Bid Undervalues the Company
Offer Expires June
13, 2023; Shareholders Need Not Take Any Action At this
Time
TORONTO, Feb. 27,
2023 /CNW/ - The Special Committee of the Board of
Directors of Canaccord Genuity Group Inc. (TSX: CF) (the "Company")
acknowledges the formal commencement this morning of the take-over
bid from certain members of the Company's management team (the
"Management Group") to acquire all the common shares of the Company
not already owned by the Management Group (the "Offer") at a price
of $11.25 per share (the "Offer
Price").
As stated in the Company's January 9,
2023 press release, the Special Committee does not support
the Offer at a price of $11.25 per
share and intends to recommend to the Board that shareholders not
tender to the Offer.
In making its recommendation, the Special Committee is relying
in part on the independent valuation provided by RBC Capital
Markets ("RBC") that, as of February 15,
2023, and subject to the assumptions, limitations and
qualifications set forth in RBC's written valuation, the fair
market value of the common shares of the Company is in the range of
$12.75 to $15.75 per common share, or between 13% and 40%
more than the current Offer Price. RBC has also delivered its
opinion that, as of February 15,
2023, the consideration under the Offer is inadequate from a
financial point of view to the holders of the common shares of the
Company other than the Management Group. The Special Committee
believes there is greater value in the Company than reflected in
the Offer Price based on the RBC formal valuation.
Since January 9, 2023, the Special
Committee has engaged in discussions with the Management Group in
an attempt to negotiate an improvement to the Offer, however, the
Special Committee and the Management Group have not come to an
agreement. As a result, the Special Committee has engaged
Barclays Capital Canada Inc. to commence an alternative transaction
process (the "Alternative Transaction Process") to explore
potential strategic alternatives to enhance shareholder value.
While the Special Committee will provide its formal
recommendation to the Board and the Company will formally respond
in detail regarding the reasons for the Special Committee's
recommendation in its directors' circular (the "Directors'
Circular") to be filed within the next 15 days, there are several
points the Special Committee would like to bring to the attention
of shareholders immediately.
- Exploring Alternative Transactions – The Special Committee
believes that the immediate cash value offered to shareholders
under the Offer is less favourable than the potential value that
might otherwise result from other alternatives reasonably available
to the Company in the circumstances, including remaining as a
stand-alone entity and pursuing the Company's existing strategy, in
each case taking into consideration the potential rewards, risks,
timelines and uncertainties associated with those other
alternatives.
- Management's Comments on the RBC Valuation – The Special
Committee noted the Management Group's comments on the RBC formal
valuation, many of which had been previously discussed with, and
considered by, RBC in the preparation of its formal valuation.
RBC is a highly credible investment bank
qualified to provide an independent valuation under Multilateral
Instrument 61-101 – Protection of Minority Security Holders in
Special Transactions ("MI 61-101").
After considering RBC's views, the Special
Committee disagrees with the Management Group's comments regarding
RBC's valuation. A detailed response to these comments will be
provided in the Directors' Circular.
The Management Group states that the RBC
valuation range of $12.75 to
$15.75 should be adjusted downwards
to $6.17 to $9.58 based, in part, on adjustments made by the
Management Group to reflect what it believes would be realized on a
liquidation of each of the Company's underlying businesses.
However, RBC's valuation clearly states that it is based on a going
concern sum-of the parts approach, not a liquidation of the Company
through the sale of each of its underlying businesses.
In addition, in response to questions from the
Special Committee, the Management Group stated that it does not
believe that this lower range represents an accurate value range in
respect of the Company. The Management Group states in its press
release that the Offer Price represents senior management's view
that the Company is worth more on an en bloc consolidated
basis than a sum of the parts liquidation sale of each of the
reported business segments of the Company. However, the
Management Group does not specify its view on what an appropriate
valuation range would be. The Special Committee has accordingly
relied on the RBC formal valuation in formulating its
recommendation.
Finally, the Special Committee notes that the
share price has, within the last 12 months, significantly exceeded
the Offer Price, as well as being within RBC's valuation
range.
- Raymond James Fairness Opinion – The Special Committee notes
that the Management Group engaged Raymond James Ltd. to provide a
fairness opinion in respect of the Offer. Shareholders should note
that unlike RBC, Raymond James Ltd. was not engaged at the request
of the Special Committee and is not independent from the Management
Group and its fairness opinion is not independent financial advice,
nor does it constitute a formal valuation by an independent
valuator as required under MI 61-101. In addition, the Raymond
James Ltd. report contains no financial analysis underlying the
fairness opinion and is therefore of little to no value to
shareholders in assessing the Offer compared to the detailed
financial analysis contained in RBC's formal valuation and
inadequacy opinion.
