iWeb Enters Merger Agreement to Privatize the Corporation

(Ping! Zine Web Hosting Magazine) – Following the execution of a non-binding proposal on March 4, 2011, iWeb Group Inc. (“iWeb”), a global provider of Internet hosting services and IT infrastructure, announces today that it has entered into a merger agreement (the “Merger Agreement”) with 7807201 Canada Inc. (the “Purchaser”) and 7807210 Canada Inc. (“Newco”), two corporations controlled directly or indirectly by Novacap Technologies III, L.P., Caisse de dépôt et placement du Québec and an investment vehicle affiliated with Bank Street Capital Partners and certain of their affiliates, in order to effect an amalgamation of iWeb with Newco (the “Amalgamation”).

Pursuant to the Amalgamation, each holder (the “Shareholders”) of common shares of iWeb, except for part of or all of the common shares held by the Principal Shareholders (as defined below) and FONDACTION (as defined below), will receive one redeemable preferred share (an “Amalco Redeemable Share”) of the amalgamated company (“Amalco”) for each common share held immediately prior to the Amalgamation. Each Amalco Redeemable Share will be redeemed immediately upon the Amalgamation for a cash consideration of $1.50 (the “Redemption Price”). The Redemption Price to be received by the Shareholders under the Amalgamation represents a premium of 45.6% and of 31.5% to the volume weighted average trading price of the common shares on the TSX Venture Exchange (the “TSXV”) for the respective 60 and 20 days ending on March 3, 2011, being the trading day prior to the announcement of the non-binding proposal review process. The transaction, which values iWeb’s equity at approximately $47 million, will be implemented by way of an amalgamation under the Canada Business Corporations Act and is subject to customary conditions precedent, including approval of the Amalgamation by the Shareholders.

Under the Merger Agreement, iWeb has agreed not to solicit competing acquisition proposals but has retained the ability to consider unsolicited acquisition proposals which the board of directors of iWeb (the “Board”) believes, in the exercise of its fiduciary duties, constitute or could reasonably be expected to lead to a superior proposal and to make a change of recommendation in the event of a superior proposal, subject to the Purchaser’s right to match, and payment of a break-fee of $3 million. Expenses of the Purchaser incurred in connection with the Amalgamation (not to exceed $700,000) shall be paid by iWeb should, among others, the required number of votes of the Shareholders (as more fully described below) not be obtained.

Éric Chouinard, Martin Leclair and Robert Brouillette (the “Principal Shareholders”) holding, in the aggregate, 18,321,349 common shares, representing approximately 63.48% of the currently outstanding common shares of iWeb, have agreed, pursuant to support and voting agreements with the Purchaser, to irrevocably support and vote in favour of the Amalgamation. Pursuant to their support and voting agreements, the Principal Shareholders cannot agree to or contemplate any competing transaction until 120 days from the date of the Merger Agreement in accordance with its terms.

Various other Shareholders of the public holding, in the aggregate, 2,311,161 common shares, representing approximately 8,01% of the currently outstanding common shares, have also agreed, pursuant to support and voting agreements with the Purchaser, to irrevocably support and vote in favour of the Amalgamation. Pursuant to their support and voting agreements, such shareholders cannot agree to or contemplate any competing transaction until 120 days from the date of the Merger Agreement in accordance with its terms.

Finally, Messrs. Martin Cauchon and Daniel Leclair, members of the Board’s special committee (the “Special Committee”) holding, in the aggregate 133,000 common shares of iWeb, have agreed, pursuant to support and voting agreements with the Purchaser, to support and vote in favour of the Amalgamation. Pursuant to their support and voting agreements, such shareholders cannot agree to or contemplate any competing transaction unless the Merger Agreement is terminated or if the Board approves or recommends or publicly proposes to or publicly states that it intends to approve or recommend another acquisition proposal.

As part of the transactions contemplated in the Merger Agreement, the Principal Shareholders and Fondaction, le Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l’emploi (“Fondaction”) will exchange, immediately prior to the Amalgamation, part or all, as the case may be, of their common shares of iWeb for shares of the Purchaser.

The Amalgamation was considered at length by the Board and was approved unanimously thereby (with Messrs. Chouinard, Leclair and Brouillette abstaining) following the report and a favourable unanimous recommendation of the Special Committee comprised of three independent members of the Board, namely René Bousquet (Chair), Martin Cauchon and Daniel Leclair. In doing so, the Board determined that, without consideration as to the interests of the Principal Shareholders and Fondaction, the Amalgamation is fair to the remaining Shareholders (the “Public Shareholders”), and in the best interests of iWeb, and authorized the submission of the Amalgamation to the Shareholders for their approval. The Board has also determined unanimously (with interested directors abstaining) to recommend to the Public Shareholders that they vote in favour of the Amalgamation.

