ISG Capital Corporation Announces Proposed Conversion to Real Estate Investment Trust
- Firm Capital to manage new diversified REIT -
TORONTO, Aug. 30, 2012 /CNW/ - ISG Capital Corporation (TSX-V: SUS) ("ISG") announced today that it has entered into an arrangement agreement with Firm Capital Property Trust ("FCPT") to effectively convert ISG into a new Real Estate Investment Trust (REIT) with members of the Firm Capital group of companies providing asset, property and executive management services.
"This transaction provides immediate liquidity for ISG shareholders who wish to crystallize the value of their investment in ISG. It also provides an opportunity to participate in future growth of a new publicly traded REIT under the direction of Firm Capital's proven management team", noted David Ogden, ISG's President and CEO.
This proposed conversion will be implemented by way of a Plan of Arrangement under the Canada Business Corporations Act and is subject to the approval of the TSX Venture Exchange (the "TSXV"), the Ontario Superior Court of Justice and ISG's shareholders as well as completion of the previously announced sale of ISG's sole real estate asset - the distribution facility located in Ingersoll, Ontario (the "Ingersoll Facility") and other customary closing conditions.
Details of the Transaction
Redemption of ISG Common Shares
Pursuant to the Plan of Arrangement, holders of ISG common shares ("Shares") other than Firm Capital Mortgage Corporation ("FCMC"), an affiliate of FCPT, will have the option of redeeming their Shares for cash, exchanging them for units in FCPT or a combination of the two, provided that each Shareholder who owns a sufficient number of Shares to receive 100 FCPT units under the Plan of Arrangement will be required to exchange Shares for at least 100 FCPT units.
The cash redemption amount per Share will be determined based on ISG's cash on hand following completion of its sale of the Ingersoll Facility less deductions for (i) required payments under ISG's management incentive plan, (ii) the cost of purchasing a "run-off" directors' and officers' insurance policy and (iii) ISG's transaction costs, and less a further deduction of $0.005 per Share. ISG currently anticipates that this will result in a cash redemption amount of approximately $0.175 per Share. The ratio at which Shares would be exchanged for FCPT units will be determined based on the cash redemption amount per Share but without the $0.005 per Share deduction, resulting in an exchange value of approximately $0.18. The FCPT units will have an initial value of $5.00 per unit, which, assuming an exchange value of $0.18 per Share, would result in an exchange ratio of 0.036 FCPT units for each Share.
Following redemption of all the Shares pursuant to the Plan of Arrangement, ISG will be a wholly-owned subsidiary of FCPT, its sole remaining Shareholder.
In connection with the transaction, FCPT will apply to list its units on the TSXV in substitution for the Shares, and receipt of TSXV conditional approval for such listing is a condition of closing.
The Plan of Arrangement and the sale of the Ingersoll Facility (collectively, the "Transactions") will each require approval by at least two-thirds of the votes cast by Shareholders at a special meeting. In addition, for the reasons described under "Business Combination" below, the Plan of Arrangement must also be approved by a simple majority of the votes cast by Shareholders at the special meeting other than FCMC and its affiliates and David Ogden and his affiliates.
David Ogden and Joseph Sorbara, each an officer and director of ISG, along with FCMC have each entered into support and voting agreements pursuant to which:
- David Ogden (and entities affiliated with him) has agreed to vote the 3,013,000 Shares he controls in favour of the Plan of Arrangement and the sale of the Ingersoll Facility and to exchange a minimum of 750,000 Shares for new REIT units;
- Joseph Sorbara (and entities affiliated with him) has agreed to vote the 3,141,000 Shares he controls in favour of the Transactions and to exchange a minimum of 750,000 Shares for new REIT units; and
- FCMC has agreed to vote the 2,071,000 Shares it controls in favour of the Transactions and to exchange all 2,071,000 Shares for new REIT units.
In addition to the commitments of David Ogden and Joseph Sorbara described above, each of the other directors of ISG have indicated that they intend to vote all of their Shares in favour of the Transactions. Collectively, the directors and officers of ISG and Firm Capital Mortgage Corporation own 10,590,000 Shares, which represent 58% of ISG's 18,242,000 issued and outstanding Shares.
The arrangement agreement provides for customary board support and non-solicitation covenants from ISG, which are subject to customary "fiduciary out" provisions that entitle ISG to consider and accept an unsolicited superior proposal in certain circumstances. The arrangement agreement also provides for the payment of a termination fee by ISG of $200,000 to FCPT on the occurrence of certain termination events.
Pursuant to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"), the Plan of Arrangement constitutes a "business combination" for ISG. Because it is listed on the TSXV, ISG is exempt from the formal valuation requirement of MI 61-101 in connection with the Plan of Arrangement. Under MI 61-101 and TSXV rules, ISG is required to obtain approval for the Plan of Arrangement by a majority of the votes cast by "disinterested" Shareholders.
Recommendation of Board of Directors
ISG's Board of Directors has unanimously determined that the Transactions are in the best interests of ISG and all Shareholders and unanimously recommends that all Shareholders approve the Transactions.
ISG expects that an information circular describing the Transactions and FCPT in greater detail will be mailed to Shareholders and available on www.sedar.com in September 2012. A special meeting of Shareholders to consider the Transactions is currently expected to be held in Toronto, Ontario in October 2012.
ISG is a publicly-traded commercial real-estate company (www.isgcapital.ca). The company is committed to creating shareholder value by incorporating environmentally and socially responsible approaches in its growth strategy.
About FIRM CAPITAL PROPERTY TRUST
Firm Capital Property Trust (FCPT) is focused on creating long-term value, capital preservation and disciplined investing to achieve stable distributable income for Unitholders. In partnership with management and industry leaders, FCPT focuses on co-owning a diversified property portfolio of multi residential, flex industrial, net lease convenience retail, net lease stand alone retail, core service provider professional and healthcare professional office space. In addition to stand alone accretive acquisitions, FCPT's primary focus is on acquisitions, on a co-ownership basis with strong financial co-owned partners and will specifically focus on joint acquisitions and the acquisition of partial interests from existing co-ownership groups, in a manner that provides liquidity to those selling co-owners and professional management for those remaining as co-partners. Firm Capital Realty Partners Inc. (FCRP), through a structure solely focused on an alignment of financial interests with FCPT, is the asset and property manager. In addition to asset and property management, FCRP will source, syndicate and participate in investments alongside FCPT.
This news release contains "forward-looking statements" within the meaning of applicable securities laws, including those relating to the Plan of Arrangement, the anticipated cash redemption amount thereunder, the expected sale of the Ingersoll Property and the proposed listing of FCPT units on the TSXV. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. In particular, there can be no assurance that the parties will proceed with the proposed plan of arrangement and associated transactions, that the ultimate terms of the proposed plan of arrangement and associated transactions will be consistent with those that currently are contemplated, that the required court, shareholder or TSXV approvals will be obtained, that the proposed plan of arrangement and associated transactions will be successfully completed or that the cash redemption amount that Shareholders are ultimately entitled to receive will be consistent with the amount currently expected by ISG. The statements in this news release are made as of the date of this release. Although ISG believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein.
Neither the TSX Venture Exchange Inc. nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) has approved or disapproved the contents of this press release.
SOURCE: ISG Capital CorporationFor further information:
President and Chief Executive Officer
(416) 203-7538 or (877) 877-0213