TORONTO, July 16,
2024 /CNW/ - Cliffside Capital Ltd.
("Cliffside" or the "Company") (TSXV: CEP) and
Cliffside Ltd. (the "Purchaser") announce today that they
have entered into an arrangement agreement (the "Arrangement
Agreement") with CFLP Limited Partnership ("CFLP") and
LC Asset Management Corporation ("LC Asset Management").
Pursuant to the Arrangement Agreement, the Purchaser will acquire
all of the issued and outstanding common shares (the "Common
Shares") in the capital of Cliffside from their holders
("Shareholders") by way of a statutory plan of arrangement
(the "Arrangement") for consideration of $0.10 per Common Share (the "Cash
Consideration"), other than Common Shares held by certain
shareholders of Cliffside ("Share Electing Shareholders")
that validly elect to receive common shares in the capital of the
Purchaser ("Purchaser Shares") in exchange for their Common
Shares ("Share Consideration" and, collectively with the
Cash Consideration, the "Consideration").
Upon completion of the Arrangement, Cliffside will be a
privately-held company.
Concurrently with its entry into the Arrangement Agreement and
to fund the Cash Consideration payable on closing of the
Arrangement: (i) the Purchaser has entered into a subscription
agreement with CFLP, pursuant to which CFLP will subscribe for the
number of Purchaser Shares for an aggregate subscription price of
up to $4.1 million; and (ii) CFLP has
entered into a subscription agreement in favour of the Company with
Michael Stein, a director of
Cliffside, pursuant to which Michael
Stein has agreed, subject to the terms and conditions set
out therein, to subscribe for units of CFLP for an aggregate
purchase price of up to $4.1
million.
The Arrangement Agreement was the result of a comprehensive
review of strategic alternatives and a negotiation process that was
conducted at arm's length with the supervision and involvement of a
committee of independent directors of Cliffside (the
"Independent Committee"), as advised by external legal and
financial advisors. The Independent Committee was appointed by the
board of directors of the Company (the "Board") to, among
other matters, review the potential transaction and potential
alternatives and consider the Company's best interests and the
implications to Shareholders and other stakeholders.
Board Approval
The Board, with Steve Malone and
Michael Stein (the "Conflicted
Directors") declaring their conflicts of interest and
abstaining from voting, unanimously approved the Arrangement
following receipt of the unanimous recommendation of the
Independent Committee. The Board unanimously, with the Conflicted
Directors abstaining from voting, recommends that Shareholders vote
in favour of the Arrangement.
The Company intends to call and hold an annual and special
meeting of Shareholders in September
2024 (the "Meeting"), where the Arrangement will be
considered and voted upon by Shareholders of record.
In making their respective determinations, the Board and the
Independent Committee considered, among other factors, the fairness
opinion of Raymond James Ltd. ("Raymond
James") to the effect that, as of July 16, 2024, subject to the assumptions,
limitations and qualifications contained therein, the Share
Consideration to be received pursuant to the Arrangement is fair,
from a financial point of view to the Share Electing Shareholders
(other than those persons whose votes on the Arrangement are
required to be excluded pursuant to MI 61-101 (as defined below)
and the Cash Consideration to be received pursuant to the
Arrangement is fair, from a financial point of view, to the
Shareholders receiving Cash Consideration.
Transaction Details
As part of the Arrangement, following the payment of the Cash
Consideration and prior to the issuance of the Share Consideration,
the Common Shares will be consolidated on the basis of one
post-consolidation Common Share for each 1,000 pre-consolidation
Common Shares (the "Share Consolidation").
The aggregate purchase price payable by the Purchaser under the
Arrangement is expected to be approximately $9,726,666.70 million, comprised of: (i)
Cash Consideration of up to approximately $4.1 million; and (ii) Share Consideration
consisting of approximately 56,283 Purchaser Shares with an
aggregate value of approximately $5,628,376.20. The Purchaser Shares will be
issued on a post-Share Consolidation basis at a value of
$100 per Purchaser Share, being a
value equal to $0.10 per Common Share
on a pre-Share Consolidation basis. The foregoing anticipated
purchase price composition is based on the assumption that Share
Electing Shareholders will exchange an aggregate of 56,283,762
pre-Share Consolidation Common Shares for Share Consideration,
representing approximately 57.9% of the issued and outstanding
pre-Share Consolidation Common Shares, and that all other
Shareholders will receive Cash Consideration.
