MATERIAL CHANGE REPORT
UNDER SECTION 75(2) OF THE SECURITIES ACT (ONTARIO),
SECTION 81(2) OF THE SECURITIES ACT (NOVA SCOTIA),
SECTION 76(2) OF THE SECURITIES ACT (NEWFOUNDLAND),
SECTION 84(1)(b) OF THE SECURITIES ACT (SASKATCHEWAN),
SECTION 118(1)(b) OF THE SECURITIES ACT (ALBERTA) AND
SECTION 85(1) OF THE SECURITIES ACT (BRITISH COLUMBIA)
1. REPORTING ISSUER
TELUS Corporation ("TELUS")
3777 Kingsway
Burnaby, British Columbia V5H 3Z7
Telephone Number: (604) 432-4722
2. DATE OF MATERIAL CHANGE
August 21, 2000
3. PRESS RELEASE
August 21, 2000, a copy of which is attached hereto.
4. SUMMARY OF MATERIAL CHANGE
On August 21, 2000, TELUS announced that it had entered into a support
agreement (the "Support Agreement") with Clearnet Communications Inc.
("Clearnet") pursuant to which TELUS, or a subsidiary thereof, agreed
to make offers to purchase (collectively, the "Offers") all of the
outstanding Class A Non-Voting Shares ("Class A Shares"), Class B
Shares, Class C Subordinate Voting Shares ("Class C Shares") and Class
D Subordinate Voting Shares ("Class D Shares") (the Class A Shares,
Class B Shares, Class C Shares and Class D Shares being herein
collectively referred to as the "Clearnet Shares") in the capital of
Clearnet. The consideration for the Offers will be, at the election of
the holder,
(a) $70.00 in cash for each Class A Share, Class C Share or Class
D Share or $0.70 in cash for each Class B Share;
(b) 1.636 fully paid and non-assessable non-voting shares in the
capital of TELUS (the "TELUS Non-Voting Shares") for each
Class A Share, Class C Share or Class D Share or 0.01636 fully
paid and non-assessable TELUS Non-Voting Shares for each Class
B Share; or
(c) a combination of the foregoing.
The Offers will be subject to a maximum of 50% of the total
consideration paid for the Clearnet Shares being cash and 50% of the
total consideration paid for the Clearnet Shares being TELUS Non-Voting
Shares. The Offers will contain pro-ration provisions to the extent
either the cash option or share option is over-subscribed.
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TELUS also announced that it had entered into lock-up agreements with
certain shareholders, (collectively, the "Lock-Up Agreements") pursuant
to which TELUS agreed to make the Offers. The Board of Directors of
Clearnet has determined that the Offers are fair and will recommend
that holders of Clearnet Shares accept the Offers.
5. FULL DESCRIPTION OF MATERIAL CHANGE
BACKGROUND AND PURPOSE OF THE OFFERS
On August 20, 2000, TELUS entered into the Support Agreement with
Clearnet pursuant to which TELUS agreed to make the Offers, either
directly or through a subsidiary, on or before September 30, 2000.
Clearnet has also agreed to co-operate with TELUS in relation to the
Offers and not to take any action which may reduce the likelihood of
success of or delay the take up and payment of Clearnet Shares
deposited under the Offers or the completion of the Offers.
TELUS has agreed to not waive or amend the terms of the Offers or
extend the expiry date of the Offers (the "Expiry Date"), being the
20th business day after the day on which the Offers are commenced,
without the prior consent of Clearnet other than (i) so that any
Acquisition Proposal ceases to be a Superior Proposal; (ii) to increase
the consideration payable under the Offers; (iii) to extend the Expiry
Date provided that the final Expiry Date may not be later than the
later of (A) October 30, 2000 or (B) the day that is one week prior to
the date that Industry Canada has publicly announced as the date on
which it will commence a PCS spectrum auction, further provided that in
no event will the Expiry Date be after November 30, 2000; (iv) to waive
any conditions of the Offers, provided that TELUS may not waive the
condition that requires that by 12:01 a.m. (local time) (the "Expiry
Time") on the Expiry Date not less than 66 2/3% of each class of
Clearnet Shares outstanding (on a fully-diluted basis) shall have been
validly deposited under the Offers such that such threshold is less
than 51% of each class of Clearnet Shares outstanding.
