Flint Corp. press release
Tuckamore Capital Shareholders Oppose the Proposed Management Buy-Out
TSX - Toronto Stock Exchange · Canada
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If the MBO is defeated, Access Holdings intends to propose a new slate of directors that will put forward a clear plan to create value while maintaining Tuckamore as a public company Access Holdings urges clients of Newport Private Wealth to direct their shares to be voted against the MBO www.VoteNOtuckamoreMBO.com
TORONTO, June 24, 2014/CNW/ - Access Holdings Management Company LLC ("Access Holdings" or "we"), with the support of other shareholders (including institutional shareholders, former directors, former CEOs of Tuckamore businesses, and shareholders holding shares through NewportPrivate Wealth) who have entered into voting and support agreements (collectively, the "Concerned Shareholders") and who together with Access Holdings own, control, manage or direct more than 5% of the outstanding common shares of Tuckamore Capital Management Inc. (the "Company" or "Tuckamore") (TSX: TX), urges fellow shareholders to protect their interests by voting no to the proposed MBOat a Special Meeting of Shareholders to be held on July 15, 2014(the "Meeting"). For additional details regarding the solicitation and the Concerned Shareholders, please see our information circular dated June 24, 2014("Circular") which has been filed today and is available at www.VoteNOtuckamoreMBO.com.
It is unacceptable that management of the Company, after years of destroying shareholder value, are now proposing to take for themselves the significant remaining value by opportunistically taking the Company private at a low-ball price of $0.75per share through a management-led buyout (the "MBO") sponsored by Birch Hill Equity Partners.
As detailed below, the proposed MBO:
Materially undervalues the Company Is a result of a seriously flawed process that is abusive to non-management shareholders Rewards failed management at the expense of shareholders Would result in substantially less value to shareholders than Access Holdings' plan to revitalize the Company
If the MBO is defeated, we intend to requisition a shareholder meeting, propose a new slate of directors, and execute a clear plan to maximize shareholder value. Details of our proposed slate of independent directors and value maximization plan are provided below. In summary:
Tuckamore is worth much more than $0.75per share
The independent valuation underpinning the proposed MBO is not reliable The independent valuation range of $0.60 to $0.81per share substantially understates Tuckamore's value by more than $120 million, or $1.25plus per share. We believe that with the right strategy and with proper management, Tuckamore can be worth more than $2.00per share. Among other things, the valuation:
_The Company's process was seriously flawed and abusive of non-management shareholders_
The Board approved the Company entering into an arrangement with Birch Hillwithout the benefit of a formal valuation because they said the share price was increasing and they wanted to get the deal to market, as per page 19 of the Tuckamore management circular _"…due to the sudden and significant increase in the market price of the Shares it was necessary to enter into an arrangement as soon as possible, which would not provide the Company enough time to obtain the receipt of a formal valuation prior to the entering of such an agreement." _ Directors made a recommendation in favor of the MBO before obtaining a formal valuation Directors agreed to unprecedented break fees No bidding process was conducted for the Company as a whole Parties who previously made proposals were rebuffed and not subsequently contacted when the MBO proposal was received No independent financial or legal advisors were engaged No committee of truly independent directors was struck to negotiate MBO terms on behalf of the non-management shareholders Several independent directors who voted to approve the MBO were newly-appointed and un-elected, with only one having any prior public company board experience Two of the "independent" directors who are key principals at NewportPrivate Wealth each regularly received $250,000per annum for the performance of management activities Tuckamore agreed to outlandish deal protections -- including a 10% break fee, no go-shop provision (despite the lack of a market canvas for alternate proposals), and a matching right to management; these protections were designed to prevent shareholders from receiving a superior proposal from another party and are egregious in the context of any transaction let alone an MBO The Board adopted a poison pill without shareholder approval and immediately prior to announcing the MBO, in another apparent (or transparent) attempt to disenfranchise non-management shareholders
_The Board and management have failed at overseeing and operating the business, while personally benefiting management_
Today, 6 of 7 Company holdings generate less earnings than they did prior to current Tuckamore management joining Many former operating company owners have left due to frustration with management History of inside dealings and an incestuous relationship between Tuckamore management and directors from Newport Private Wealth (which shares the same address as Tuckamore) Tuckamore director compensation, in particular as provided to Messrs Kinney and Brown, is greater than at most major Canadian corporations, and is over three times larger than the average cash compensation of directors for the five largest publically traded companies in North America Significant board turnover with 12 directors departing since Dean MacDonald'sarrival in December 2008, and their replacements resulting in a board with little independence and strong ties to management In spite of disappointing share price performance, certain Tuckamore directors affiliated with Newport Private Wealth paid themselves more than the Newportclients who own Tuckamore shares received from the performance of those shares over the same period The members of the senior management team participating in the MBO are apparently entitled to millions of dollars in "change of control" payments, despite themselves being the party acquiring control From January 2009when incumbent management joined to December 2013, Tuckamore's stock price dropped by more than 43% during a period in which the market increased by over 46% for a total return delta of 90% The total compensation for the top five managers at Tuckamore and Tuckamore's board of directors for the four year period ending in 2012 (2013 data not yet available), exceeded the average market cap of the Company for that period
Tuckamore's senior executives have mismanaged this business. Now they are proposing to reward themselves by buying it back on the cheap, along with their partners at Birch Hill. It is up to Tuckamore's non-management shareholders to make sure that doesn't happen. Vote no to the MBO.