Completion of the Arrangement is subject to the approval of: (i)
at least two-thirds of the votes cast by Shareholders, voting as a
single class; and (ii) a simple majority of the votes cast by
Shareholders (excluding Common Shares required to be excluded
pursuant to Multilateral Instrument 61-101 - Protection of
Minority Security Holders in Special Transactions ("MI
61-101"). The Arrangement is also subject to customary closing
conditions, including the receipt of court and regulatory
approvals, customary non-solicitation covenants subject to
"fiduciary out" provisions and a right to match in favour of
the Purchaser, and customary covenants regarding the conduct of the
Company's business prior to the closing of the Arrangement.
All of the directors of Cliffside and certain Shareholders (the
"Supporting Shareholders"), collectively holding an
aggregate of approximately 76% of the outstanding Common Shares,
have entered into voting support agreements with the Company, the
Purchaser and CFLP pursuant to which they have agreed to vote their
Common Shares in favour of the Arrangement and, with respect to
certain Shareholders holding approximately 57.9% of the Common
Shares, have agreed to elect to receive Share Consideration in
exchange for their Common Shares. Excluding all Common Shares
required to be excluded pursuant to MI 61-101, the Supporting
Shareholders hold approximately 66% of the remaining Common
Shares.
On completion of the Arrangement, the asset management agreement
dated July 1, 2016 between Cliffside
and LC Asset Management will be terminated and of no further force
or effect and LC Asset Management will be dissolved.
Following completion of the Arrangement, the Company will cause
the Common Shares to cease to be listed on the TSX Venture Exchange
(the "TSXV") and intends to submit an application to cease
to be a reporting issuer under applicable Canadian securities
laws.
The foregoing summary is qualified in its entirety by the
provisions of the Arrangement Agreement, a copy of which, together
with the voting support agreements, will be filed on SEDAR+ at
www.sedarplus.ca.
Early Warning Disclosure
Prior to the closing of the Arrangement, the Purchaser holds no
Common Shares. On closing of the Arrangement, the Purchaser will
acquire 97,266,670 Common Shares, being 100% the issued and
outstanding Common Shares of Cliffside. Further information
may be obtained by contacting Praveen Gupta, Chief Financial
Officer of Cliffside, at (647) 776-5810 or
pgupta@cliffsidecapital.ca.
Advisors
Raymond James is acting as
financial advisor to the Independent Committee. Gardiner Roberts
LLP is acting as legal advisor to the Independent Committee.
Bennett Jones LLP is acting as
legal advisor to Cliffside.
About Cliffside
Cliffside is focused on investing in strategic partnerships with
parties who have specialized expertise and a proven track record in
originating and serving loans and similar types of financial
assets. Cliffside's strategy is to generate revenue as an investor,
affording its shareholders an opportunity to invest in the growing
alternative lending sector with the potential for attractive. For
more information, see Cliffside's filings on SEDAR+ at
www.sedarplus.ca.
About Cliffside Ltd.
The Purchaser was incorporated on May 27,
2024 pursuant to the laws of the Province of Ontario. The Purchaser was incorporated for
the sole purpose of completing the Arrangement and is controlled by
Steve Malone, a director and Chief
Executive Officer of Cliffside. Its head office is located at 11
Church Street, Suite 200, Toronto,
Ontario, M5E 1W1.
About CFLP
CFLP is a limited partnership formed on June 25, 2024 under the laws of the Province of
Ontario for the sole purpose of
funding the Cash Consideration payable on completion of the
Arrangement. Upon completion of the Arrangement, CFLP will be
the majority shareholder of the Purchaser and is controlled by
Michael Stein, a director of
Cliffside. Its head office is located at 11 Church Street, Suite
200, Toronto, Ontario, M5E
1W1.
About LC Asset Management
LC Asset Management was incorporated on March 17, 2016 pursuant to the laws of the
Province of Ontario. LC Asset
Management is controlled by Steve
Malone and Michael Stein and
provides certain management services to Cliffside. Its head office
is located at 11 Church Street, Suite 200, Toronto, Ontario, M5E 1W1.
