Offer to purchase CLEARNET.pdf - About TELUS

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TELUS intends to integrate Clearnet with its existing mobile wireless business and operate them nationwide. TELUS further intends Clearnet to continue to build out its Mike iDEN network in Canada to the extent economically feasible and to increase its population coverage by four million by the end of 2003. Given the compatibility in technology (TELUS and Clearnet both use CDMA technology for their PCS networks), and the complementarity of geography in which TELUS and Clearnet currently provide mobile wireless services, TELUS expects the business of Clearnet to complement its existing mobile wireless business. The integration is expected to enhance TELUS’ ability to (i) offer bundled or packaged wireless and wireline telecommunications services on a national basis, thereby increasing customer choice, (ii) develop and sell new applications, such as data and Internet, for wireless services and develop future technologies, and (iii) achieve economies of scale, thereby reducing capital and operating expenditures. In addition, TELUS management has identified significant operating synergies and tax synergies. The operating synergies include the elimination of overlapping branding and advertising expenses, conversion of roaming traffic to each other’s networks, increasing efficiency in network operations and rationalization of corporate and back-office expenses. If TELUS is successful and acquires control of Clearnet as a result thereof, it is further expected that certain changes will be effected with respect to the composition of the board of directors of Clearnet to allow nominees of TELUS to become members of the board of directors of Clearnet. In addition TELUS and Clearnet may, subject to Clearnet’s agreement, effect an internal reorganization prior to the Take-up Date in order to realize certain efficiencies. See ‘‘Background to the Offers — Support Agreement’’. TELUS intends to liquidate Clearnet into, or amalgamate Clearnet with one or more affiliates of TELUS or to otherwise combine the business operations of Clearnet and TELUS to achieve the objectives set out above. If permitted by applicable law, subject to the completion of the Offers, if all of the issued and outstanding Clearnet Shares are acquired as a result of the Offers, a Compulsory Acquisition or a Subsequent Acquisition Transaction, if any, the Offerors intend to delist the Clearnet Non-Voting Shares from the TSE and NASDAQ. See ‘‘Price Range and Trading Summary of Clearnet Non-Voting Shares’’. SOURCE OF FUNDS TELUS has entered into the Commitment Letter for the provision of 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 (collectively the ‘‘Banks’’). The credit facilities (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 make the required offers to purchase outstanding notes of Clearnet. The Banks have committed to fully underwrite the Credit Facilities and will act as agents in a planned syndication of a portion of the commitment to a group of financial institutions. Tranche A will be comprised of a 364 day non-revolving bridge facility, Tranche B will be comprised of a 364 day revolving line of credit and Tranche C will be comprised of a 364 day non-revolving liquidity backstop facility. Security for repayment of the Credit Facilities includes the pledge of certain shares of specified subsidiaries of TELUS, including those of Acquisition Co.; the assignment of demand intercompany loans made by TELUS to effect the Offers; the assignment of any secured or unsecured intercompany debt owed by Clearnet to TELUS; and the unlimited joint and several guarantees of certain specified subsidiaries of TELUS and Acquisition Co. TELUS has agreed, pursuant to a fee letter with the Banks, to pay an underwriting and structure fee equal to 1.5% of Tranche A and B and 0.25% on Tranche C, 35% of which was paid on signing the Committment Letter and the balance to be paid on the Take-up Date. In addition TELUS will pay an amount equal to 2.25% of any amount drawn down under Tranche C from time to time. TELUS will be obligated to pay an annual agency fee to be negotiated. 34
The funds obtained pursuant to the Credit Facilities will bear interest, at the base rate (plus a margin) or a specified margin over LIBOR, in the case of borrowings in U.S. funds. There is provision for lenders to provide short term loans where the interest rate for borrowings is based on a specified margin over the lender’s cost of funds. Covenants contained in the Credit Facilities limit certain corporate acts of TELUS and its subsidiaries and require TELUS and its subsidiaries to meet certain financial tests and to supply certain information to the Banks. The Credit Facilities also include additional covenants, representations, warranties, conditions and default provisions, which are customary for such credit facilities. TELUS expects that the amounts advanced pursuant to the Credit Facilities will be repaid or refinanced, in whole or in part, with funds generated from operations, issuances of debt 35 and/or equity sales of assets or additional financings, the terms of which will be subject to market conditions and other factors prevailing at the relevant time. SELECTED PRO FORMA FINANCIAL INFORMATION The following table sets out certain pro forma consolidated financial information for TELUS and Clearnet as at June 30, 2000 and the