TORONTO, May 8, 2013 /CNW/ - Sprott Inc. ("Sprott")
(TSX:SII) and Sprott Resource Lending Corp. (the "Company" or
"Sprott Resource Lending") (TSX:SIL) (NYSE MKT:SILU) are pleased to
announce that they have entered into a definitive agreement (the
"Arrangement Agreement") pursuant to which Sprott will acquire, by
way of a court-approved plan of arrangement under the Canada
Business Corporations Act ("CBCA"), all of the issued and
outstanding common shares of Sprott Resource Lending.
Pursuant to the terms of the Arrangement
Agreement, each Sprott Resource Lending shareholder (other than
Sprott) will receive 0.5 of a Sprott common share and C$0.15 in cash for each Sprott Resource Lending
common share held, implying an offer of C$1.65 per share based on Sprott's closing price
on the Toronto Stock Exchange ("TSX") on May
7, 2013. The offer represents approximately a 20.4% premium
to the Company's 20-day volume weighted average price on the TSX
for the period ending May 7, 2013 and
a 11.5% premium to the Company's closing price on the TSX on
May 7, 2013.
"This acquisition provides Sprott with more than
C$220 million in new capital which
will be used to seed and launch new initiatives, while continuing
to grow its private lending business through a new lending
partnership expected to launch later this year," said Jack Lee, Lead Director of Sprott. "This
transaction will both support Sprott's growth in international
markets and provide the company with a strong balance sheet to
pursue various growth opportunities."
"We are pleased to enter into this agreement
with Sprott," said Murray Sinclair,
Chairman of Sprott Resource Lending's Board of Directors. "This
transaction provides our shareholders with a premium to the current
share price and gives them an opportunity to participate in the
growth of a larger, more diversified company with significant
upside to the resource sector."
Based on the currently issued and outstanding
shares of the Company as of the date of this announcement, the
number of Sprott common shares to be issued as part of the
consideration will be approximately 69 million shares, representing
approximately 39.0% of Sprott's currently issued and outstanding
shares on a non-diluted basis.
The transaction values the Company's equity at
approximately C$243 million on a
non-diluted basis. Following completion of the transaction, Sprott
Resource Lending shareholders will own approximately 28.1% of
Sprott's outstanding common shares on a non-diluted basis, based on
their current shareholdings in Sprott Resource Lending.
The Board of Directors of Sprott Resource
Lending formed a Special Committee of independent directors to
consider the Arrangement Agreement, the terms of which were
negotiated at arm's length with Sprott. Cormark Securities Inc.
("Cormark"), independent valuator to the Special Committee of
Sprott Resource Lending, provided an oral opinion to the effect
that, based upon and subject to certain assumptions, limitations
and qualifications, the consideration is fair, from a financial
point of view, to the shareholders of Sprott Resource Lending
(other than Sprott). In addition, under the supervision of the
Special Committee, Cormark has prepared an independent valuation
and has provided an oral opinion that, based upon and subject to
the assumptions, limitations and qualifications in such opinion, as
at May 8, 2013, the fair market value
of the Sprott Resource Lending shares is in the range of
C$1.47 to C$1.57 per share. The
transaction is a "business combination" for the purposes of
Multilateral Instrument 61-101 - Protection of Minority Security
Holders in Special Transactions.
The Board of Directors of Sprott Resource
Lending, based on the recommendation of the Special Committee, is
unanimously recommending that Sprott Resource Lending shareholders
vote in favour of the transaction.
Other Aspects of the Transaction
Directors and officers of the Company as well as
certain shareholders of the Company, including Dundee Corporation
and certain associates of Sprott, have entered into voting support
agreements with Sprott pursuant to which each such party has agreed
to vote in favour of the transaction. Such locked-up shares
represent approximately 25.4% of the common shares of the Company
outstanding on a non-diluted basis.
Completion of the transaction is subject to a
number of customary conditions, including: approval of the plan of
arrangement by the Ontario Superior Court of Justice, which will
also serve as the basis for the exemption from the registration
requirements of the United States Securities Act of 1933, as
amended (the "US Securities Act"); a favourable vote of at least
(i) 66 2/3% of the holders of Sprott Resource Lending common shares
and (ii) a simple majority of the votes cast by minority
shareholders of Sprott Resource Lending, voted at an annual and
special meeting of shareholders expected to be held in late
June 2013; and the receipt of all
necessary regulatory and stock exchange approvals. The Arrangement
Agreement includes a customary non-solicitation clause and right to
match covenants and provides for the payment of a C$6.8 million break fee to Sprott, and expense
reimbursement to Sprott and the Company under certain
circumstances. Sprott common shares to be received by shareholders
of the Company pursuant to the plan of arrangement will be listed
solely on the TSX and will not be registered under the US
Securities Act but will be offered under an exemption to the
registration requirements thereunder and under applicable state
"blue sky" laws in the United
States.
As of the date hereof, Eric Sprott owns or has control or direction
over 94,241,270 Sprott common shares representing approximately
52.7% of the issued and outstanding Sprott common shares. Mr.
Sprott does not own or control any shares of Sprott Resouce
Lending. After giving effect to the transaction, Mr. Sprott's
position in Sprott will be diluted to approximately 38.0%. As
Sprott is expected to issue in excess of 25.0% of its currently
issued and outstanding common shares under the transaction, the
approval of the issuance of the Sprott common shares by Sprott's
shareholders is required under subsection 611(c) of the TSX Company
Manual. As contemplated by subsection 604(d) of the TSX Company
Manual, Sprott has satisfied this requirement by obtaining the
written consent of Mr. Sprott based on his ownership or control or
direction over more than 50.0% of Sprott's common shares.