Additional Information about the Arrangement
Further information regarding the Arrangement, the Arrangement
Agreement and the Meeting, including a copy of Raymond James' fairness opinion, will be
included in the management information circular expected to be
mailed to Shareholders of record in connection with the Meeting in
August 2024. Copies of the proxy
materials in respect of the Meeting will be available on the
Company's SEDAR+ profile at www.sedarplus.ca.
Cautionary Notes
This press release contains certain forward-looking
statements and forward-looking information, as defined under
applicable Canadian securities laws (collectively,
"forward-looking statements"). In some cases, but not
necessarily in all cases, forward-looking statements can be
identified by the use of forward-looking terminology such as
"will", "intend", "anticipate", "could", "should", "may", "might",
"expect", "estimate", "forecast", "plan", "potential", "project",
"assume", "contemplate", "believe", "shall", "scheduled", and
similar terms and, within this press release, include, without
limitation, any statements (express or implied) respecting: the
rationale of the Board for entering into the Arrangement Agreement;
the composition of the Consideration payable on completion of the
Arrangement; the expected benefits of the Arrangement; the holding
of the Meeting; the anticipated timing, steps and completion of the
Arrangement, including the Share Consolidation; approval of the
Arrangement by the Shareholders at the Meeting; approval of the
TSXV; the satisfaction of the conditions precedent to the
Arrangement; timing, receipt and anticipated effects of Shareholder
and other approvals of the Arrangement; the anticipated delisting
of the Common Shares from the TSXV; and the Company ceasing to be a
reporting issuer under applicable Canadian securities laws. In
addition, any statements that refer to expectations, projections or
other characterizations of future events or circumstances are
forward-looking statements.
Forward-looking statements are not historical facts, nor
guarantees or assurances of future performance but instead
represent management's current beliefs, expectations, estimates and
projections regarding future events and operating performance.
Forward-looking statements are necessarily based on a number of
opinions, assumptions and estimates that, while considered
reasonable by the Company as of the date of this release, are
subject to inherent uncertainties, risks and changes in
circumstances that may differ materially from those contemplated by
the forward-looking statements, including, without limitation that:
Share Electing Shareholders will elect to receive Share
Consideration in the amounts anticipated; the Arrangement
will be completed on the terms currently contemplated or at all;
the Arrangement will be completed in accordance with the timing
currently expected; all conditions to the completion of the
Arrangement will be satisfied or waived; and the Arrangement
Agreement will not be terminated prior to the completion of the
Arrangement.
Important factors that could cause actual results to differ,
possibly materially, from those indicated by the forward-looking
statements include, but are not limited to: actual elections by
Share Electing Shareholders to receive Cash Consideration or Share
Consideration; the possibility that the proposed Arrangement will
not be completed on the terms and conditions currently contemplated
or at all; the possibility of the Arrangement Agreement being
terminated in certain circumstances; the ability of the Board to
consider and approve a superior proposal for the Company; and other
risk factors identified under "Risk Factors" in the Company's
latest annual information form and management's discussion and
analysis for the year ended December 31,
2023, in the Company's management's discussion and analysis
for the period ended March 31, 2024,
and in other periodic filings that the Company has made and may
make in the future with the securities commissions or similar
regulatory authorities in Canada,
all of which are available under the Company's SEDAR+ profile
at www.sedarplus.ca. These factors are not intended
to represent a complete list of the factors that could affect the
Company. However, such risk factors should be considered
carefully.
Readers, therefore, should not place undue reliance on any
such forward-looking statements. Further, these forward-looking
statements are made as of the date of this press release and,
except as expressly required by applicable law, Cliffside disclaims
any intention and undertakes no obligation to update or revise any
forward-looking statements whether as a result of new information,
future events or otherwise, except as required under applicable
Canadian securities laws. All of the forward-looking statements
contained in this release are expressly qualified by the foregoing
cautionary statements.
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. Neither the TSXV nor its Regulation
Service Provider (as that term is defined in the policies of the
TSXV) accepts responsibility for the adequacy or accuracy of this
release.
SOURCE Cliffside Capital Ltd.