In making their respective determinations, the Board and the Special Committee considered, among other things, a fairness opinion from ModelCom Inc. (“ModelCom”) to the effect that, as of May 3, 2011, and based upon and subject to the limitations, assumptions and qualifications contained therein, the Redemption Price is fair, from a financial point of view, to the Public Shareholders. A copy of the fairness opinion will be included in the management information circular that will be sent to the Shareholders in connection with the special meeting of Shareholders to consider the Amalgamation which is expected to take place in Montréal on June 13, 2011. Copies of the management information circular, the Merger Agreement, the amalgamation agreement, the support and voting agreements and certain related documents will be filed with Canadian securities regulators and will be available on SEDAR at www.sedar.com as part of iWeb public filings. The management information circular in connection with the special meeting of Shareholders to consider the Amalgamation is expected to be mailed to Shareholders in the coming days.

Furthermore, the Board considered the following reasons for its recommendation:

Significant Premium

The Redemption Price to be received by the Shareholders under the Amalgamation represents a premium of 25% over the closing price of $1.20 per share on March 3, 2011, and a premium of 45.6% and 31.5% respectively, over the 60-day and 20-day volume weighted average trading price on the TSXV for the periods ended on March 3, 2011, being the last trading day prior to iWeb’s announcement of its receipt of a non-binding offer from Novacap.

Extensive Review Process

In the course of the last months, the Board and iWeb’s management initiated a number of actions to identify and assess strategic and financial options available to iWeb for delivering its business plan and maximizing shareholder value. To assist iWeb in this process, the Board retained the services of DH Capital Partners Inc. During its mandate, the Special Committee reviewed each of these options in light of the proposed Amalgamation.

Realize Immediate Value and Liquidity and All-Cash Consideration

The all-cash consideration offered in the Amalgamation permits the Shareholders to immediately realize fair value without incurring the inherent risks of iWeb’s business plan or the risks of the market volatility inherent in technology stocks generally. iWeb’s shares are thinly traded and the Amalgamation provides immediate liquidity to all Shareholders.

Fairness Opinion

ModelCom provided the Board and the Special Committee with a written opinion to the effect that, as of May 3, 2011, and based upon and subject to the limitations, assumptions and qualifications contained therein, the consideration to be received by the Shareholders under the Merger Agreement is fair, from a financial point of view, to the Public Shareholders.

Strong Support from Shareholders

Shareholders which beneficially own, directly or indirectly, or exercise control or direction over, in the aggregate, 20,826,310 common shares of iWeb as at May 3, 2011, which represent approximately 72.16% of the outstanding common shares of iWeb, have expressed their intention, under the support and voting agreements, to vote in favour of the Amalgamation. These Shareholders include members of iWeb’s management, its founders, members of the Special Committee and various Public Shareholders.

Reasonableness of the Merger Agreement

The terms and conditions of the Merger Agreement were reviewed by the members of the Special Committee in consultation with its legal advisors and were determined to be fair and reasonable in the particular circumstances of the Amalgamation. Such terms and conditions are the result of arm’s length negotiations between iWeb and the Purchaser. The Special Committee has been kept informed of the negotiations at all times and had the opportunity to provide its comments to the parties.

Low Execution Risk

There are no regulatory issues which are expected to arise in connection with the Amalgamation and prevent its completion. The Amalgamation is not subject to further due diligence on the part of the Purchaser.

Ability to Respond to Superior Proposals

Under the Merger Agreement, the Board maintains the ability to consider and respond, in certain circumstances and in accordance with its fiduciary duties, to unsolicited proposals that would be more favourable to Shareholders from a financial point of view than the Amalgamation. The termination fee payable to the Purchaser in certain circumstances involving superior proposals is, in the Board’s judgment, reasonable in the context of break-up fees negotiated in other transactions and the particular circumstances of the Amalgamation.

BCF LLP is acting as legal counsel to iWeb and Jarry Bazinet is acting as legal counsel to the Special Committee. Fasken Martineau DuMoulin LLP is acting as legal counsel to the Purchaser. Gowling, Lafleur, Henderson LLP is also acting as legal counsel to Caisse de dépôt et placement du Québec and Goodwin Procter LLP is acting as legal counsel to BSCP IW Holdings, LLC. ModelCom is acting as financial advisor to the Special Committee.

Subject to receiving the required Shareholder approval and the satisfaction of the other customary conditions, it is anticipated that the Amalgamation, if approved by the Shareholders, will be completed shortly after the special meeting of Shareholders and that full payment of $1.50 per share will be effected at that time.

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