The Western Investment Company of Canada Limited (TSXV: WI)
("
Western" or the "
Corporation"),
today announced that companies affiliated with Paul Rivett have
offered to invest at least $20 million into the Corporation (the
"
Transaction") to transform Western into a
property and casualty insurance and investment holding company.
Completion of the Transaction is subject to the approval of the TSX
Venture Exchange (the "
TSXV"), shareholder
approval and various other conditions. The terms of the Transaction
are set forth in a definitive agreement dated March 21, 2024 (the
"
Definitive Agreement") that also provide for a
potential upsize to $23 million and for a number of other corporate
transactions described below. The transactions as contemplated
constitute a Change of Business under the policies of the TSXV.
"There are several fundamental reasons for our investment in
Western, but by far the most important factor in our decision was
the team at Western," said Paul Rivett. "After actively searching
for a premier team and platform we believe that Western, its
insurance subsidiary Fortress, along with the skills and experience
of Scott Tannas and Shafeen Mawani, are the right combination for
us to build an insurance and investment holding company in Canada.
Together, our goal over the long-term is to compound book value per
share for Western shareholders through prudent organic growth of
the existing insurance book of business, the pursuit of accretive
acquisitions that generate additional investable float, and
investing over the long-term on a total return basis."
Business and Capital Allocation Strategy Upon
the successful closing of the Transaction (the
"Closing"), Western will focus its efforts toward
building an insurance and investment holding company. The initial
priorities will be to:
- Consolidate Western’s ownership of Fortress Insurance Company
("Fortress") to at least 51%;
- Grow the Fortress platform to $100 million per annum in written
premiums by 2028 through a combination of prudent organic growth
and accretive acquisitions; and
- Continue managing Western’s non-insurance holdings as long-term
investments.
Rights OfferingUpon Closing of the Transaction,
Western intends to undertake a rights offering ("Rights
Offering") to existing eligible Western shareholders by
way of a rights offering circular. Under the proposed terms of the
Rights Offering, each eligible shareholder as of the record date
for such offering will be issued two and a half (2 ½) rights
("Rights") for each common share of the
Corporation ("Common Share") held on the Record
Date, entitling that holder to purchase one (1) Single Voting Share
(as defined herein) for each whole one (1) Right held at a price of
$0.40 per Single Voting Share for a period of 60 days. The Rights
are intended to provide existing Western shareholders with a
mechanism to ensure their economic interest in the Corporation is
not diluted.
Western has made application to the TSXV to have the Rights
listed on the TSXV. The Rights will be offered to registered
shareholders resident in a province or territory of Canada. The
Rights will not be offered to U.S. persons or sold into the United
States. Shareholders who fully exercise their Rights may be
entitled to subscribe for additional Single Voting Shares, if
available, as a result of unexercised Rights prior to expiry of the
Rights Offering.
The definitive terms of the Rights Offering, including
the proposed record date, will be set forth in a subsequent news
release. The Rights Offering (including the subscription price and
any listing of the Rights on the TSXV) is subject to applicable
regulatory approval, including approval of the TSXV.
Executive Team Upon Closing, the Western team
will consist of the following individuals:
- Paul Rivett to be appointed to
President and Chief Executive Officer;
- Scott Tannas to be appointed to
Chairman of the Board of Directors for a 5-year term with the
option to renew by mutual agreement;
- Stacey Cross to remain as Chief
Financial Officer; and
- Shafeen Mawani to remain as Chief
Operating Officer in addition to his continuing role as President
and CEO of Fortress.
It is anticipated that the aforementioned executive team, plus
the supplemental services provided by Mr. Rivett’s investment
management company, Tevir Capital Corp. ("TCC"),
will be sufficient to operate Western for the next 12-24 months,
barring any material change to Western’s business.
The previously planned retirement of Chairman Jim Dinning from
the Board of Directors will also take effect at Closing. Mr.
Dinning will remain committed to continuing as a supportive
shareholder and advisor to Western.
