PrefBlog

Desjardins has announced:

that it has entered into a support agreement with Western Financial Group (TSX:WES), the largest insurance and financial services retailer in Western Canada with 121 offices in British Columbia, Alberta, Saskatchewan and Manitoba, pursuant to which it will acquire all of the issued and outstanding common shares of Western Financial at a price of $4.15 per common share in cash (the ‘’Offer’’) for a total transaction value of $443 million.
…
Holders of convertible preferred shares and convertible unsecured debentures of Western Financial may participate in the Offer by converting such securities into common shares of Western Financial Group and tendering such shares to the Offer. By exercising the relevant conversion rights and participating in the Offer, holders of the following securities would receive the following premiums over par values: Series 2 preferred shares ‐ 15%; Series 5 preferred shares ‐ 48%; and convertible unsecured debentures ‐ 38%.

Great. Now I’m going to get all kinds of questions about convertible preferreds.

Series 5 is WES.PR.C which was issued in September 2009. The prospectus (available on SEDAR) states:

The Preferred Shares are convertible into our common shares (“Common Shares”) at the option of the holder at any time, or if called for redemption, on the business day immediately preceding the date fixed for redemption, at a conversion price of $2.81 per Common Share (the “Conversion Price”), being a rate of 35.5872 Common Shares per Preferred Share, subject to adjustment. See “Details of the Offering – Conversion”.

A nice windfall indeed!

WES.PR.D is Series 2, which closed in December 2009. According to the 2009 Annual Report:

Series 2 Preferred shares issued by the Company are convertible at the holder’s option at any time into common shares at a fixed conversion price of $3.60 per share. These shares are redeemable by the Company only after the third anniversary and up to the fifth anniversary if the common shares are trading at or greater than 135% of the $3.60 conversion price. These shares have been recorded as equity. Dividends paid and accrued are recorded against retained earnings.

Unfortunately, WES.PR.A is Series 3:

Series 3 Preferred shares issued by the Company are convertible at the holder’s option at any time into common shares at a fixed conversion price of $7.25 per share. These shares are redeemable by the Company only after the third anniversary and up to the fifth anniversary if the common shares are trading at or greater than 135% of the $7.25 conversion price. These shares have been recorded as equity. Dividends paid and accrued are recorded against retained earnings.

… and WES.PR.B is Series 4:

Series 4 Preferred shares issued by the Company are convertible at the holder’s option at any time into common shares at a fixed conversion price of $6.90 per share. These shares are redeemable by the Company only after the third anniversary and up to the fifth anniversary if the common shares are trading at or greater than 135% of the $6.90 conversion price. These shares have been recorded as equity. Dividends paid and accrued are recorded against retained earnings.

None of the WES preferred shares are tracked by HIMIPref™.

Update, 2011-1-21: Takeover bid documents mailed.

This entry was posted on Thursday, December 23rd, 2010 at 11:23 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.