Shareholders (as defined below) holding collectively, approximately 81% of the ARR Shares (and 55% of the ARR Shares after excluding the ARR Shares held or controlled by Altius Minerals and any other persons whose votes are required to be excluded under MI 61-101 (as defined below)) have each entered into voting support agreements (the “Support Agreements”) to vote their ARR Shares in favour of the Transaction, subject to certain customary exceptions.
Independent Valuation and Fairness Opinion. National Bank Financial Inc. (“NBF”) delivered a formal valuation and fairness opinion to the Special Committee, pursuant to which it concluded that as of September 11, 2024, the fair market value of the ARR Shares is in the range of C$10.50 to C$12.50 per ARR Share and that the Consideration to be received by the ARR Minority Shareholders under the Transaction is fair, from a financial point of view, to the ARR Minority Shareholders.
Minority Vote and Court Approval. The Transaction must be approved by (i) 66 2/3% of the votes cast by the holders of ARR Shares; and also (ii) a simple majority of the votes cast by holders of ARR Shares after excluding any votes of Altius Minerals and any other persons required to be excluded under MI 61-101. The Court of King’s Bench of Alberta will also consider the fairness and reasonableness of the Transaction.
Special Committee Oversight. The Special Committee, which is comprised entirely of independent directors, oversaw, reviewed and directly participated in the negotiation of the Transaction and Arrangement Agreement. The Special Committee and its legal and independent financial advisors engaged in extensive analysis and robust negotiations in an attempt to obtain the best available terms for the Company and the ARR Minority Shareholders.

David Bronicheski, Chair of the Special Committee, commented “The decision to re-privatize ARR comes largely as a result of several successive years of generally declining valuations in the renewable energy sector of the North American public markets. As a result, we have concluded that the current limited availability and high implied cost of public equity capital does not support ARR’s expected investment opportunities in a manner that allows for shareholder value accretion. We believe that Northampton, including its institutional investor base, provides the Company with a partner that matches well with our anticipated opportunity set, while also providing our minority shareholders with an attractive premium and liquidity.”

Geoffrey Strong, Chief Executive Officer of Northampton commented “We are excited to announce this transaction today and to the beginning of a long-term partnership. We are greatly impressed with the accomplishments to-date of ARR and the underlying Great Bay Renewables joint venture team and look forward to contributing to the support and resources required for the business to reach its full potential.”

Voting Support Agreements

Altius Minerals, the directors and officers of the Company and Altius Minerals, and certain shareholders of the Company (collectively, the “Supporting Shareholders”) have each entered into Support Agreements to vote their ARR Shares in favour of the Transaction, subject to certain customary exceptions.

The Supporting Shareholders hold, collectively, approximately 81% of the ARR Shares (and 55% of the ARR Shares after excluding the ARR Shares held or controlled by Altius Minerals and any other persons whose votes are required to be excluded under MI 61-101).

Special Committee and Board of Directors Recommendations

A special committee (the “Special Committee”) of ARR’s Board of Directors comprised solely of independent directors, being David Bronicheski (Chair), Karen Clarke-Whistler and Earl Ludlow was constituted to consider the Transaction. The Special Committee, on behalf of ARR’s Board of Directors, obtained a formal valuation (the “Valuation”) from NBF as required by Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Valuation was prepared under the supervision of the Special Committee and determined that in NBF’s opinion, and based upon and subject to the assumptions, limitations and qualifications set forth therein, the fair market value of the ARR Shares, as at September 11, 2024 is in the range of C$10.50 to C$12.50 per ARR Share. In addition, NBF has provided a fairness opinion to the Special Committee (the “Fairness Opinion”), stating that in its opinion, and based upon and subject to the assumptions, limitations and qualifications set forth therein, the Consideration to be received by the ARR Minority Shareholders pursuant to the Transaction is fair, from a financial point of view, to the ARR Minority Shareholders.

The Board of Directors (excluding Mrs. Anna El-Erian and Mr. André Gaumond, who recused themselves from voting on the Transaction as a result of their potential conflict of interest in the Transaction as Mrs. Anna El-Erian and Mr. André Gaumond are also directors of Altius Minerals), following due consideration and receipt of the recommendation of the Special Committee who received the Fairness Opinion and the Valuation, unanimously approved the Transaction and recommend that ARR Minority Shareholders vote in favour of the Transaction.

Transaction Conditions and Timing

The Transaction will be implemented by way of a court-approved plan of arrangement under the Business Corporations Act (Alberta) and will require the approval of: (i) 66 2/3% of the votes cast by the holders of ARR Shares; and (ii) a simple majority of the votes cast by holders of ARR Shares after excluding any votes of Altius Minerals and any other persons required to be excluded under MI 61-101, all at a special meeting of ARR shareholders (the “Special Meeting”) to consider the Transaction.

The completion of the Transaction will also be subject to obtaining required court and other approvals and satisfaction of closing conditions customary for a transaction of this nature. The Arrangement Agreement provides for customary deal-protection provisions, including a non-solicitation covenant on the part of ARR and a right for Northampton to match any Superior Proposal (as defined in the Arrangement Agreement). The Arrangement Agreement includes a termination fee of US$6.75 million, payable by ARR, under certain circumstances (including if the Arrangement Agreement is terminated in connection with ARR pursuing a Superior Proposal). A reverse termination fee of US$6.75 million is payable by the Purchaser to ARR if the Arrangement Agreement is terminated as a result of the Purchaser failing to deposit the Consideration with the depositary.

It is anticipated that the Special Meeting to consider the Transaction will be held in November 2024. The terms and conditions of the Transaction will be disclosed in greater detail in a management information circular for the Special Meeting that will be mailed to the ARR Shareholders.

The Transaction is expected to close in the fourth quarter of 2024, subject to obtaining the required approvals and other customary closing conditions. Following completion of the Transaction, the Company expects to be delisted from the TSX and to cease to be a reporting issuer in all provinces and territories of Canada.

Advisors and Counsel

National Bank Financial Inc. is acting as the independent valuator and financial advisor to the Special Committee in connection with the Transaction.

McCarthy Tétrault LLP and Pierce Atwood LLP are acting as counsel to ARR.

Kirkland & Ellis LLP and Mintz LLP are acting as counsel to Northampton.

Additional Information about the Proposed Transaction

Copies of the Fairness Opinion, the Valuation, and a description of the various factors considered by the Special Committee and the Board of Directors of the Company in their determination to approve the Transaction, as well as other relevant background information, will be included in the management information circular to be mailed to the Company’s Shareholders in advance of the Special Meeting.

Copies of the management information circular for the Special Meeting, the Arrangement Agreement, the plan of arrangement, the Support Agreements and other related documents will be filed with Canadian securities regulators and will be available on the SEDAR+ profile of ARR at www.sedarplus.ca. ARR’s Shareholders are urged to read those and other relevant materials when they become available.

¹Due to dilution resulting from issuance of additional ARR Shares upon the settlement of the RSUs, DSUs and options in connection with the Transaction which ARR Shares will be acquired by the Purchaser pursuant to the Transaction.

About Altius Renewable Royalties Corp.