NEW YORK, July 14, 2021 /CNW/ -- (NASDAQ:
MDCA) – The Special Committee of MDC Partners Inc.
("MDC" or the "Company") responded today to highly misleading,
inaccurate and false statements made by Indaba Capital ("Indaba")
in a press release dated July 13,
2021, concerning the business combination (the
"Transaction") between MDC and Stagwell Media LP ("Stagwell").
"Indaba has grossly misrepresented the facts contained in the
MDC proxy statement, seemingly to further Indaba's extremely risky
gambit of threatening to scuttle this highly attractive business
combination as an attempt to extract more value," said Irwin Simon, Chairman of the Special Committee
of the MDC Board of Directors. "In reality, Indaba is simply wrong
on most of the facts and its irresponsible and ungrounded
assertions are putting this value-creating deal at risk and placing
MDC shareholders and employees at both Stagwell and MDC in harm's
way."
Indaba's press release falsely asserts, for example, that the
Stagwell parties and executives are receiving more than 180 million
shares in the Transaction because of an "adjustment of 12 million
shares … [as] compensation expense for 'brand employees of
Stagwell' … [and] another approximately seven million shares to be
issued to Stagwell managers." In fact, as the pro forma financial
statements in the prospectus makes plain, these 19 million shares
are being granted by Stagwell from the 180 million shares
that Stagwell will receive in the transaction and are not, in any
way, in addition to the 180 million shares. And so, while Indaba
breathlessly proclaims that Stagwell is receiving "almost
$100 million" more than previously
disclosed, Indaba is simply wrong, and its bold, but false,
assertions threaten the completion of the Transaction on entirely
specious grounds.
So too with the balance of Indaba's assertions and the
accompanying feigned shock. For example:
- Indaba claims that "Stagwell on the other hand did not increase
its 2021 EBITDA guidance." This is false. Both the MDC proxy
materials and a separate press release yesterday from Stagwell make
plain that Stagwell has increased its 2021 EBITDA expectations.
Stagwell's press release correctly states that "Stagwell has
provided updated financial guidance to MDC and the Special
Committee of its Board of Directors reflecting improved performance
for the Stagwell business through the end of 2021. … The quarter's
significant out-performance and exit momentum are the drivers for
the improved guidance that [Stagwell has] provided to MDC, which is
included in the supplement to the proxy statement/prospectus filed
today by MDC."
- The Stagwell special dividend is not new, has been fully
disclosed since the announcement of the transaction in December 2020 and was accounted for in the
Special Committee's assessment of relative contributions and value.
MDC has always analyzed the transaction with full knowledge of the
amount of net debt that Stagwell would contribute to the combined
company. The transaction will, in fact, materially de-lever MDC,
excluding deferred acquisition costs and minority investments, and
all of MDC's disclosures regarding pro forma leverage have been
fully accurate. If Stagwell did not distribute cash to its owners
prior to the Transaction, Stagwell's contributions to the combined
business would be even greater and it would seek a larger equity
stake in the combined company.
- Indaba wrongly asserts that the non-controlling interest is a
leveraging event. This liability did not appear on Stagwell's
March 31 balance sheet because
Stagwell did not have this arrangement on March 31. Importantly, the cash flows associated
with this redeemable non-controlling interest were not included in
the DCF valuation of Stagwell by the Special Committee. Moreover,
this new contractual arrangement is one the Special Committee
believes adds significant value to the combined business because it
will ultimately result in the outright ownership by New MDC of one
of Stagwell's most attractive businesses. Because this arrangement
is expected to be in place prior to the close of the Transaction,
it is now included on the [pro forma] balance sheet.
- Indaba continues to falsely assert that "a majority of the
identified directors for the newly combined entity appear to have
direct personal or professional overlap with Mr. Penn." That is
simply untrue. Seven of the nine board members will be independent
– independent not only of MDC but, more importantly of Stagwell and
its affiliates
"The Special Committee and I recognize that Indaba would like a
greater stake in the combined business," continued Mr. Simon.
"Shareholders should rest assured that the Special Committee fought
hard to get as much from Stagwell as we could. But, we have a
counter-party and there is a limit to what Stagwell is willing to
do. Based on MDC's current market price and the amended deal terms,
Stagwell is now contributing its business at an implied valuation
that is essentially in-line with MDC's. We are at that limit."
Mr. Simon concluded, "The July 26
vote is whether to accept this deal – one the Special Committee
believes is very much in the interest of shareholders – or return
to a standalone MDC which will remain highly levered. There is no
other transaction with Stagwell or anyone else. Indaba's false
allegations and misrepresentations cannot change the reality that
this transaction is terrific for MDC shareholders and represents
their best chance to have a significant stake in a scaled company
with a stronger balance sheet that operates in some of the fastest
growing segments of the digital marketing and advertising
sector."