"The proposed Transaction is something the entire Board crafted
together with Paul because his vision aligns with the same
aspirations we have for our business and our shareholders," said
Scott Tannas, President and Chief Executive Officer of Western. "By
combining Paul’s track record of success in value investing, and
the strength of Western’s insurance business, we believe this
Transaction represents a significant leap forward in the ability of
Western to create value for our shareholders. I would also like to
thank Jim Dinning and Western's other directors for their support
and tireless efforts on the Board in the lead up to this
Transaction, and their years of dedicated service to Western’s
shareholders and stakeholders."
Paul RivettPaul Rivett currently serves as
founder and president of TCC and Chairman of the Board of Directors
for Chorus Aviation and GreenFirst Forest Products. Previously, he
joined Fairfax Financial Holdings Limited
("Fairfax") in 2003 and served as President
between 2013 and 2020. Mr. Rivett led Fairfax’s corporate
development which included debt and equity financings, mergers and
acquisitions, as well as prominent investment and
insurance/reinsurance transactions. He attracted proprietary
insurance and non-insurance investments with a commitment to a
long-term, decentralized approach to investing.
The Definitive Agreement which is an Arm's Length Transaction
contemplates that TCC or its affiliates will invest $20,000,000
into Western in exchange for 50,000,000 multiple voting shares
("MVS") with an over-allotment option for TCC (or
an approved designate) to purchase up to an additional 7,500,000
MVS for $3,000,000, and that Western will undertake a series of
transactions including the Rights Offering, an opportunity for
Western shareholders to exchange their Common Shares for MVS (the
"Share Exchange"), and in the discretion of
management, a stock consolidation as described below. The
Transaction will involve amending the articles of the Corporation
to provide for 2 classes of common shares, the current Common
Shares ("Single Voting Shares"), which provide for
1 vote per share and which will be renamed Subordinate Voting
Shares following the Shareholders Meeting, and the MVS, which will
provide for 10 votes per share.
The terms of the Transaction are summarized below. Unless
otherwise stated, all amounts are expressed in Canadian
dollars.
|
TCC |
Western Shareholders |
Investment into Western |
$20,000,000 |
|
Multiple Voting Shares ("MVS") issued - 10
votes/share |
50,000,000 |
|
Existing Common Shares ("Single Voting Shares" or
"SVS") - 1 vote/share |
|
30,207,756 |
Optional conversion rights for Western shareholders (SVS can be
converted to MVS on 1:1 basis) |
|
1:1 |
Rights to be issued to Western shareholders |
|
2.5 @ $0.40per share |
Additional capital from Rights (if 100% exercised) |
|
$30,200,000 |
Equity Ownership Post Transaction (% of total
shares outstanding) |
|
|
No Rights exercised by Western shareholders |
62.3% |
37.7% |
All Rights exercised by Western shareholders |
32.1% |
67.9% |
|
Western Shareholder ProtectionsWestern
shareholders benefit from several protective mechanisms in the
proposed Transaction:
- Dual class share structure modeled
on the Canadian Coalition for Good Governance Dual Class Share
Policy.
- Western shareholders may, at their
discretion, convert their SVS shares into MVS shares on a one for
one basis.
- TCC’s MVS shares (along with all MVS
shares) will be restricted from sale without 6 months' prior
written notice.
- In order to obtain the ability to
trade the MVS freely, TCC (along with any other MVS holders) must
give Western 6 months written notice of the intent to convert MVS
to SVS and the MVS must then, after the 6 months’ holding period,
be converted to freely tradeable SVS of Western.
- Western intends to undertake the
Rights Offering (as described below) to existing eligible Western
shareholders.
- TCC is restricted under securities
rules from privatizing Western without the approval of a majority
of the minority vote of the common shareholders.
Board of DirectorsAt the meeting of Western
shareholders to approve the Transaction (the "Shareholders
Meeting"), Western will propose increasing the size of the
Board of Directors to nine members, that three members of the
current Board of Directors of Western (including Scott Tannas) will
remain, and six new members (including Paul Rivett) will be
appointed to the Board of Directors.
Board members resigning at the Closing or at the next AGM will
be allowed to retain their options until expiry.
TCC Management ContractTCC will provide Western
with access to legal, financial, business development and other
expert and clerical assistance for a fixed fee of $500,000 per
year.
Stock ConsolidationAt the Shareholders Meeting,
Western will also put forward a proposal for shareholders to
approve a consolidation of the Single Voting Shares and the
Multiple Voting Shares on a basis of up to 1 for 10. Any decision
to implement a stock consolidation would remain at the discretion
of Western's board of directors.
