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The Co-operators and Addenda Capital Inc. Announce Agreement

Feb 25, 2008

    GUELPH, ON and MONTREAL, Feb. 25 /CNW/ - The Co-operators Group Ltd.
("The Co-operators") and Montreal-based institutional investment management
firm Addenda Capital Inc. ("Addenda") (TSX: ADV) today announced that they
have entered into an agreement. Under the terms of the agreement, Addenda will
amalgamate with a subsidiary of The Co-operators ("Newco") and the
shareholders of Addenda will receive upon completion of the amalgamation
$26.50 in cash for each Addenda share, representing a premium of 23.8% to the
closing price of $21.40 for Addenda common shares on Friday February 22, 2008
and a premium of 25.7% to the 20-day volume weighted average price of $21.09
for Addenda common shares. The transaction, which values Addenda's equity at
approximately $306.5 million, will be implemented by way of a statutory
amalgamation under the Companies Act (Quebec) and is subject to customary
conditions precedent including approval of the amalgamation by shareholders of
Addenda and obtaining any required regulatory approvals.
    Certain senior management shareholders of Addenda (the "Senior Management
Shareholders") will exchange, immediately prior to the amalgamation, in the
aggregate approximately 50% of their common shares of Addenda for shares of
Newco. Solidarity Fund QFL ("the Fund"), a current shareholder of Addenda,
will exchange, immediately prior to the Amalgamation, 100% of its common
shares of Addenda for shares of Newco and will subscribe to additional common
shares of Newco. Certain other employees of Addenda ("the Employee
Shareholders") will be offered an opportunity to exchange, immediately prior
to amalgamation, part of their common shares of Addenda for shares of Newco.
    The Senior Management Shareholders and the Fund, representing
approximately 25% of the issued and outstanding common shares of Addenda, have
each entered into a voting support agreement pursuant to which they have
agreed, subject to certain conditions, to vote their common shares in favour
of the amalgamation.
    The proposed amalgamation has been approved unanimously by the Board of
Directors of Addenda (with interested directors abstaining) following the
report and favourable, unanimous recommendation of a Transaction Committee
comprised of three independent directors, namely Marie Giguère (Chair),
Richard Drouin and Pierre Martin. In doing so, the Addenda Board determined
that the amalgamation is fair to the Addenda shareholders other than the
Senior Management Shareholders, the Employee Shareholders who will acquire
shares of Newco and the Fund (the "Public Shareholders") and in the best
interests of Addenda and authorized the submission of the amalgamation to
shareholders of Addenda for their approval at a special meeting of
shareholders. The Board of Addenda also has determined unanimously (with
interested directors abstaining) to recommend to the Public Shareholders that
they vote in favour of the amalgamation.
    The Transaction Committee received an opinion from its financial advisor,
CIBC World Markets Inc. that the consideration to be received under the
transaction is fair from a financial point of view to the Public Shareholders.
In addition, the Transaction Committee received a report on the value of the
Addenda shares from PricewaterhouseCoopers LLP.acting as independent valuator.
Copies of the fairness opinion and the formal valuation report, factors
considered by the Transaction Committee and the Board and other relevant
background information will be included in the management information circular
that will be sent to Addenda shareholders in connection with the special
meeting to consider the amalgamation.
    Addenda has agreed not to solicit competing acquisition proposals for
Addenda but has retained the ability to consider a competing acquisition
proposal not solicited by it which the Addenda Board believes may lead to a
superior proposal and to terminate the agreement in the event of a superior
proposal, subject to The Co-operators right to match and payment of a break-up
fee of $8.0 million. The agreement also allows Addenda to continue to declare
and pay quarterly dividends to shareholders in the ordinary course of
    A meeting of shareholders to consider the amalgamation is anticipated to
take place in April. To be implemented, the amalgamation will require approval
by two-thirds of the votes cast by holders of common shares. The amalgamation
will also require approval by a simple majority of the votes cast by Public
    Soon after the completion of the amalgamation, the business of Co-
operators Investment Counselling Limited, a wholly-owned subsidiary of The Co-
operators, will be combined with that of Addenda.
    With assets under management of approximately $29 billion, Addenda is a
leader in the institutional fixed income market. Based in Guelph, Ontario, The
Co-operators is the leading Canadian-owned multi-product insurance company.
The new entity, which will operate under the Addenda brand, will have offices
in Montreal, Toronto, Guelph and Regina, will manage approximately $40 billion
in assets and have significant potential for future growth.
    The combined entity will be known as Addenda Capital Inc. Addenda will be
headed by Michael White who will become President and CEO. Most of Addenda's
management will continue to serve in their current capacity within the new
entity. Myriam Larcher will remain Chief Operating Officer and Chief Financial
Officer while Yvan Fontaine will act as Senior Vice President and Co-Chief
Investment Officer. Benoît Durocher will become Executive Vice President,
Client Service and Marketing. Joe DiMassimo, Senior Vice President Sales and
Service will continue to work out of Addenda's current Toronto office. The
senior management team has agreed to invest in the new entity given the strong
similarities between the respective corporate cultures of Addenda and The Co-
operators. Jim MacDonald, currently Chief Investment Officer of Co-operators
Investment Counselling, will become Senior Vice president and Co-Chief
Investment Officer of the new company.
    "This transaction creates a national investment manager of significant
scale and offers existing clients of Addenda and Co-operators Investment
Counselling Limited excellent choice in diversification of asset classes,
management styles and capabilities," commented Kathy Bardswick, president and
CEO of The Co-operators. "The two companies complement each other well, and
this acquisition supports The Co-operators strategic goal of significantly
growing our presence in Quebec."
    "We are very excited about this transaction which will allow Addenda to
team up with an insurance industry leader and its investment management
subsidiary. This combination will further enhance Addenda's ability to meet
our clients' needs in terms of specialty products such as liability driven
investing" said Carmand Normand, Executive Chairman of the Board of Addenda.
    "For its part, the Solidarity Fund QFL, is pleased to align itself with a
major strategic partner such as The Co-operators, whose values and vision are
perfectly attuned to its own. By increasing its assets under management and
having access to an already well established network, Addenda Capital will be
able to spur its growth across Canada. We are all the more pleased to see the
new entity will be headquartered in Montreal, raising further the city's
profile as a major player in the asset management industry," said Gaeten
Morin, Executive Vice President, Investments, at the Solidarity Fund QFL.
    Scotia Capital Inc. is acting as financial advisor and Borden Ladner
Gervais LLP is acting as legal counsel to The Co-operators. Pricewaterhouse
Coopers LLP acted as independent valuator and CIBC World Markets Inc. is
acting as financial advisor to Addenda and the Transaction Committee. Fasken
Martineau DuMoulin LLP is acting as legal counsel to the Transaction Committee
of Addenda and McCarthy Tetrault LLP is acting as legal counsel to the Senior
Management Shareholders. The Fund is supported by its in-house legal and
acquisition teams.
    Subject to receiving the required Addenda shareholder and regulatory
approvals and the satisfaction of the other customary conditions, it is
anticipated that this transaction would close in approximately two to three


