Upper Lakes responds to criticisms of Davie sale

davie signNOVEMBER 14, 2012 — Upper Lakes Group Inc. of Toronto, Ontario, today expressed its concerns over what it describes as "unsubstantiated allegations regarding the sale of its wholly-owned subsidiary Chantier Davie Canada Inc. that have been made by an unsuccessful bidder."

It was widely reported earlier this month that the Quebec government had approved the sale of the shipyard to London-based Zafiro Marine, with which Cecon, which has three offshore construction vessels on order at Davie, has a strategic alliance. The sale has yet to be finalized and Upper Lakes is apparently concerned that it could be put in danger by the allegations.

One critic who has been widely quoted in French language media in Quebec is Michel Juneau-Katsuya, described in one report as the head of a group that also wanted to acquire the site. If your French is up to it, here's that report (if your French isn't up to it, the Google translation is hysterically funny).

Mr. Juneau-Katsuya is a former Canadian Security Intelligence Service officer who is a favorite with Canadian media members in need of a catchy quote. His recent remarks on the misadventures of General David Petraeus have attracted rather more attention than his criticisms of the Davie sale.

Another unsuccessful bidder who has been publicly critical of the sale process is Mr. Ronald Carré of Marine Industries Plus. Radio Canada reports that he has asked the economic crimes division of the Quebec police to investigate "irregularities" at Davie.

In a statement issued today, Upper Lakes notes that in July 2011 Chantier Davie acquired the Davie shipyard, entered into a joint venture with SNC-Lavalin and submitted a bid under the National Shipbuilding Procurement Strategy of the federal government. At that time, the shipyard was in insolvency proceedings and there were three partly-built vessels under construction for Cecon ASA.

Unfortunately, the NSPS bid was unsuccessful. After its joint venture partner withdrew, Upper Lakes concluded that it was necessary to attempt to sell the shipyard promptly, given the limited funds of Chantier Davie.

After several parties expressed an interest in purchasing Chantier Davie and to encourage bids from all interested parties, Upper Lakes developed a process with the assistance of PricewaterhouseCoopers for the sale to a purchaser with demonstrated technical capabilities and financial resources sufficient to promptly reopen the shipyard. Potential purchasers, including the parties who had already contacted Upper Lakes, were notified of the sale process and invited to submit expressions of interest to PwC by noon on July 30, 2012. All expressions of interest were considered in order to identify the best fit with the disclosed sale criteria. In accordance with the process disclosed to bidders, one bidder was selected for negotiation of a definitive agreement and was given access to additional, sensitive information for due diligence purposes. A share purchase agreement was then signed, subject to several closing conditions.

Ian MacGregor, Managing Director of Upper Lakes, commented that "We were responsible for the sale process and I am satisfied that the process, as described in writing to potential bidders, was followed. It was certainly in the interest of Upper Lakes to encourage all credible bidders to submit their best proposals in compliance with the process requirements."

Mr. MacGregor added that "We worked diligently to find a purchaser in a position to promptly reopen the Davie shipyard. In our view, recently published criticisms of the sale process are unfounded and could jeopardize successful completion of the sale and prompt reopening of the shipyard."

Upper Lakes Group Inc. is a private, family-owned company that operates shipbuilding and ship repair facilities, as well as grain businesses and real estate development.

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