six month period then ended, after giving effect to the acquisition by the Offerors of all of the Clearnet Shares pursuant to the Offers and certain other adjustments. The pro forma consolidated financial information is not necessarily indicative of the results that actually would have occurred, or the results expected in future periods, had the events reflected herein occurred on the dates indicated. No attempt has been made to calculate or estimate the effect of any potential synergies or harmonization of accounting policies between the two companies. See Schedule II — ‘‘TELUS Corporation Unaudited Pro Forma Consolidated Financial Statements’’. For the six months ended June 30, 2000 (Millions, except per share amounts and operating statistics) Pro Forma Financial Operating revenues ........................................................ $3,251.2 EBITDA ............................................................... $1,146.8 Operating income ......................................................... $ 485.0 Net income before goodwill amortization ........................................ $ 94.9 Goodwill amortization ...................................................... $ 123.8 Common share loss ........................................................ Earnings (loss) per Share $ (30.7) Before goodwill charges ................................................... $ 0.32 Net ................................................................. $ (0.11) Capital expenditures ....................................................... Operating statistics Wireless $ 610.9 Cellular customers, end of period (1)(2) (000’s) ..................................... 1,907 Net additions (3) (000’s) (last 12 months) ......................................... 400 Average monthly revenue (ARPU) (last 12 months) ................................ Other $ 57 (4) Network access lines, end of period (000’s) ...................................... 4,893 Internet customers, end of period (000’s) ........................................ Certain book value information is set out in Annex A hereto. 435 (1) Includes 46,000 QuébecTel cellular customers. TELUS purchased approximately 70% of QuébecTel on June 1, 2000 (2) Includes digital and analogue cellular customers, ESMR customers, and analogue SMR customers (3) Net additions and Average monthly revenue excludes QuébecTel (4) Includes 302,000 QuébecTel access lines and 81,000 QuébecTel Internet customers
Page 1 and 2: No securities commission or similar
Page 3 and 4: QUESTIONS AND ANSWERS ABOUT THE OFF
Page 5 and 6: outstanding voting shares of Clearn
Page 7 and 8: WHERE YOU CAN OBTAIN MORE INFORMATI
Page 9 and 10: SUMMARY The following is a summary
Page 11 and 12: Commitment to Accept the Offers by
Page 13 and 14: Selected Historical and Pro Forma C
Page 15 and 16: DEFINITIONS In the accompanying Sum
Page 17 and 18: ‘‘Governmental Entity’’ mea
Page 19 and 20: ‘‘Shareholders Agreements’’
Page 21 and 22: Shares and the amount of cash recei
Page 23 and 24: shares into the Depositary’s acco
Page 25 and 26: the person or persons specified by
Page 27 and 28: (l) neither TELUS nor the Banks bec
Page 29 and 30: condition of the Offers specified u
Page 31 and 32: (f) the Holdco Shareholder properly
Page 33 and 34: Notice of any determination regardi
Page 35 and 36: The Offers are not being made to, n
Page 37 and 38: On July 14, 2000, Darren Entwistle,
Page 39 and 40: espect of such Acquisition Proposal
Page 41: etter positioned to take advantage
Page 45 and 46: part of its national strategy, TELU
Page 47 and 48: to require holders of TELUS Non-Vot
Page 49 and 50: ‘‘Dividends’’ in TELUS’ A
Page 51 and 52: systems. Change in the regulation o
Page 53 and 54: (b) the management proxy circular o
Page 55 and 56: COMMITMENTS TO ACQUIRE SECURITIES O
Page 57 and 58: the proposed transaction is likely
Page 59 and 60: ACQUISITION OF CLEARNET SHARES NOT
Page 61 and 62: least equal in value to the conside
Page 63 and 64: Beneficial owners of Clearnet Conve
Page 65 and 66: separately dispose of the balance o
Page 67 and 68: also be taxable Canadian property w
Page 69 and 70: No brokerage fees or commissions wi
Page 71 and 72: CONSENT OF AUDITORS To: British Col
Page 73 and 74: CERTIFICATE OF 612459 B.C. LTD. The
Page 75 and 76: MANAGEMENT’S REPORT Management is
Page 77 and 78: TELUS CORPORATION (FORMERLY BCT.TEL
Page 87 and 88: 4. FINANCING COSTS TELUS CORPORATIO
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TELUS CORPORATION (FORMERLY BCT.TEL
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SCHEDULE II TELUS CORPORATION UNAUD
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COMPILATION REPORT To the Directors
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TELUS CORPORATION PRO FORMA CONSOLI
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TELUS CORPORATION NOTES TO THE PRO
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TELUS CORPORATION PRO FORMA CONSOLI
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SCHEDULE III TELUS CORPORATION U.S.
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The following table restates the ma
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ANNEX A ADDITIONAL INFORMATION ADDI
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Fares F. Salloum President — Inte
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Officers Name and Position held wit
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