In the Support Agreement, TELUS covenants, among other things, that
until it has taken up and paid for the Clearnet Shares under the Offers
or the Support Agreement has been terminated:
(a) TELUS shall, and shall cause each of its subsidiaries to,
conduct its and their respective businesses only in, and not
take any action except in the usual, ordinary and regular
course of business and consistent with past practice; and
(b) TELUS shall not take any action or permit any of its
subsidiaries to take any action that would interfere with or
be inconsistent with the completion of the transactions
contemplated in the Support Agreement or would render, or that
reasonably may be expected to render, any representation or
warranty made by it in the Support Agreement untrue in any
material respect at any time prior to the Expiry Date if then
made.
In the Support Agreement, Clearnet covenants, among other things, that
until TELUS has taken up and paid for the Clearnet Shares under the
Offers or the Support Agreement has been terminated:
(a) Clearnet shall not, directly or indirectly, through any
officers, director, employee, representative or agent, or any
of its subsidiaries:
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(i) solicit, initiate, invite or knowingly encourage
(including by way of furnishing confidential
information or entering into any form of agreement,
arrangement or understanding) the initiation of or
participate in any inquiries or proposals regarding
an Acquisition Proposal;
(ii) participate in any discussions or negotiations
regarding any Acquisition Proposal; or
(iii) approve or recommend any Acquisition Proposal or
enter into any agreement related to any Acquisition
Proposal;
provided, however, that nothing in the Support
Agreement may prevent the Board of Directors of
Clearnet from considering or participating in
discussions or negotiations or entering into a
confidentiality agreement and providing information
to a person who proposes a BONA FIDE Acquisition
Proposal or recommending to its shareholders an
agreement in respect of an unsolicited BONA FIDE
written Acquisition Proposal (i) in respect of which
any required financing has been demonstrated to the
satisfaction of the Board of Directors of Clearnet,
acting in good faith, to be reasonably likely to be
obtained; (ii) in respect of which the ability of the
party making such unsolicited BONA FIDE written
Acquisition Proposal to consummate the transactions
contemplated by such Acquisition Proposal and comply
with the foreign ownership provisions under the
Telecommunications Act and Radiocommunications Act
has been demonstrated to the satisfaction of the
Board of Directors of Clearnet, acting in good faith;
(iii) which is not subject to a due diligence access
condition which allows access to information not
provided to TELUS; (iv) in respect of which the Board
of Directors of Clearnet determines (having consulted
outside counsel) that it is required in the exercise
of its fiduciary duty to consider; and (v) in respect
of which the Board of Directors of Clearnet
determines in good faith, after consultation with
financial advisors, if consummated in accordance with
its terms, would result in a transaction more
favourable to its shareholders, from a financial
point of view, than the Offers (any such Acquisition
Proposal being referred to as a "Superior Proposal");
and
(b) Notwithstanding the above, Clearnet may accept, approve or
recommend or enter into any agreement, undertaking or
arrangement in respect of an Acquisition Proposal on the basis
that it constitutes a Superior Proposal if and only if: (i) it
has provided TELUS with a copy of the Acquisition Proposal
document which has been determined to be a Superior Proposal
and (ii) 60 hours (the "Notice Period") have elapsed from the
later of the date TELUS received notice of the determination
to accept, approve or recommend an agreement in respect of
such Acquisition Proposal, and the date TELUS received a copy
of the Acquisition Proposal document. During the Notice
Period, TELUS shall have the opportunity to offer to amend the
Support Agreement and the Offers. The Board of Directors of
Clearnet will review any offer by TELUS to amend the terms of
the Support Agreement in good faith to determine, in its
discretion and in the exercise of its fiduciary duties,
whether TELUS' offer to amend the terms of the Support
Agreement and the Offers upon acceptance by Clearnet would
result in the Acquisition Proposal not being a Superior
Proposal. If the Board of Directors of Clearnet so determines,
it will enter into an amended agreement with TELUS reflecting
TELUS' amended proposal and the Offers will be amended
accordingly.