Other Information
The Management Group's Offer must remain open for acceptance for
a minimum of 105 days from today, or June
13, 2023, so shareholders need not take any action at this
time. Shareholders are cautioned that there can be no assurance
that the Offer or any other transaction will be completed. In
particular, the Special Committee acknowledges that the Management
Group has stated that it collectively owns approximately 21.3% of
the outstanding common shares of the Company and is not interested
in supporting any transaction that may emerge from the Alternative
Transaction Process or any other alternative transaction. In
addition, a significant shareholder of the Company holding
approximately 8.8% of the outstanding common shares has entered
into an irrevocable lock-up agreement in support of the Offer that
requires it to, among other things, tender its common shares to the
Offer and vote against any transaction that may emerge from the
Alternative Transaction Process or any other alternative
transaction. The Management Group's position and the irrevocable
lock-up agreement may impact the Alternative Transaction Process,
including the availability of any alternatives that may emerge from
the Alternative Transaction Process.
The Offer does not contemplate the acquisition of the Company's
outstanding preferred shares and the Offer is not conditional on
same.
The Special Committee of independent directors is comprised of
Gillian H. Denham (Chair of the
Special Committee), Charles N.
Bralver, Dipesh J. Shah and
Sally J. Tennant. The Special
Committee has retained Davies Ward Phillips & Vineberg LLP, as
its independent legal counsel, and has engaged RBC Capital Markets,
as its independent financial advisor to provide financial advice
and a formal valuation of the Company's common shares as required
under MI 61-101.
ABOUT CANACCORD GENUITY GROUP
INC.
Through its principal subsidiaries, the Company is a leading
independent, full-service financial services firm, with operations
in two principal segments of the securities industry: wealth
management and capital markets. Since its establishment in 1950,
the Company has been driven by an unwavering commitment to building
lasting client relationships. We achieve this by generating value
for our individual, institutional and corporate clients through
comprehensive investment solutions, brokerage services and
investment banking services. The Company has wealth management
offices located in Canada, the UK,
Guernsey, Jersey, the Isle of Man and Australia. The Company's international capital
markets division operates in North
America, UK & Europe,
Asia, Australia, and the Middle East.
Canaccord Genuity Group Inc. is publicly traded under the symbol
CF on the TSX.
CAUTION REGARDING FORWARD-LOOKING
STATEMENTS
This press release may contain "forward-looking information" as
defined under applicable securities laws ("forward-looking
statements"). These statements relate to future events or future
performance and reflect management's expectations, beliefs, plans,
estimates, intentions and similar statements concerning anticipated
future events, results, circumstances, performance or expectations
that are not historical facts, including: business and economic
conditions; the Company's growth, results of operations,
performance and business prospects and opportunities; the Company's
value as a stand-alone entity pursuant to its existing strategy;
the availability of alternative transactions that may emerge from
the Alternative Transaction Process or otherwise; and the impact of
the Management Group's position and the significant shareholder's
irrevocable lock-up agreement on the Alternative Transaction
Process. Such forward- looking statements reflect management's
current beliefs and are based on information currently available to
management. In some cases, forward-looking statements can be
identified by terminology such as "may", "will", "should",
"expect", "plan", "anticipate", "believe", "estimate", "predict",
"potential", "continue", "target", "intend", "could" or the
negative of these terms or other comparable terminology. By their
very nature, forward-looking statements involve inherent risks and
uncertainties, both general and specific, and a number of factors
could cause actual events or results to differ materially from the
results discussed in the forward-looking statements.
In evaluating these statements, readers should specifically
consider various factors that may cause actual results to differ
materially from any forward-looking statement. These factors
include, but are not limited to, whether any alternative
transaction to the Offer may emerge, pursuant to the Alternative
Transaction Process or otherwise, and the Company's ability to
consummate such alternatives; the possibility that the Management
Group may not be able to obtain or satisfy, in a timely manner or
otherwise, the minimum tender of common shares, or the required
regulatory approval and other conditions necessary to complete the
Offer; market and general economic conditions (including slowing
economic growth, inflation and rising interest rates); the dynamic
nature of the financial services industry; the potential continued
impacts of the coronavirus (COVID-19) pandemic on the Company's
business operations and on the global economy; the impact of the
war in Ukraine and the resulting
humanitarian crisis on the global economy, in particular its effect
on global oil, agriculture and commodity markets; and the risks and
uncertainties discussed from time to time in the Company's interim
condensed and annual consolidated financial statements, its annual
report and its annual information form ("AIF") filed on
www.sedar.com as well as the factors discussed in the sections
entitled "Risk Management" and "Risk Factors" in the AIF, which
include market, liquidity, credit, operational, legal and
regulatory risks.
Although the forward-looking statements contained in this press
release are based upon assumptions that the Company believes are
reasonable, there can be no assurance that actual results will be
consistent with these forward-looking statements. The
forward-looking statements contained in this press release are made
as of the date of this press release and should not be relied upon
as representing the Company's views as of any date subsequent to
the date of this press release. Except as may be required by
applicable law, the Company does not undertake, and specifically
disclaims, any obligation to update or revise any forward-looking
statements, whether as a result of new information, further
developments or otherwise.
SOURCE Canaccord Genuity Group Inc.