GWR Global Water Resources Corp. Announces Plan to Merge With Global Water Resources, Inc.

/THIS PRESS RELEASE IS INTENDED FOR DISTRIBUTION IN CANADA ONLY AND IS NOT INTENDED FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES./

PHOENIX, AZ, Jan. 19, 2016 /CNW/ - GWR Global Water Resources Corp. (TSX: GWR) (the "Company") announced today that it has agreed to pursue a proposed transaction with Global Water Resources, Inc. ("GWRI") that will result in, subject to the satisfaction of shareholder approval and certain other conditions, the Company merging with and into GWRI (the "Proposed Transaction").

Background and Summary of Proposed Transaction

The following is a summary of the background to, and certain key elements of, the Proposed Transaction; further details will be contained in the materials sent to the Company's shareholders in connection with the meeting called to approve the Proposed Transaction.

• The Company (which we refer to as "CanCo") was incorporated in British Columbia to acquire shares of US-based GWRI (which we refer to as "USCo"). CanCo's sole asset consists of an equity interest in USCo. The public shareholders of CanCo currently indirectly own, in the aggregate, an approximate 37.5% equity interest in USCo and certain private shareholders currently directly and indirectly own, in the aggregate, an approximate 62.5% equity interest in USCo.
  
  
• If approved by CanCo shareholders and subject to the satisfaction of certain other conditions, the Proposed Transaction will result in the elimination of CanCo, and shareholders of CanCo becoming stockholders of USCo.
  
  
• Shareholders of CanCo will be asked to approve the merger of CanCo with and into USCo. As a result of the merger, CanCo will cease to exist as a British Columbia corporation and USCo, governed by the corporate laws of the State of Delaware, will be the surviving entity.
  
  
• On the effectiveness of the merger, CanCo shareholders will receive one share of common stock of USCo for every CanCo common share held.
  
  
• On completion of the Proposed Transaction, without giving effect to any stock issued in the U.S. IPO as described below, the public shareholders of CanCo will own, in the aggregate, an approximate 37.5% equity interest in USCo and the private shareholders of CanCo and USCo will own, in the aggregate, an approximate 62.5% equity interest in USCo. Accordingly, shareholders' economic interests in respect of USCo will remain unchanged and, instead of holding an interest in USCo indirectly through CanCo, shareholders will hold their interests directly in USCo.
  
  
• The merger is conditional upon the concurrent completion of a proposed initial public offering of shares of common stock of USCo in the United States (the "U.S. IPO"). The number of shares to be offered and the price for the U.S. IPO have not yet been determined.
  
  
• The merger is also conditional upon, among other things, the shares of common stock of USCo having been approved for listing on the Toronto Stock Exchange and the NASDAQ Global Market.
  
  
• On completion of the Proposed Transaction, USCo intends to pay a regular monthly dividend of U.S.$0.02 per share of common stock (U.S.$0.24 per share annually), which is approximately the U.S.$ equivalent of the current C$0.0283 monthly dividend of CanCo based on current exchange rates. The declaration and payment of dividends by USCo will be subject to compliance with applicable law, and depend on, among other things, its results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, restrictions in its debt agreements and in any preferred stock, business prospects and other factors that the board of directors of USCo may deem relevant.

Reasons for the Proposed Transaction

The Proposed Transaction is part of the Company's overall plan to simplify the corporate structure by eliminating one level of holding company ownership, refinance the outstanding tax-exempt bonds of USCo on more favourable terms (as described below), improve liquidity for shareholders over the medium to long-term and have a single governing jurisdiction in the U.S., where all of the assets, operations and employees of the business are located.

On completion of the Proposed Transaction, USCo will have the right to redeem all of its outstanding tax-exempt bonds at a price of 103% of the principal amount, plus interest accrued at the redemption date. As of December 31, 2015, the principal balance of such bonds was U.S.$106.7 million. Following completion of the Proposed Transaction, USCo plans to refinance these bonds and, based on discussions with lenders, believes it can reduce the effective interest rate on the outstanding balance by 75 to 150 basis points. The refinancing of USCo's tax-exempt bonds at reduced interest rates or at all will depend on a number of factors that are beyond its control, including market conditions, and therefore the completion of the bond refinancing cannot be assured.

The board of directors of CanCo has determined that the Proposed Transaction is in the best interests of CanCo and has unanimously approved the Proposed Transaction (with interested directors abstaining) and recommends that CanCo shareholders vote for the Proposed Transaction.

All of the directors and the executive officers of CanCo who own common shares, (including Mr. William S. Levine who has control or direction over approximately 18.3% of the outstanding CanCo common shares) have advised the board of directors that they intend to vote their shares in favour of the Proposed Transaction.

Timetable and Approvals

The Proposed Transaction will require approval by (i) 66^2/3% of the votes cast by CanCo's shareholders and (ii) a majority of the votes cast by CanCo's shareholders, other than certain directors and shareholders of CanCo, in each case present at the meeting in person or by proxy, as well as approval by the Supreme Court of British Columbia.

The Proposed Transaction constitutes a business combination under applicable Canadian securities laws and is therefore subject to a formal valuation and minority shareholder approval requirements. CanCo has applied to the applicable Canadian securities regulators for an exemption from the formal valuation requirement in respect of the Proposed Transaction.

The Meeting date will be set, and the materials containing details of the Proposed Transaction will be mailed to CanCo shareholders, as soon as practicable. Subject to the satisfaction of all applicable conditions, including those relating to the U.S. IPO, the Proposed Transaction is expected to close in the second quarter of 2016.

About GWR Global Water Resources Corp.
The Company was incorporated in British Columbia to acquire shares of U.S. based GWRI and to actively participate in the management, business and operations of GWRI through its representation on the board of directors of GWRI and its shared management of GWRI. GWRI is a water resources company located in Phoenix, Arizona, that owns and operates regulated water, wastewater and recycled water utilities in the metropolitan Phoenix area.

Cautionary Note Regarding Forward-Looking Statements
This press release includes certain forward-looking statements. These forward looking statements include, but are not limited to our plans, objectives, expectations and intentions, and other statements contained in this release including the completion and potential effects of the transactions described herein, the future payment of dividends by USCo, the size and timing of the U.S. IPO, and the refinancing of USCo's tax-exempt bonds at reduced interest rates or at all, that are not historical facts as well as statements identified by words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", or the negative of these terms, or other words of similar meaning. These statements are based on our current beliefs or expectations and are inherently subject to significant uncertainties and changes in circumstances, many of which are beyond our control. Actual results may differ materially from these expectations due to changes in global political, economic, business, competitive, market and regulatory factors and other factors discussed under the heading "Risk Factors" in the Company's most recent Annual Information Form. We undertake no obligation to publicly update any forward-looking statement, except as required by law, whether as a result of new information, future developments or otherwise.

SOURCE GWR Global Water Resources Corp.

Laura Scutaru, Investor Relations, Tel: [phone], Email: [email protected], www.gwresources.com