If at any time after the execution of the Support Agreement:
(a) TELUS terminates the Support Agreement because certain
conditions relating to Clearnet's representations and
warranties in the Support Agreement have not been satisfied by
the Expiry Time on the Expiry Date;
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(b) Clearnet shall have entered into an agreement with respect to
a Superior Proposal; or
(c) the Board of Directors of Clearnet has withdrawn, qualified or
changed any of its recommendations or determinations in a
manner adverse to TELUS, except if that withdrawal,
qualification or change is a result of a Specific TELUS Event,
or has approved or recommended any Acquisition Proposal;
(each of the above being a "TELUS Payment Event"), then if the TELUS
Payment Event occurs on a date (the "Date") which is after the later of
(i) August 28, 2000, and (ii) three days following the making of a
Superior Proposal, if made on or before (i), Clearnet shall pay to
TELUS $92,500,000 and if the TELUS Payment Event occurs prior to the
Date, Clearnet shall pay to TELUS $185,000,000.
Also on August 20, 2000, TELUS entered into the Lock-Up Agreements with
each of Nextel International, Inc. ("Nextel"), Motorola Canada Limited
("Motorola"), Madison Dearborn Capital Partners, L.P. and Lenbrook Inc.
pursuant to which TELUS agreed to make the Offers.
Nextel and Motorola have each agreed to elect to receive TELUS
Non-Voting Shares in exchange for 100% and 75%, respectively, of the
Clearnet Shares owned by them, representing an aggregate of 22.5
million TELUS Non-Voting Shares. Nextel and Motorola have also agreed
to a standstill on these shares for a period of up to one year
following the date the Clearnet Shares are taken-up and paid for under
the Offers.
The Board of Directors of Clearnet, upon the recommendations of an
independent committee of the board and its financial advisor, RBC
Dominion Securities Inc., has recommended the Offers for approval by
the holders of the Clearnet Shares.
For the purposes of the foregoing,
"Acquisition Proposal" means any merger, amalgamation, consolidation,
business combination, strategic alliance, recapitalization,
liquidation, take-over bid, sale of material assets (or any lease, long
term supply agreement or other arrangement having the same effect as a
sale of material assets), any material sale of treasury shares or
rights or interests therein or thereto or similar transactions
involving Clearnet or its subsidiaries, or a BONA FIDE proposal to do
so, excluding the Offers.
"Specific TELUS Event" means any material adverse change in TELUS which
occurs as a result of an act of God, hurricane, tornado, epidemic,
landslide, earthquake, an act of public enemy, war (declared or
undeclared), insurrection, embargo, general unrest or restraint of
government and people or similar occurrence.
FINANCING OF THE OFFERS
TELUS has arranged for senior credit facilities in an aggregate amount
of up to $7.7 billion through The Toronto-Dominion Bank and Morgan
Guaranty Trust Company of New York. The credit facilities will be
available in three tranches, in the amounts of $5 billion ("Tranche
A"), $1.25 billion ("Tranche B") and $1.45 billion ("Tranche C"),
respectively. The purposes of the credit facilities will be to finance
the Offers, finance existing and acquired indebtedness and to provide
funds which may be required to purchase outstanding notes of Clearnet.
The credit facilities are for a 364 day term. Security for repayment of
the credit facilities includes the:
(a) pledge of certain shares of specified subsidiaries of TELUS,
include those of the subsidiary through which the Offers may
be conducted, if applicable ("AcqCo");
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(b) assignment of demand intercompany loans made by TELUS to
effect the Offers;
(c) assignment of secured and unsecured intercompany debt owed by
Clearnet to TELUS; and
(d) unlimited joint and several guarantees of the specified
subsidiaries of TELUS and AcqCo, if applicable.
