Premium Brands signs deal to convert from trust
Specialty food maker Premium Brands Income Fund said it signed a deal with Thallion Pharmaceuticals Inc to convert its company structure to a dividend-paying corporation from a trust.
Premium Brands said the transaction is the most efficient way to switch its corporate structure in advance of the government-mandated end to the tax-advantaged trust format in 2011.
Trusts had been given a tax break in return for distributing the bulk of their cash to investors. However, in 2006 the federal government became concerned about loss of taxes because of the format's popularity and gave the trusts five years to convert into normal corporations.
The new Premium Brands corporate entity expects to pay a quarterly dividend of 29.4 Canadian cents per share, which is equal to the Premium Brands' current monthly distribution of 9.8 Canadian cents per unit, the company said in a statement.
The conversion will occur according to a statutory plan of arrangement and is expected to be effective in July 2009, it said.
Under the plan, Premium Brands' unitholders will receive one common share of Thallion, a biotechnology company, in exchange for each trust unit of Premium Brands, and Thallion will change its name to Premium Brands Holdings Corp.
Premium Brands Holdings Corp will not retain any of the businesses carried on by Thallion, but will own and operate the existing businesses of Premium Brands.
Thallion will transfer its assets and liabilities, including the proceeds from this transaction, to a new subsidiary company, New Thallion OpCo, which will receive C$8.85 million.
New Thallion OpCo will carry on Thallion's business operations as a public entity.
On completion, Premium Brands unitholders will own 100 percent of the shares of the original Thallion entity.
Thallion shareholders will exchange their Thallion shares on a one-for-one basis for shares of the parent company of New Thallion OpCo which shall subsequently amalgamate with New Thallion OpCo.
This transaction allows us to sustain our clinical momentum in an extremely challenging market for growth capital, said Lloyd Segal, chief executive of Thallion Pharmaceuticals.
Premium Brands units were flat at C$9.05, while shares of Thallion were up 12 percent at 18 Canadian cents Wednesday morning on the Toronto Stock Exchange. ($1=1.081 Canadian dollar)
(Reporting by R. Manikandan in Bangalore; Editing by Ratul Ray Chaudhuri)
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