EnerCare completes acquisition of Direct Energy's OHCS business in Ontario

On July 24, 2014, EnerCare Inc. (EnerCare) and EnerCare Solutions Inc. (EnerCare Solutions) announced that they entered into a definitive asset purchase agreement with Direct Energy Marketing Limited (Direct Energy), a wholly-owned subsidiary of Centrica plc (Centrica), to purchase their Ontario home and small commercial services (OHCS) business for a purchase price of C$550 million. The acquisition closed on October 20, 2014.

The purchase price of the acquisition was approximately C$550 million, subject to working capital and other adjustments. The acquisition was financed through a combination of debt and equity, including approximately C$317 million from the net proceeds of EnerCare's bought deal offering of subscription receipts, approximately C$124 million from debt facilities entered into in connection with the acquisition, and approximately C$100 million from the private placement of EnerCare common shares to Direct Energy. The 7,602,308 shares issued to Direct Energy were issued at C$13.00, the same price as the subscription receipts and are subject to a 12-month lock-up and thereafter, one-half of such shares will be subject to a further 6-month lock-up.

The bought deal offering of subscription receipts, which closed August 18, 2014 and raised gross proceeds of approximately C$333 million was underwritten by a syndicate of underwriters co-led by National Bank Financial Inc. and TD Securities Inc. and included Scotia Capital Inc., RBC Dominion Securities Inc., CIBC World Markets Inc., Desjardins Securities Inc., Canaccord Genuity Corp. and Jacob Securities Inc. A total of 25,635,525 subscription receipts were sold at a price of C$13.00 per subscription receipt, including 1,788,525 subscription receipts that were sold as a result of the exercise in full of the over-allotment option by the underwriters. On closing of the acquisition, each outstanding subscription receipt was exchanged for one common share of EnerCare, resulting in the issuance of 25,635,525 shares, and a dividend equivalent cash payment equal to C$0.1208 per subscription receipt.

EnerCare's debt facilities with The Toronto-Dominion Bank and National Bank of Canada are comprised of: (i) a 4-year non-revolving, non-amortizing variable rate term credit facility in the amount of C$210 million, which has been drawn for the purpose of financing the acquisition and re-financing EnerCare Solutions' existing C$60 million term loan; and (ii) a 5-year C$100 million revolving, non-amortizing variable rate credit facility, which replaces EnerCare Solutions' existing C$35 million revolving facility and which is currently undrawn.

EnerCare and EnerCare Solutions, one of Canada's leading providers of energy conservation products and services, own a portfolio of approximately 1.1 million installed water heaters and other assets, rented primarily to residential customers in Ontario.

Direct Energy is one of the largest retail providers of electricity, natural gas, and home services in North America.

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