6. RELIANCE ON SECTION 85(2) OF THE ACT
TELUS is not relying on Section 85(2) of the Act.
7. OMITTED INFORMATION
There is no omitted information.
8. SENIOR OFFICERS
For further information contact:
Mr. James W. Peters
Executive Vice President, Corporate Development &
Corporate Affairs and General Counsel
TELUS Corporation
3777 Kingsway
Burnaby, British Columbia V5H 3Z7
Telephone: (604) 432-4722 Telecopier: (604) 437-8560
9. STATEMENT OF SENIOR OFFICER
The foregoing accurately discloses the material change referred to
herein.
DATED at Burnaby, British Columbia this 30th day of August, 2000.
TELUS CORPORATION
Per: "ROBERT J. DARDI"
-------------------------------
Robert J. Dardi
Vice President and Corporate Secretary
TELUS AND CLEARNET TO CREATE CANADA'S
LARGEST WIRELESS COMPANY
C$6.6 BILLION ACQUISITION OF CLEARNET PROVIDES TELUS
WITH IMMEDIATE NATIONAL WIRELESS COVERAGE AND SETS
STAGE FOR MOBILITY, DATA AND INTERNET GROWTH
TORONTO, August 21, 2000 - In what will be the largest acquisition in Canadian
telecommunications history, TELUS Corporation (TSE: T, T.A)has agreed to offer
to acquire all of the shares of national digital wireless company Clearnet
Communications Inc.(TSE: NET.A; NASDAQ: CLNT).The combined entity will be a
leader in the fast-growing market for national wireless voice, data and Internet
services. The combination of TELUS 's and Clearnet 's wireless operations will
produce the largest wireless company in Canada in terms of annual revenue,
customer growth and wireless spectrum position.
The transaction, valued at C$6.6 billion, will unite Western Canada 's leading
wireless company with the country 's most dynamic national wireless company.
This deal is a major advance in building TELUS into the leading Canadian
provider of advanced, integrated communications, with more than 1.8 million
customers, a license to provide coverage to 30.7 million potential customers and
existing digital network coverage for more than 21 million potential customers
from coast to coast. George Cope, President and CEO of Clearnet, will assume
leadership of the combined wireless entity as its President and CEO.
A BOLD NEW FORCE IN CANADIAN TELECOMMUNICATIONS
"Wireless and IP applications are the two fastest-growing areas in
telecommunications and their convergence will be the most significant event of
the next decade for our industry. Our objective is to become the Canadian leader
of this market, " said Darren Entwistle, TELUS President and CEO. "This
transaction will give us immediate national wireless coverage, which will serve
as the foundation for the data and Internet strategy we are about to unveil.
"This deal is significant not only in its scale, but, more importantly, it
signifies TELUS 's strong commitment to becoming Canada 's preeminent data and
wireless communications company. And it indicates how TELUS will behave in the
future. We will act quickly, decisively and responsibly, focusing on growth
areas of our industry to add value for our shareholders."
George Cope, President and CEO of Clearnet, called the deal "an exciting and
compelling opportunity for Clearnet shareholders, clients and employees to be
part of a bold new force in Canadian telecommunications. Together, we will be
able to dramatically expand our ability to fully exploit the opportunities in
Canadian wireless.
"Our clients will greatly benefit from this transaction through access to a
competitive and integrated mix of new and improved services, including bundled
services and new data and Internet options. Joining forces with TELUS means we
will have unparalleled human and financial resources to capitalize on the
wireless revolution in voice, Internet and data services."
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Under the terms of a Support Agreement between TELUS and Clearnet, pursuant to
which TELUS has agreed to make, and Clearnet has agreed to support, the offer,
TELUS will offer to acquire all of the outstanding shares of Clearnet for C$70
per share (after giving effect to the conversion ratio between Clearnet 's Class
B and Class A non-voting shares). Clearnet shareholders have the right to elect
to receive C$70 in cash or 1.636 TELUS Non-Voting shares for each Clearnet share
tendered, or any combination, subject to the aggregate consideration paid by
TELUS being one-half cash and one-half TELUS Non-Voting shares. Tendering
shareholders will be prorated depending upon the total number of shareholders
electing to receive cash versus TELUS Non-Voting shares.