We have a plan to revitalize the Company and increase shareholder value
Under our plan:
Former owners and key managers of the operating businesses have agreed to join a reconstituted Board of Directors to work together to reverse the years of damage under the current management team Current excessive Company overhead costs can likely be reduced by 50% We are prepared to have the Company refinance and deleverage the business on market-based terms, subject to approval of any transaction terms by an independent board of directors By not proposing to effect a change of control of the Company and continuing to operate the Company as a public company, our plan will allow shareholders to avoid losing the full benefit of the Company's $132 millionof tax losses We will consider alternative liquidity options for shareholders who seek to exit their investment
We urge our fellow shareholders to be the smart money here, reject the MBO, replace the board, and realize a better return on their investment.
The Concerned Shareholders have serious issues with the MBO announced on May 5th, 2014 and approved by the Tuckamore board of directors and entered into with insiders Dean MacDonald(a director and the Chief Executive Officer of Tuckamore) and Adrian Montgomery(the Chief Investment Officer of Tuckamore), and with the financial support of Birch HillEquity Partners. The MBO is abusive to non-management shareholders, and is the result of a fatally flawed process that failed to adequately represent the interests of minority shareholders. We believe that Tuckamore is worth much more than the $0.75offered under the MBO and that taking the Company private at this time is highly opportunistic and not in the interest of shareholders. We believe the board of directors of the Company did not exercise independent business judgment and did not give adequate regard to the interests of non-management shareholders.
"For years Tuckamore shareholders have been forced to live with a sub-optimal capital structure, excessive executive and board compensation, management's failure to manage corporate overhead costs, a lack of transparency, the absence of any real thesis or plan to create value, and share price underperformance relative to any index of peers and to Tuckamore's potential. The proposed terms and price of the MBO is a final insult to Tuckamore shareholders by both management and the board. We believe it is imperative that shareholders vote no to the MBO to protect their interests and the value of their investment. We also believe it is time for new leadership on Tuckamore's board who will unlock shareholder value by acting as independent fiduciaries, aligning the interests of management and shareholders, adopting corporate governance best practices, optimizing the investment portfolio with a new management team that has relevant private equity experience, and focusing relentlessly on improving operational performance and financial flexibility," said Kevin McAllister, Managing Partner of Access Holdings.
"We believe that our value creation plan can generate multiples of the current value offered and leave the company public to allow beleaguered shareholders to participate in future value creation potential. Doing so, however, will require a change to a board of directors and management at Tuckamore that in our opinion has spent the last five years putting their own interests ahead of shareholders," said Mr. McAllister.
"Birch Hill'sinterest, in spite of management's poor performance track record, should be a clear indication to all of the significant upside Birch Hillexpects to realize," added McAllister, "The same value opportunity that has attracted Birch Hillcan be replicated and we believe exceeded for the benefit of all of Tuckamore's public shareholders by removing existing holding company management and focusing on the portfolio as our value creation plan outlines."