Share ExchangeThe definitive terms and
procedures for the Share Exchange (including timing and shareholder
eligibility) will be set forth in a subsequent news release. The
Share Exchange is subject to applicable regulatory approval,
including approval of the TSXV.
Conditions PrecedentThe Transaction is subject
to customary closing conditions, including approval by Western’s
shareholders and regulatory approvals, including the TSXV, and the
condition that Western has obtained sufficient additional shares in
Fortress to reach a minimum aggregate holding of 51% of Fortress’
shares outstanding. Western intends to seek a waiver from the
sponsorship requirements under TSXV policies for a Change of
Business transaction.
Acquisition of Additional Fortress SharesIn
connection with Western acquiring additional shares of Fortress,
Western plans to offer the existing Fortress shareholders the
option of receiving cash or Single Voting Shares at a price of
$0.40 per share which could result in the issuance of up to an
additional 30,000,000 Single Voting Shares.
Webcast - Join Scott Tannas and Paul Rivett as they
discuss the Proposed TransactionMarch 27, 2024 at
9:00 AM Mountain Time, 11:00 AM Eastern TimeOn Wednesday,
March 27, 2024, please join Scott Tannas, President and CEO of
Western, and Paul Rivett, Founder and President of TCC, on a
webcast where they will discuss the proposed Transaction and their
vision for Western’s strategy going forward. Participants of the
live event will also have the opportunity to ask questions.
The webcast will take place at 11:00 AM Eastern Time, 10:00 AM
Central Time, 9:00 AM Mountain Time, and 8:00 AM Pacific Time.
Participants can access the webcast using the link below:
Webcast Link
Following the webcast a recording of the event will be available
at the link above.
Shareholders Meeting and ApprovalsShareholder
approval is required for a number of the transactions described in
this news release, including: TCC becoming a "control person" of
Western, the amendment of Western's articles to create the Multiple
Voting Shares and to re-classify the existing Common Shares as
Single Voting Shares, the election of directors in conjunction with
the Transaction, and the stock consolidation. Each of the
resolutions will require approval by two-thirds (66 2/3%) of the
votes cast by Western shareholders at the meeting (other than the
resolution to appoint directors, which will require the customary
50% majority of votes cast at the meeting). The Transaction will
also be subject to the approval of a majority of the minority of
the votes cast by Western shareholders at the Shareholders Meeting,
excluding any shares owned or controlled by TCC, Paul Rivett or
Scott Tannas. The date and time of the Shareholders Meeting will be
announced in coming weeks, at which time meeting materials will be
sent to Western shareholders.
Board of Directors' Recommendations The
Transaction has been unanimously approved by the board of directors
of both Western and TCC.
Investor RelationsWestern also announced today
that it has retained Market Climber Inc. ("Market
Climber") for services that may fall within the scope of
the TSXV Corporate Finance Policy 3.4 - Investor Relations,
Promotional and Market-Making Activities (the
"Services"). Under the terms of the agreement,
Western will pay Market Climber a monthly fee of $7,500 for the
Services, which includes shareholder engagement, corporate
communications, investor relations and assistance with proxy
mailing and Shareholders Meeting support. The agreement commenced
on February 7, 2024 and will terminate following the Shareholders
Meeting, unless extended by mutual agreement for a 12 month term
(terminable on 30 days' notice). At the time of this announcement,
neither Market Climber nor its principals have any direct or
indirect interest in Western's securities.
Market Climber is an experienced investor relations firm with an
extensive track record of unlocking value through a comprehensive
approach to investor relations. Market Climber has won numerous IR
awards including IR Magazine's 2022 award for Best Investor
Relations. Market Climber has served clients on every major North
American exchange, across a wide range of industries, with
enterprise values from under $10 million to more than $10
billion.
Definitive AgreementThe Definitive Agreement
contains a number of customary representations, warranties and
conditions and termination rights. A copy of the Definitive
Agreement will be available on SEDAR+ at www.sedarplus.ca.
Trading HaltTrading of the Common Shares will
remain halted pending receipt and review of acceptable
documentation pursuant to Section 2.2 of TSXV Policy 5.2 regarding
a Change of Business transaction.