The Special Committee and MDC Board urge MDC shareholders to
vote "FOR" the Transaction.
The Special Meeting of Shareholders to vote on the Transaction
(the "Special Meeting") will be held on Monday, July 26, 2021 at 11 AM ET, and can be accessed virtually at
https://web.lumiagm.com/401933402. The Company will extend
the scheduled proxy cut-off time for the Special Meeting and accept
proxies and voting instructions, including electronic voting, until
two business days prior to the time of the Special Meeting.
About MDC Partners Inc.
MDC Partners is one of the most influential marketing and
communications networks in the world. As "The Place Where Great
Talent Lives," MDC Partners is celebrated for its innovative
advertising, public relations, branding, digital, social and event
marketing agency partners, which are responsible for some of the
most memorable and effective campaigns for the world's most
respected brands. By leveraging technology, data analytics,
insights and strategic consulting solutions, MDC Partners drives
creative excellence, business growth and measurable return on
marketing investment for over 1,700 clients worldwide. For more
information about MDC Partners and its partner firms, visit our
website at mdc-partners.com, sign up for investor-related
updates and alerts, and follow us on LinkedIn.
Cautionary Statement Regarding Forward-Looking
Statements
This communication may contain certain forward-looking
statements (collectively, "forward-looking statements") within the
meaning of Section 27A of the U.S. Securities Act of 1933, as
amended and Section 21E of the U.S. Exchange Act and the United
States Private Securities Litigation Reform Act of 1995, as
amended, and "forward-looking information" under applicable
Canadian securities laws. Statements in this document that are not
historical facts, including statements about MDC's or Stagwell's
beliefs and expectations and recent business and economic trends,
constitute forward-looking statements. Words such as "estimate,"
"project," "target," "predict," "believe," "expect," "anticipate,"
"potential," "create," "intend," "could," "should," "would," "may,"
"foresee," "plan," "will," "guidance," "look," "outlook," "future,"
"assume," "forecast," "focus," "continue," or the negative of such
terms or other variations thereof and terms of similar substance
used in connection with any discussion of current plans, estimates
and projections are subject to change based on a number of factors,
including those outlined in this section. Such forward-looking
statements may include, but are not limited to, statements related
to: future financial performance and the future prospects of the
respective businesses and operations of MDC, Stagwell and the
combined company; information concerning the Transaction; the
anticipated benefits of the Transaction; the likelihood of the
Transaction being completed; the anticipated outcome of the
Transaction; the tax impact of the Transaction on MDC and
shareholders of MDC; the timing of the shareholder meeting to
approve the Transaction (the "Special Meeting"); the shareholder
approvals required for the Transaction; regulatory and stock
exchange approval of the Transaction; and the timing of the
implementation of the Transaction. A number of important factors
could cause actual results to differ materially from those
contained in any forward-looking statement, including the risks
identified in our filings with the Securities Exchange Commission
(the "SEC").
These forward-looking statements are subject to various risks
and uncertainties, many of which are outside MDC's control.
Important factors that could cause actual results and expectations
to differ materially from those indicated by such forward-looking
statements include, without limitation, the risks and uncertainties
set forth under the section entitled "Risk Factors" in the
registration statement on Form S-4 filed on February 8, 2021, and as amended on March 29, 2021, April 21,
2021 and April 30, 2021 (the
"Form S-4"), under the section entitled "Risk Factors" in the proxy
statement/prospectus on Form 424B3 filed on May 10, 2021 (together with the Form S-4, the
"Proxy Statement/Prospectus"), under the caption "Risk Factors" in
MDC's Annual Report on Form 10-K for the year-ended December 31, 2020 under Item 1A and under the
caption "Risk Factors" in MDC's Quarterly Report on Form 10-Q for
the quarter-ended March 31, 2021
under Item 1A. These and other risk factors include, but are not
limited to, the following:
- an inability to realize expected benefits of the Transaction or
the occurrence of difficulties in connection with the
Transaction;
- adverse tax consequences in connection with the Transaction for
MDC, its operations and its shareholders, that may differ from the
expectations of MDC or Stagwell, including that future changes in
tax law, potential increases to corporate tax rates in the United States and disagreements with the
tax authorities on MDC's determination of value and computations of
its tax attributes may result in increased tax costs;
- the occurrence of material Canadian federal income tax
(including material "emigration tax") as a result of the
Transaction;
- the impact of uncertainty associated with the Transaction on
MDC's and Stagwell's respective businesses;
- direct or indirect costs associated with the Transaction, which
could be greater than expected;
- the risk that a condition to completion of the Transaction may
not be satisfied and the Transaction may not be completed; and
- the risk of parties challenging the Transaction or the impact
of the Transaction on MDC's debt arrangements.