ACCESS HOLDINGS IS PRESENTING THE FIRST CLEAR VALUE CREATION PLAN FOR SHAREHOLDERS IN FIVE YEARS AND BRING THE RESOURCES TO EXECUTE
Value is optimized for shareholders by revitalizing the board with directors who bring relevant industry experience, observe good governance and are truly independent, and who will quickly act on the following Value Creation Plan:
Re-engage with certain former owners and key managers of the operating businesses, many of whom have told us they left over the past five years out of frustration with the lack of capital and poor management support from Tuckamore, and the excessive compensation awarded to Tuckamore executives. Our proposed operating team includes: Reduce excessive and unproductive corporate overhead costs likely by as much as 50% through the elimination of excessive executive compensation, overhead expenses and office space. Based on the Company's current valuation multiple this alone should create over $20 millionof enterprise value or nearly $0.25of value per share. Bring in a new management team with proven private equity deal and portfolio management experience, who have the ability to re-build collaboration and rapport with Tuckamore's operating company management teams and other stakeholders, engage in an open and transparent dialog with shareholders and actively manage the optimization of the portfolio. We are prepared as and when needed, and with the assistance of leading market credit providers, to have the Company refinance its balance sheet to address pending debt maturities and avoid having to sell any operating companies under duress. This will also allow the operating companies to reinvest their free cash flow for growth. Debt refinancing terms have been sourced from a number of Canadian banks and US debt funds with whom we have long-standing relationships, and can be used to the extent existing debt investors do not want to amend and extend the existing facilities. Any such refinancing would be done on market terms, subject to the approval of an independent and elected board of directors with public company and capital markets experience. Keep Tuckamore public and avoid a change of control to ensure that shareholders enjoy the full benefit of the Company's $132 milliontax asset, plus any future upside.
The goal of this plan is to unlock the latent value that exists for all shareholders. The proposal would preserve Tuckamore as a public company as we believe emphatically that the take-private transaction for Tuckamore shareholders is opportunistic and a poor value maximizing alternative because the company's $132 milliontax asset will be lost to shareholders. With proper management engagement and relevant industry expertise, the Tuckamore portfolio can be grown for the benefit of all shareholders.
INDEPENDENT, PROVEN AND EXPERT NOMINEES FOR DIRECTORS
As noted above, if the MBO is defeated, we intend to propose a new slate of directors and a clear plan to create value while maintaining Tuckamore as a public company. Our director nominees (the "Nominees"), each of whom has committed to invest personally in shares of Tuckamore if elected to the Board, are seasoned industry executives and public company directors with track records of creating and preserving shareholder value, and include past owners and managers of Tuckamore's key operating businesses, as follows:
Jeff Westeinde: Mr. Westeinde co-foundedQuantum Environmental Group in 1992 and served as the CEO of Quantum Murray LP until 2011, having championed the merger in 2007 with Murray Demolition. Under his leadership Quantum Murray achieved revenues of $230 millionand employed over 800 professionals from offices throughout British Columbia, Alberta, Saskatchewanand Ontario. Mr. Westeinde has been distinguished as Entrepreneur of the Year by Ernst and Young, named one of Canada's Top 40 under 40 by the Globe and Mail, recognized with the Young Alumni Award from the University of Western Ontarioand has been awarded the Queen's Diamond Jubileemedal for his distinguished service to Canada.
David Drinkwater: Mr. Drinkwater is a Senior Adviser at Rothschild Canada where he was Chairman from 2009 to 2013. Previously, Mr. Drinkwater held various senior executive roles at Nortel Networks, Ontario Power Generation Inc. and Bell Canada. He is also a former Senior Partner of the law firm of Osler, Hoskin & Harcourt LLP. Mr. Drinkwater served as Executive Assistant to the Chair of Ontario Securities Commission and has been an Independent Director at TransAlta Renewables Inc., Consumers Water Heater Income Fund, Clean Power Operating Trust of Clean Power Income Fund and Hollinger Inc. Mr. Drinkwater holds a LL.M. from the London School of Economics, LL.B. from Dalhousie Universityand a B.A. in Business Administration from the Richard Ivey School of Business at the University of Western Ontario.