    Based in Guelph, Ontario, The Co-operators is a group of Canadian
companies offering home, auto, life, group, travel, commercial and farm
insurance, as well as investment products. With assets of $7 billion, The Co-
operators is a co-operative owned by 40 Canadian co-operatives, credit unions
and like-minded organizations. It is well known for its community involvement,
and is listed among the 50 Best Employers in Canada.
    Addenda is an investment management firm specializing in the active
management of fixed-income portfolios, primarily for institutional clients.
    Copies of the Merger Agreement and certain related documents will be
filed with Canadian securities regulators and will be available at the
Canadian SEDAR website at The management information circular
in connection with the special meeting of shareholders to consider the
Amalgamation is expected to be mailed to shareholders over the coming weeks.
The circular also will be available as part of Addenda public filings at

    Prospective information

    This press release presents certain "forward-looking statements" within
the meaning of applicable securities laws relating to the proposal to take
Addenda Capital Inc. private, including statement relating to the terms and
conditions of the proposed transaction. Readers are cautioned not to place
undue reliance on forward-looking statement. Actual results and developments
may differ materially from those contemplated by these statements depending
on, among other things, the risks that the parties will not proceed with a
transaction, that the ultimate terms of the transaction will differ from those
that currently are contemplated, and that the transaction will be not be
successfully completed for any reason (including the failure to obtain the
required approvals). The statements in this news release are made as of the
date of this release and, except as required by applicable law, Addenda
undertakes no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.

For further information: Leonard Sharman, Media Relations, The
Co-operators, (519) 767-3925, x-2707; or Michael White, President,
Co-operators Investment Counselling Limited, (519) 767-3077; Benoit Durocher,
President and Chief Executive Officer, Addenda Capital Inc., (514) 287-7373

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