You can obtain copies of MDC's filings under its profile on
SEDAR at www.sedar.com, its profile on the SEC's website at
www.sec.gov or its website at www.mdc-partners.com. MDC does
not undertake any obligation to update any forward-looking
statements as a result of new information, future developments or
otherwise, except as expressly required by law. All forward-looking
statements in this communication are qualified in their entirety by
this cautionary statement.
Additional Information and Where to Find It
In connection with the Transaction, MDC and New MDC filed with
the SEC the Proxy Statement/Prospectus. This
communication is not a substitute for the Proxy
Statement/Prospectus or any other document MDC may file with the
SEC in connection with the Transaction.
INVESTORS AND SECURITYHOLDERS OF MDC ARE URGED TO READ CAREFULLY
THE PROXY STATEMENT/PROSPECTUS REGARDING THE TRANSACTION IN ITS
ENTIRETY (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) OR ANY
DOCUMENTS WHICH ARE INCORPORATED BY REFERENCE IN THE PROXY
STATEMENT/PROSPECTUS, BECAUSE THEY CONTAIN IMPORTANT INFORMATION
ABOUT THE TRANSACTION. You may obtain, free of charge, copies of
the Proxy Statement/Prospectus and other relevant documents filed
by MDC or New MDC with the SEC, at the SEC's website at
www.sec.gov. In addition, investors and securityholders are able to
obtain free copies of the Proxy Statement/Prospectus and other
relevant documents filed by MDC or New MDC with the SEC and from
MDC's website at http://www.mdc-partners.com.
The URLs in this announcement are intended to be inactive
textual references only. They are not intended to be active
hyperlinks to websites. The information on such websites, even if
it might be accessible through a hyperlink resulting from the URLs
or referenced herein, is not and shall not be deemed to be
incorporated into this announcement. No assurance or representation
is given as to the suitability or reliability for any purpose
whatsoever of any information on such websites.
No Offer or Solicitation
This communication does not constitute an offer to buy or
exchange, or the solicitation of an offer to sell or exchange, any
securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, sale or exchange would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. This communication is not
a substitute for any prospectus, proxy statement or any other
document that MDC or New MDC may file with the SEC in connection
with the Transaction. No money, securities or other consideration
is being solicited, and, if sent in response to the information
contained herein, will not be accepted.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of the U.S. Securities Act of
1933, as amended. The Transaction and distribution of this document
may be restricted by law in certain jurisdictions and persons into
whose possession any document or other information referred to
herein should inform themselves about and observe any such
restrictions. Any failure to comply with these restrictions
may constitute a violation of the securities laws of any such
jurisdiction. No offering of securities will be made directly or
indirectly, in or into any jurisdiction where to do so would be
inconsistent with the laws of such jurisdiction.
Participants in the Solicitation
MDC, New MDC and their respective directors and executive
officers and other members of management and employees, may be
deemed to be participants in the solicitation of proxies from MDC's
shareholders with respect to the approvals required to complete the
Transaction. More detailed information regarding the identity of
these potential participants, and any direct or indirect interests
they may have in the Transaction, by security holdings or
otherwise, is set forth in the Proxy Statement/Prospectus filed
with the SEC. Information regarding MDC's directors and executive
officers is set forth in the definitive proxy statement on Schedule
14A filed by MDC with the SEC on May 10,
2021, in the Annual Report on Form 10-K filed by MDC with
the SEC on March 16, 2021, as amended
on April 27, 2021 and in the
Quarterly Report on Form 10-Q filed by MDC with the SEC on
May 10, 2021. Additional
information regarding the interests of participants in the
solicitation of proxies in respect of the Special Meeting is
included in the Proxy Statement/Prospectus filed with the
SEC. These documents are available to the shareholders of MDC
free of charge from the SEC's website at www.sec.gov and from MDC's
website at www.mdc-partners.com.
You must not construe the contents of this document as legal,
tax, regulatory, financial, accounting or other advice, and you are
urged to consult with your own advisors with respect to legal, tax,
regulatory, financial, accounting and other consequences of the
Transaction, the suitability of the Transaction for you and other
relevant matters concerning the Transaction.
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SOURCE MDC Partners Inc.