The offer price of C$70 per share represents a 53 per cent premium to the
closing price (C$45.80; US$31.00) of the Clearnet Class A non-voting shares on
Friday, August 18, 2000, the last trading day before the transaction was
announced.
TELUS has entered into lock-up agreements with certain Clearnet shareholders
holding an aggregate of more than 86 per cent of the voting interest in Clearnet
and more than 30 per cent of the economic interest in Clearnet under which these
shareholders have agreed to tender all of their Clearnet shares to the TELUS
offer. If accepted by all shareholders, Clearnet shareholders will hold 18.5 per
cent of TELUS shares outstanding.
Subject to the conditions described above, Nextel Communications, Inc., through
Nextel International, Inc., and Motorola Canada Limited, two of Clearnet 's
major shareholders, have agreed to elect to receive TELUS Non-Voting shares in
exchange for 100 per cent and 75 per cent, respectively, of the Clearnet shares
that they own, representing a total of 22.5 million TELUS Non-Voting shares.
Furthermore, Nextel and Motorola have agreed to a standstill on these shares for
a period of up to one year following the closing date of the transaction.
TD Securities and J.P. Morgan & Co. Inc. acted as financial advisors for TELUS
and have fully underwritten the debt component of the transaction 's financing.
The Board of Directors of Clearnet, upon the recommendations of an independent
committee of its directors established to consider TELUS 's offer and of RBC
Dominion Securities Inc., its financial advisor, has recommended the offer for
approval by its shareholders. It is anticipated that the offer will be mailed to
Clearnet shareholders in mid-September, 2000. The Support Agreement provides
that Clearnet must pay a "break fee " to TELUS in certain circumstances. If an
acquisition proposal emerges before August 29, 2000 and the Board of Directors
of Clearnet recommends that proposal and TELUS does not match it, Clearnet will
pay a break fee and the shareholders to the Lock Up agreements may tender to
that proposal.
"This transaction has been structured with the optimum mix of cash and equity, "
said Darren Entwistle. "We wanted to ensure that after the closing of the
transaction, TELUS would remain financially strong and would have the financial
flexibility to finance its data and Internet initiatives to fuel the company 's
growth. We are committed to maintaining an investment grade credit rating. Our
June 30, 2000 pro forma balance sheet after acquiring Clearnet shows net debt of
C$7.6 billion and total shareholders equity of C$6.8 billion. We are maintaining
our dividend, as we are committed to meet the expectations of our current
shareholders.
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"George and I are very excited about the opportunities that lie ahead, and I
look forward to working with him in his position as leader of our combined
wireless operations," added Entwistle. "We believe these two companies are a
great fit. We share a common vision of our industry 's future, we have
compatible wireless technology and together we are the leading national player -
TELUS is the wireless leader in Western Canada, while Clearnet has a powerful
presence in Eastern Canada."
Clearnet brings to TELUS more than 2,600 team members with an exceptionally
strong entrepreneurial culture. "Our national employee team is renowned for its
talent, motivation and commitment to leading the wireless industry," said George
Cope. "We look forward to joining with TELUS 's experienced team of wireless
professionals in the implementation of the new wireless voice, data and Internet
strategy of our combined entity."
LEADING EDGE DIGITAL WIRELESS SOLUTIONS
By operating its own national digital wireless network, TELUS will be able to
compete more aggressively for wireless customers across Canada. Clearnet and
TELUS 's wireless operations offer compatible digital PCS services based on the
same leading-edge CDMA digital wireless technology. Clearnet also brings to the
combined wireless entity the unique Mike network, a powerful multifunctional
wireless tool aimed at the business market. Clearnet 's fast-growing Mike
network boasts the highest average revenue per unit in the Canadian wireless
industry.