About The Western Investment Company of
Canada Limited Western is a unique publicly traded,
private equity company founded by a group of successful Western
Canadian businesspeople, and dedicated to building and maintaining
ownership in successful Western Canadian companies, and helping
them to grow. Western's shares are traded on the TSX Venture
Exchange under the symbol WI.
For more information on Western, please visit its website at
www.winv.ca.
To add yourself to our email news alert subscription please
visit this link.
CONTACT INFORMATION - The Western Investment Company of Canada
Limited
Scott Tannas President and Chief Executive Officer (403)
652-2663 stannas@winv.ca
Advisories
Completion of the Transaction is subject to a number of
conditions, including but not limited to, TSXV acceptance and if
applicable, disinterested shareholder approval. Where applicable,
the Transaction cannot close until the required shareholder
approval is obtained. There can be no assurance that the
Transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the
management information circular to be prepared in connection with
the Transaction, any information released or received with respect
to the Transaction may not be accurate or complete and should not
be relied upon. Trading in the securities Western should be
considered highly speculative.
The TSXV has in no way passed upon the merits of the proposed
transaction and has neither approved nor disapproved the contents
of this news release.
This document contains forward-looking statements. More
particularly, this document contains statements concerning: the
completion of the transactions contemplated by the Definitive
Agreement, including the completion of the Transaction and the
other proposed transactions described in this news release, and the
appointment of the new CEO and additional directors; the use of
proceeds from the Transaction; the future strategy and focus for
Western; and future acquisitions and growth opportunities. Readers
are cautioned that the foregoing list of factors should not be
construed as exhaustive.
The forward-looking statements are based on certain key
expectations and assumptions made by Western, including
expectations and assumptions concerning the ability of Western to
successfully implement its strategic plans and initiatives, the
timing of receipt of required shareholder and regulatory approvals
(including TSXV approval) and third party consents and the
satisfaction of other conditions to the completion of the
Transactions.
Although Western believes that the expectations and assumptions
on which the forward-looking statements made by Western are based
are reasonable, undue reliance should not be placed on the
forward-looking statements because no assurance can be provided
that they will prove to be correct. Since forward-looking
statements address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated
due to a number of factors and risks. These include, but are not
limited to, risks that required shareholder, TSXV, regulatory and
third party approvals and consents are not obtained on terms
satisfactory to the parties within the timelines provided for in
the Definitive Agreement, or at all, and risks that other
conditions to the completion of the Transactions are not satisfied
on the timelines set forth in the Definitive Agreement or at all,
the ability of management to execute its business strategy, and the
impact of general economic conditions in Canada and the United
States. A description of additional assumptions used to develop
such forward-looking information and a description of risk factors
that may cause actual results to differ materially from
forward-looking information can be found in Western's disclosure
documents on the SEDAR+ website at www.sedarplus.ca.
The forward-looking statements contained in this news release
are made as of the date hereof and Western undertakes no obligation
to update publicly or revise any forward-looking statements or
information, whether as a result of new information, future events
or otherwise, unless so required by applicable securities laws.
This news release also contains financial outlook information
("FOFI") about prospective results of operations
and book value, which are subject to the same assumptions, risk
factors, limitations, and qualifications as set forth in the above
paragraphs. FOFI contained in this news release was made as of the
date of this news release to provide information about management's
current expectations and plans relating to the future. Readers are
cautioned that such information may not be appropriate for any
other purpose. Western disclaims any intention or obligation to
update or revise any FOFI contained in this news release, whether
as a result of new information, future events or otherwise, except
as required by applicable law.
This news release shall not constitute an offer to sell or the
solicitation of an offer to buy securities in the United States,
nor shall there be any sale of the securities in any jurisdiction
in which such offer, solicitation or sale would be unlawful. The
Rights and underlying Single Voting Shares and the Multiple Voting
Shares being offered have not been, nor will they be, registered
under the 1933 Act or under any U.S. state securities laws, and may
not be offered or sold in the United States absent registration or
an applicable exemption from the registration requirements of the
1933 Act, as amended, and applicable state securities laws.
"Neither the TSX Venture Exchange nor its Regulatory
Services Provider (as that term is defined in policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release."
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