Byron Dunn: Mr. Dunn is the founder and CEO of Independence Contract Drilling. Previously, Mr. Dunn has held the position of CEO at CAMAC Energy Inc. and GES-Global Energy Services and various senior executive positions at Harvest Natural Resources, Inc. and National Oilwell Varco, Inc. and Chairman of the Board of TTS Marine ASA. Mr. Dunn also held increasingly responsible roles in the UBS Global Energy and Power Group, serving as Oilfield Service Research Global Sector Coordinator and later as Executive Director of the Investment Banking Group. Earlier in his career, Mr. Dunn was Manager of Upstream Business Development and Acquisitions for Phibro Energy. He began his career with Chevron USA, where he worked as Drilling Engineer in the Gulf of Mexico, later becoming Eastern Region Production Coordinator. Mr. Dunn graduated from the Illinois Institute of Technologywith a degree in chemical engineering in 1980 and an MBA from the University of Chicagoin 1986. He is a member of the American Institute of Chemical Engineers, the Society of Petroleum Engineers and the National Association of Corporate Directors. Mr. Dunn is also a Fellow with the National Association of Corporate Directors.
John Bell: Mr. Bell is Chairman of Onbelay Capital Inc. and is a prior director and head of the audit committee of Tuckamore. Mr. Bell is a director at Strongco Corporation, Royal Canadian Mint and DelMar Pharmaceuticals Inc. Previously Mr. Bell has served in executive and directorship positions at Shred-Tech Limited, Polymer Technologies, ATS Automation and Tooling Systems, BSM Wireless, Hospitals of Ontario Pension Plan, Cambridge Memorial Hospital, Waterloo Regional Police Commission, Canada's Community Triangle Accelerator Network and Region of Waterloo Prosperity Council. Mr. Bell is a Fellow of the Institute of Chartered Accountants of Ontario, and a graduate of the University of Western Ontario, School of Business Administration (Ivey). Mr. Bell also holds the ICD.D, FCP and FCA designations. John Bellexercises control or direction over 302,352 shares of the Company.
Paul Gour: Mr. Gour is the founder of PLNS Ventures Inc., an investor in low and mid-market companies in the Albertaregion. Prior to founding PLNS Ventures, Mr. Gour served as the CEO of two of Tuckamore Capital's operating companies: Clearstream Energy Services from 2009 to 2011, where he aligned 21 businesses into four operating segments and increased EBITDA by over 50%, and Titan Supply from 2007 to 2011, where he led numerous business process / operational improvements and guided the Company through the challenging 08/09 time period. Mr. Gour has over 30 years of experience in heavy equipment, International sales, transportation, distribution, and services business. Having started his career with Finning (Canada), Mr. Gour has gained significant exposure to the oil & gas, construction, mining and forestry industries. Mr. Gour holds an MBA from the University of Albertawith a focus on acquisitions, finance and international business.
Kevin McAllister: Mr. McAllister founded Access Holdings, a private investment firm. Prior to Access Holdings, Kevin was with Sterling Partners where he was a member of the Investment Committee. In Canada, he most recently led the sourcing, underwriting, execution and management of LivingstonInternational (formerly TSX-listed Livingston International Income Fund), Foundation Partners Group (formerly assets and management team from TSX-listed Keystone International IDS) and Conversant (formerly TSX-listed MOSAID). Mr. McAllister began his private equity career in the Buyout Group of American Capital (NASDAQ: ACAS) and has been a member of the board of directors of FPG (member of the Audit and Compensation committees), Conversant (member of the Audit and Compensation committees), Livingston International (member of the Audit committee), Milton'sFine Foods and nSpired Natural Foods. Kevin is also the former Chairman of the Chicago Association of Private Equity Executives. Kevin holds an MBA from the University of Chicago, Graduate School of Business and a BA in Economics from Dickinson College. Kevin McAllisterexercises control or direction over 600,000 shares of the Company.
Potential Conflict of Interest Regarding Newport Private Wealth
We are further concerned that shares of Tuckamore owned by clients of Newport Private Wealth may be voted in favor of the proposed MBO against the best interests of these clients. The Tuckamore management circular states that Newport'sinvestment committee has agreed to recommend to its clients to vote in favour of the proposed MBO. We understand that it is Newport'spolicy to vote their clients' shares in accordance with the recommendation of Newport'sinvestment committee unless Newportreceives a specific direction from its client that the client would like to vote differently. To prevent their shares from being voted for the proposed MBO, clients of Newportmust direct their financial advisor to vote their shares against the proposed MBO.