In addition, Rick
Rule, an insider of each of Sprott and Sprott Resources
Lending, owns or has control or direction over 19,267,500 Sprott
common shares representing approximately 10.8% of the issued and
outstanding Sprott common shares and 12,455,613 Sprott Resource
Lending common shares representing approximately 8.5% of the
Company's issued and outstanding common shares. After giving effect
to the transaction, Mr. Rule will own or have control or direction
over 25,495,307 Sprott common shares representing approximately
10.3% of Sprott's issued and outstanding common shares. Further,
assuming completion of the transaction, insiders of Sprott (other
than Mr. Rule), who own common shares of the Company, will be
issued an aggregate of approximately 2.1 million Sprott common
shares.
Completion of the transaction is currently
expected to occur in early July 2013.
The Board of Directors of Sprott Resource Lending has approved the
payment of a regular quarterly dividend of C$0.015 per common share in respect of the
Company's first fiscal quarter for payment on June 7, 2013 to shareholders of record on
May 21, 2013 and hereby notifies the
Company's shareholders that it will designate the full amount of
such dividend as an "eligible dividend" for purposes of the
Income Tax Act (Canada).
Further, Sprott, in accordance with its dividend policy and subject
to applicable law, expects to issue a regular quarterly dividend in
respect of Sprott's second fiscal quarter, in due course, following
the completion of the transaction.
The terms and conditions of the Arrangement
Agreement will be disclosed in more detail in Sprott Resource
Lending's management information circular, which is expected to be
filed and mailed to Sprott Resource Lending shareholders in late
May 2013.
Details regarding these and other terms of the
transaction are set out in the Arrangement Agreement, which will be
available on SEDAR at www.sedar.com.
Advisors and Legal Counsel
Heenan Blaikie LLP is acting as legal counsel to
Sprott. Stikeman Elliott LLP is acting as legal counsel to Sprott
Resource Lending. Cormark Securities is acting as financial advisor
to the Special Committee of the Board of Directors of Sprott
Resource Lending.
Conference Call
A conference call is scheduled for May 9, 2013 at 10:00 a.m.
EDT. The Toronto area
call-in number is (647) 427-7450 and the toll-free call-in number
is (888) 231-8191. The passcode is 63855481#. The call will also be
webcast at www.sprottinc.com and www.newswire.ca.
About Sprott Inc.
Sprott is a leading independent asset manager
dedicated to achieving superior returns for its clients over the
long term. Sprott currently operates through four business units:
Sprott Asset Management LP, Sprott Private Wealth LP, Sprott
Consulting LP, and Sprott U.S. Holdings Inc. Sprott Asset
Management is the investment manager of the Sprott family of mutual
funds and hedge funds and discretionary managed accounts; Sprott
Private Wealth provides wealth management services to high net
worth individuals; and Sprott Consulting provides management,
administrative and consulting services to other companies. Sprott
U.S. Holdings Inc. includes Sprott Global Resource Investments Ltd,
Sprott Asset Management USA Inc.,
and Resource Capital Investments Corporation. Sprott is
headquartered in Toronto, Canada,
and is listed on the Toronto Stock Exchange under the symbol "SII".
For more information on Sprott, please visit www.sprottinc.com.
About Sprott Resource Lending Corp.
Sprott Resource Lending (www.sprottlending.com)
specializes in lending to resource companies on a global basis.
Headquartered in Toronto, the
Company seeks to generate income from lending activities as well as
the upside potential of bonus arrangements with borrowers generally
tied to the underlying property or shares of the borrower. Pursuant
to a management services agreement and a partnership agreement,
Sprott Lending Consulting Limited Partnership ("SLCLP") provides
Sprott Resource Lending day to day business management as well as
other management and administrative services. SLCLP is a wholly
owned subsidiary of Sprott (www.sprottinc.com), the parent of
Sprott Asset Management LP (www.sprott.com). For more information
about Sprott Resource Lending, please visit SEDAR
(www.sedar.com).
Caution Regarding Forward-Looking Statements
and Information
This document includes certain statements that
constitute "forward-looking statements" and "forward-looking
information" within the meaning of applicable securities laws
(collectively, "forward-looking statements"). These statements
include statements regarding Sprott's or Sprott Resource Lending's
intent, or the beliefs or current expectations of Sprott's or
Sprott Resource Lending's officers and directors. Such statements
are typically identified by words such as "believe", "anticipate",
"estimate", "project", "intend", "expect", "may", "will", "plan",
"should", "would", "contemplate", "possible", "attempts", "seeks"
and similar expressions. Forward-looking statements may relate to
Sprott's or Sprott Resource Lending's future outlook and
anticipated events or results.
By their very nature, forward-looking statements
involve numerous assumptions, inherent risks and uncertainties,
both general and specific, and the risk that predictions and other
forward-looking statements will not prove to be accurate. Do not
unduly rely on forward-looking statements, as a number of important
factors, many of which are beyond Sprott's or Sprott Resource
Lending's control, could cause actual results to differ materially
from the estimates and intentions expressed in such forward-looking
statements. These factors include, but are not limited to: (a) the
inability of Sprott Resource Lending to obtain (i) approval of the
transaction by the court and the other regulatory approvals, and
(ii) approval of the transaction by the shareholders at an annual
and special meeting of Sprott Resource Lending shareholders; and
(b) the occurrence of any other event, change or other circumstance
that could give rise to the termination of the Arrangement
Agreement, or the delay of consummation of the transaction or
failure to complete the arrangement for any other reason.
Forward-looking statements speak only as of the
date those statements are made. Except as required by applicable
law, neither Sprott nor Sprott Resource Lending assume any
obligation to update, or to publicly announce the results of any
change to, any forward-looking statement contained herein to
reflect actual results, future events or developments, changes in
assumptions or changes in other factors affecting the
forward-looking statements.
SOURCE Sprott Inc.