Both companies bring strategic partnerships with key U.S. wireless carriers to
their combined wireless operation. Clearnet 's partner Nextel communications,
Inc.(NASDAQ: NXTL),provider of the largest guaranteed all-digital wireless
network in the United States, offers, with Nextel Partners, Inc.(NASDAQ:
NXTP),Mike clients seamless coverage in 98 of the top 100 U.S. markets. TELUS
has a partnership with Verizon (NYSE: VZ)through GTE Corporation, which is a
member in the Verizon Wireless joint venture, the largest wireless service
provider in the United States. Through this partnership, TELUS will be able to
provide its cellular and PCS customers seamless, single-rate roaming North
America wide.
Through this transaction, TELUS avoids the expense and uncertainties involved in
building out its own cross-Canada wireless network and in developing its own
wireless organization in Eastern Canada. The combination of Clearnet and TELUS
networks will allow TELUS to compete in the wireless market on a national scale
approximately three years sooner than if it had decided to build its own
network. As well, the synergies in this transaction, including tax-losses
carried forward, operating and revenue synergies, are estimated at approximately
C$2.1 billion to C$2.4 billion.
The transaction is expected to be completed in October, 2000.
FORWARD LOOKING STATEMENTS
SOME STATEMENTS IN THIS DOCUMENT LOOK FORWARD IN TIME AND DEAL WITH OTHER THAN
HISTORICAL OR CURRENT FACTS FOR TELUS AND CLEARNET. SUCH STATEMENTS ARE
QUALIFIED IN THEIR ENTIRETY BY THE INHERENT RISKS AND UNCERTAINTIES SURROUNDING
FUTURE EXPECTATIONS, INCLUDING BUT NOT LIMITED TO, THE RISKS ASSOCIATED WITH:
GENERAL BUSINESS CONDITIONS IN CANADA AND THE COMPANIES ' SERVICE TERRITORIES IN
CANADA; COMPETITION ON WIRELESS SERVICES (CELLULAR),LOCAL AND LONG DISTANCE
SERVICES, DATA AND INTERNET SERVICES AND WITHIN THE CANADIAN TELECOMMUNICATIONS
INDUSTRY GENERALLY; ADVERSE REGULATORY ACTION; TECHNOLOGICAL CHANGE; TAXATION;
AVAILABILITY OF SUFFICIENT FUNDING; AND GENERATION OF OPERATING CASHFLOW
SUFFICIENT TO PROVIDE FINANCIAL VIABILITY. FOR ADDITIONAL INFORMATION WITH
RESPECT TO CERTAIN OF THESE AND OTHER FACTORS, SEE THE REPORTS FILED BY TELUS
AND CLEARNET WITH CANADIAN PROVINCIAL SECURITIES COMMISSIONS
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AND THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION. TELUS AND CLEARNET
DISCLAIM ANY INTENTION OR OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE OFFER TO
EXCHANGE/PROSPECTUS, THE SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9
AND OTHER OFFER DOCUMENTATION REGARDING THE TRANSACTION TO BE FILED WITH
CANADIAN PROVINCIAL SECURITIES COMMISSIONS AND THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION, AS THEY WILL CONTAIN IMPORTANT INFORMATION. SECURITY
HOLDERS MAY OBTAIN A FREE COPY OF THE OFFER TO EXCHANGE/PROSPECTUS (WHEN
AVAILABLE)AND OTHER RELATED DOCUMENTS FILED BY TELUS AND CLEARNET AT THE SEC'S
WEB SITE AT WWW.SEC.GOV AND THE SEDAR WEB SITE AT WWW.SEDAR.COM. WHEN AVAILABLE,
THE OFFER TO EXCHANGE/PROSPECTUS AND THE OTHER DOCUMENTS MAY ALSO BE OBTAINED
FROM TELUS, ATTENTION: TELUS CORPORATION INVESTOR RELATIONS, FLOOR
30-D,10020-100 STREET, EDMONTON, AB T5J 0N5.