KIK Custom Products, to be acquired by Caxton-Iseman Capital for C$804 million

KIK Custom Products, to be acquired by Caxton-Iseman Capital for C$804 million

KCP Income Fund, parent of KIK Custom Products, to be acquired by Caxton-Iseman Capital for C$804 million

KCP Income Fund (the "Fund" or "KCP") (TSX: KCP.UN) and Caxton-Iseman Capital, Inc. today announced that KCP has entered into a definitive agreement with an acquisition vehicle organized by Caxton-Iseman providing for the acquisition by Caxton-Iseman of all of the assets of KCP for a total acquisition cost of C$804 million. Immediately after completion of the acquisition the units of KCP will be redeemed for $10.00 per unit in cash. That value represents a 25.0% premium to the March 30, 2007 closing price, a 27.6% premium to the 10-day volume weighted average trading price, and a 35.1% premium to the trading price for KCP units immediately prior to the November 24, 2006 announcement that it would undertake a strategic process.

      The transaction is subject to the approval of the Fund unitholders (two-third approval and majority of minority), the receipt of regulatory approvals and other customary closing conditions. Closing of the transaction is scheduled to occur in June, 2007, unless extended in accordance with the agreement. A circular describing the proposed transaction will be mailed to Fund unitholders for a unitholder meeting (anticipated to be held in early June, 2007) to consider the transaction.

      KCP unitholders will continue to receive distributions for all months ending prior to the month in which closing of the transaction occurs. If closing occurs other than on a month end, KCP unitholders will also receive partial distributions for that month, provided that if closing occurs after the 15th day of the month, such partial distribution shall not exceed one half of the regular monthly distribution.

      The proposed transaction results from a strategic process initiated by KCP's board of trustees to identify and consider strategic alternatives available to the Fund to enhance unitholder value. Following the announcement of the Canadian federal government's intention to tax income trusts, KCP's board formed a special committee consisting of all independent trustees to oversee the strategic review process, and engaged TD Securities Inc. and Genuity Capital Markets to act as financial advisors. The process involved consideration of a full range of value enhancement alternatives and involved a significant number of interested parties.

      The board of trustees of KCP, on the recommendation of the special committee of independent trustees and having received fairness opinions from TD Securities Inc. and Genuity Capital Markets, has unanimously approved, and resolved to recommend that the Fund's unitholders approve, the proposed transaction.

      David Cynamon, the founder and CEO of KCP, has agreed to vote his units in favour of (and to sell such units into) the proposed transaction and will maintain a small ownership position in the Caxton-Iseman acquisition vehicle on the same basis as other Caxton-Iseman principals. Other members of KCP's management team will acquire a small stake in the Caxton-Iseman acquisition vehicle.

      James Arnett, Chairman of the special committee of the board, said: "After considering a wide variety of strategic alternatives and reviewing a range of initial transaction proposals from a number of interested parties, the special committee unanimously voted in favour of the proposed transaction. We feel that the present transaction ascribes full value to KCP's unique platform and leadership position in contract manufacturing and gives full credit for the company's growth opportunities. We believe this is an excellent outcome for unitholders."

      David Cynamon, Chief Executive Officer of KCP, said: "This transaction reflects the significant value that has been achieved through the vision, dedication and sheer hard work of KCP's extraordinary employees and executive team. This agreement is an ideal outcome for the process, as we will deliver immediate premium value to our unitholders in the form of cash."

      Frederick J. Iseman, Managing Partner of Caxton-Iseman, said: "KCP's management team has built an impressive company in two important sectors. From its roots as an acquiror of bleach manufacturers, KCP has transformed itself into North America's premier contract manufacturer, producing great products for many of the world's top consumer products companies and retailers. We look forward to working with KCP's outstanding management team to continue to build the company."

      Caxton-Iseman has received a commitment from J.P. Morgan Securities Inc., Credit Suisse and UBS to provide debt financing for the transaction.

      In connection with the transaction, KIK Acquisition Company, a wholly owned subsidiary of the Fund, anticipates commencing a consent solicitation to amend the terms of its exchangeable unsecured subordinated debentures (TSX:KCC.DB.U) to provide for an early redemption date. The acquisition agreement includes a non-solicitation covenant by KCP and related provisions customary for transactions of the nature proposed.

      TD Securities Inc. and Genuity Capital Markets are financial advisors to the KCP board in connection with the transaction. Heenan Blaikie LLP is legal advisor for the special committee, and Goodmans LLP is legal advisor for KCP. Caxton-Iseman's financial advisors with respect to the transaction are UBS Investment Bank and Atlas Strategic Advisors, LLC, and its legal advisors are Paul, Weiss, Rifkind, Wharton & Garrison LLP and Blake, Cassels and Graydon LLP.

      About KCP Income Fund

      KCP, through its operating subsidiaries KIK Holdco Company and KIK Operating Partnership, is one of North America's largest custom manufacturers of consumer products in the laundry, household cleaners, personal care, over-the-counter medicated and pharmaceutical categories, with 19 integrated manufacturing facilities and 4 Kem Krest distribution centers strategically located throughout North America. KCP's product lines include Laundry, Household Cleaners, Personal Care, OTC Medicated and Pharmaceutical, all supported by KCP's in-house technical expertise and value-added services. KCP produces leading consumer products for Fortune 500 companies including Albertsons, Colgate-Palmolive, Dial, Johnson & Johnson, Kroger, Loblaws, L'Oreal, Procter & Gamble, Safeway, SC Johnson, Sysco, Target, Unilever, Walgreens, and Wal-Mart.

      The Fund provides unitholders with monthly cash distributions. Trust units are listed on the Toronto Stock Exchange under the symbol KCP.UN.

      About Caxton-Iseman

      Caxton-Iseman Capital, Inc. is a New York-based private equity firm. Its portfolio companies include Ply Gem Industries, Inc., a manufacturer of vinyl and aluminum building products; Buffets, Inc., the largest buffet restaurant chain in the U.S.; Electrograph Systems, Inc., a leading national distributor of display technology solutions; Valley National Gases Incorporated, a leading packager and distributor of gases, welding equipment and supplies, propane and fire protection equipment; American Residential Services, LLC, a leading provider of HVAC and plumbing services; and Prodigy Health Group, Inc., a rapidly expanding health care services company. Caxton-Iseman's companies have combined revenues of approximately US$5 billion, EBITDA of approximately US$500 million and 75,000 employees. The firm's investment vehicles have available capital in excess of US$2 billion.