Gestion G. Aubert Ltée responds to a recent CVTech press release

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Jun 03, 2013, 03:29 ET

VICTORIAVILLE, QC, June 3, 2013 /PRNewswire/ - Gestion G. Aubert Ltée, which is controlled by Mr. Guy Aubert, currently the second largest beneficial shareholder of CVTech Group Inc. ("CVTech" or the "Company"), has responded to a press release made by CVTech on May 31, 2013.

Gestion G. Aubert Ltée, which had attempted in May 2012 to replace the board of directors of CVTech, has recently distributed a detailed letter to the shareholders of CVTech in view of the annual shareholders meeting to be held on June 4, 2013.

In response to CVTech's May 31, 2013 press release, Gestion G. Aubert Ltée would like to provide further comment for the benefit of shareholders:

	-	In its press release, CVTech refers to a prior offer made by the leading NYSE listed electrical contractor (the "Interested Party"), and to the formation of an independent committee (the "Committee") to review strategic and financial alternatives with the objective of enhancing shareholder value, without mentioning that the Committee had been dissolved months before the receipt of the offers referred to by Gestion G. Aubert Ltée to acquire the Company for $1.65 and $1.95 per share.

	-	In its press release, CVTech mentions that the $1.95 per share offer was declined by the board of directors because the offer was "inferior to the valuation of the Corporation set by the Committee". However, like the offers themselves, the valuation has never been disclosed to shareholders, who were not even made aware of the existence of the Committee until May 2012. All that shareholders know is that the trading price of the Company's shares has never approached the offered price of $1.95, a price deemed insufficient to cause the board to try to negotiate with the Interested Party in order to maximize the value of the Company or to initiate a process to solicit competing offers as was done in 2012.

	-	The information provided by CVTech in its press release is also difficult to comprehend and raises several questions:

			●	Was an independent committee appointed by the Company in 2013 to consider the new offers made by the Interested Party?

			●	Was consideration given in 2013 to solicit competing offers to ensure the value of the Company would be maximized in the context of the $1.95 offer made by the Interested Party, already a premium of 70% over the share price at previous closing?

			●	If the valuation of the Company in 2012 was such that an offer at a premium of 70% to current share price was not deemed sufficiently interesting to pursue, what assumptions and projections had been made by the Committee in arriving at its 2012 estimate?

			●	How do recent financial results compare to those assumptions and projections?

			●	In light of the rationale for declining the offer as expressed by CVTech in its press release dated May 31, 2013, to what extent has the geographical reach and expertise of the Company been extended since 2012, by strategic acquisitions or otherwise?

			●	Is the valuation of the Company set by the Committee in 2012 still accurate in light of the recent financial results?

	-	Instead of proactively engaging in negotiations with the Interested Party, CVTech's board decided that it was in the best interests of the Company and of its shareholders to "continue the execution of its initial business plan". However, the benefits listed by CVTech for pursuing its initial business plan are unclear:

			●	The realization of strategic acquisitions: Since the acquisition of Riggs Distler in July 2009, CVTech has only completed one minor acquisition - B.G. High Voltage Systems Limited purchased in April 2013 for $2.7M.

			●	Provide better medium-term growth in CVTech's value than a short-term sale: Unfortunately, the board's definition of value creation seems unclear since i) the Company's share price has not exceeded $1.50 in the last 3 years; ii) the latest quarter's financial results for Q1 2013 were among the worst on record since Q1 2009; and iii) by March 31, 2013, the backlog had decreased substantially to $184 Million, as compared to $260 Million at March 31, 2012, and $317 Million at March 31, 2011; and while the Company has recently announced $77 Million in new contracts, it had reported $90 Million of new contract awards by this time last year. Faced with these realities, it appears that CVTech's leadership has not created significant value in the past 3 years, and that prospects for future value creation under the current business plan are dim.

			●	Continuation of the Company's activities in Quebec: CVTech is predominantly a business driven by revenues from its U.S. customers who represent more than 70% of the total Company revenues and whose U.S. business units' assets represent more than 60% of total assets. Further, there is not any reason to believe that there would be a negative impact to Quebec-based stakeholders should the Company be acquired by a U.S. company that currently does not do business in Quebec.

Gestion G. Aubert Ltée has recommended that at the upcoming Annual and Special Meeting of Shareholders, shareholders should refuse to approve new by-laws that were passed by the board on May 2, 2013 without disclosing:

			●	that the new by-laws restrict the voting rights of shareholders where the vote is taken by show of hands;

			●	that the new by-laws eliminate the minimum notice of 24 hours for the convening of a special meeting of the board, permitting such meetings to be held on written or verbal notice of only 1 hour in situations considered urgent by the Chairman, President or Managing Director, in their discretion; and

			●	that the new by-laws restrict the ability of the board to remove an officer of the Company where the appointment is governed by a special contract.

	-	Institutional Shareholder Services ("ISS"), a leading proxy advisory services firm, has issued a report recommending that CVTech's shareholders vote AGAINST the new by-laws noting that the quorum requirement for shareholder's meeting is below best practice at only 15 percent irrespective of the number of persons present at the meeting.

Gestion G. Aubert Ltée would also like to clarify that the letter and press releases by Gestion G. Aubert Ltée do not relate to any events which occurred while Mr. Guy Aubert was a director of CVTech, and the information disclosed is not subject to any duty of confidentiality.

SOURCE Gestion G. Aubert Ltée