Precision Drilling Trust to Convert to Corporation
Precision Drilling Trust intends to convert to a growth-oriented corporation pursuant to a plan of arrangement under the Business Corporations Act (Alberta). Precision anticipates seeking approval from unitholders in conjunction with its 2010 annual and special meeting of unitholders (the "Meeting") and expects to complete the Conversion by May 31, 2010.
The Board of Trustees and the Board of Directors of the administrator of the Trust (together the "Board") believe that it is the right time to proceed with the Conversion for the following reasons:
- Precision believes the Conversion is important for future attraction and retention of worldwide investors.
- Access to capital markets for income trusts may become more limited in 2010.
- The Trust anticipates efficiencies and cost savings from presenting the Conversion for approval of the unitholders at its regularly scheduled annual general meeting.
- The Conversion removes the restriction on non-resident ownership.
- The Conversion will occur on a tax-deferred basis.
- On October 31, 2006, the Canadian Minister of Finance announced the Specified Investment Flow Through Trust ("SIFT") income and distribution tax which effectively eliminated the benefits of Precision's income trust structure by introducing additional income taxes to be imposed on trusts (generally) for taxation years commencing January 1, 2011.
- The Conversion removes the growth limitations imposed by the SIFT legislation.
The proposed Conversion will be completed in compliance with the distribution method provided for under the Income Tax Act (Canada). The Conversion requires the approval of Precision's unitholders, as well as customary court and regulatory approvals. An information circular and proxy statement will be mailed to Precision unitholders in connection with the meeting. To be implemented, the Conversion must be approved by not less than two-thirds of the votes cast by unitholders at the Meeting. Further details about the timing and mechanics of the Conversion will be communicated over the next two months.
The Board retained TD Securities Inc. ("TD Securities") to act as its financial advisor in connection with this transaction. Pursuant to this mandate, TD Securities has provided the Board with an opinion that, as at the date thereof and subject to the particular assumptions, considerations and limitations summarized therein, the consideration to be received by unitholders pursuant to the Arrangement is fair, from a financial point of view, to such unitholders. The full text of the TD Securities fairness opinion will be appended to the management information circular to be provided to unitholders in connection with the proposed Conversion.
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