Goodwood Dissident Circular Provides Dacha Shareholders With Compelling Reasons to Replace Board
Dacha Shareholders Urged to Free Dacha From Stan Bharti and Forbes & Manhattan and Bring an End to Culture of Insider Self-Enrichment and Related Party Dealings
Director Nominees Comprise Highly Respected and Experienced Business Leaders
New Board to be Assisted by Peter V. Gundy, Founder and Former Chairman and President of Neo Material Technologies Inc.
TORONTO, Nov. 6, 2012 /CNW/ - Goodwood Inc. announced today the distribution of its dissident proxy circular and accompanying letter to shareholders of Dacha Strategic Metals Inc. urging shareholders to elect a new board of directors at Dacha that will bring an end to the inappropriate related party dealings, culture of insider self-enrichment and inadequate board oversight that has characterized Dacha for the past three years under the direction of Stan Bharti and Forbes & Manhattan, Inc.
Goodwood, which exercises control and direction over approximately 6.4% of Dacha's outstanding shares, is soliciting proxies for the election of seven new directors at Dacha's upcoming shareholders' meeting to be held on November 28, 2012. The Goodwood Nominees are: Ian W. Delaney, Jorge Bernhard, Timothy E. Thorsteinson, Gregory M. Cameron, Tye W. Burt, Daniel Marks and Peter H. Puccetti. Goodwood's circular highlights the Goodwood Nominees' proven track records of honest leadership, building businesses and creating shareholder value.
If elected, the Goodwood Nominees expect to be assisted in bringing value to Dacha's shareholders by the services of Peter V. Gundy. Mr. Gundy is a founder and former Chairman and President of Neo Material Technologies Inc., and widely regarded as one of the foremost world experts in the rare earth element business, with unparalleled sourcing, trading and other relationships.
Goodwood's circular also highlights the failures of Dacha's current board and management under the direction of Stan Bharti and Forbes & Manhattan, contrasting the significant 65% drop in Dacha's share price during fiscal 2012 from its peak against the approximately $3.8 million in compensation, including substantial discretionary cash bonuses, paid to Dacha's directors and management during fiscal 2012. As well, the circular refers to the wholly-inappropriate "change of control" arrangements recently purportedly implemented by Dacha's board that, if allowed to stand, would see a further $8 million, or approximately 22% of Dacha's current market capitalization, wrongfully transferred from Dacha's shareholders into the pockets of Dacha's insiders including Forbes & Manhattan. The circular also lays out the disturbing sequence of events whereby Dacha was forced to take a $3.7 million write-off in fiscal 2012 in relation to a non-arm's length related party loan previously advanced by Dacha, for no apparent business purpose, to a private company associated with Stan Bharti and Forbes & Manhattan.
The circular outlines the substantial support that the Goodwood Nominees have already garnered, with shareholders holding approximately 35.2% of Dacha's outstanding shares, including Goodwood, having to date confirmed that they have lost trust and confidence in the current directors of Dacha and intend to vote in favour of the Goodwood Nominees at the Meeting.
All shareholders of Dacha are urged to join Goodwood in freeing Dacha from Stan Bharti and Forbes & Manhattan by voting their YELLOW form of proxy or voting instruction form in accordance with the instructions provided in Goodwood's circular. Shareholders who require assistance in the completion and delivery of a YELLOW proxy or voting instruction form should contact Goodwood's proxy solicitation agent, Georgeson Shareholder Communications Canada, Inc., at 1-888-605-8415 (toll-free in North America) or firstname.lastname@example.org.
Goodwood also announced that it was served yesterday afternoon with a Notice of Application filed by Dacha against Goodwood Inc. and others seeking, among other things, that they be enjoined from voting their common shares. Goodwood believes that this proceeding is wholly without merit and has been brought by Dacha simply as a tactic to distract Dacha's shareholders from the track record of value destruction and failed leadership by Dacha's current board and management. Goodwood Inc. intends to vigorously defend against this proceeding and resist any attempt by Dacha's current board to seek to delay the November 28, 2012 shareholders' meeting or otherwise frustrate the will of the majority of Dacha's shareholders.
Goodwood's dissident circular and form of YELLOW proxy will be publicly accessible shortly at www.sedar.com. The full text of Goodwood's letter to Dacha's shareholders is appended below.
212 King Street West, Suite 201
Toronto, Ontario CANADA
November 5, 2012
Dear Fellow Shareholder:
We are today providing you with our proxy circular and asking for your support to elect a new board of directors at Dacha Strategic Metals Inc. ("Dacha") that will bring an end to the inappropriate related party dealings, culture of insider self-enrichment and inadequate board oversight and direction that has characterized Dacha for the past three years under the control of Stan Bharti and Forbes & Manhattan, Inc. ("Forbes & Manhattan").
Dacha's Board is Not Acting in Your Interests
Dacha urgently requires a new board of directors that will act in the best interests of Dacha and all its shareholders, rather than serving the interests of Stan Bharti and Forbes & Manhattan:
during fiscal 2012, Dacha's stock price declined 65% from its high
leaving the company with a market capitalization of only $37 million;
under the control of directors assembled by Stan Bharti and Forbes &
Manhattan, Dacha has consistently demonstrated that it will place the
interests of Stan Bharti and Forbes & Manhattan ahead of the interests
of Dacha's shareholders. The actions referred to below, while suiting
the purposes of Stan Bharti and other Dacha insiders who benefited from
them, were demonstrably not in the interests of Dacha or its
Dacha's board recently purportedly adopted inappropriate "change of
control" arrangements that, if permitted to stand, will transfer at
least $8 million, equal to approximately 22% of Dacha's current market
capitalization, from Dacha's shareholders into the pockets of Dacha's
insiders, including $3.3 million to Forbes & Manhattan;
these change of control arrangements are on top of the more than $3.8
million in compensation paid to Dacha's directors and management during
fiscal 2012, which included substantial discretionary cash bonuses paid
to certain directors notwithstanding Dacha's declining share price;
- in fiscal 2012, Dacha was forced to take a $3.7 million write-off, equal to approximately 10% of its current market capitalization, on account of the non-payment of a non-arm's length related party loan previously advanced by Dacha to a company associated with Stan Bharti and Forbes & Manhattan - contrary to applicable regulatory requirements, this related party loan was advanced without the required public disclosure or notification to the TSX Venture Exchange; and
- Dacha's board recently purportedly adopted inappropriate "change of control" arrangements that, if permitted to stand, will transfer at least $8 million, equal to approximately 22% of Dacha's current market capitalization, from Dacha's shareholders into the pockets of Dacha's insiders, including $3.3 million to Forbes & Manhattan;
Dacha's board recently spent months wasting Dacha shareholder value
pursuing an ill advised related party merger transaction with another
Forbes & Manhattan company, Aberdeen International Inc., that was not
in the best interests of Dacha's shareholders or ultimately even
capable of completion, apparently because the combined company did not
meet the net income tests under the Toronto Stock Exchange's listing
requirements;Dacha has shown itself to be devoid of any coherent
strategy to protect the interests of shareholders during the current
down-cycle in rare earth element pricing. Over the past 12 months, the
net asset value of Dacha's metals inventory and cash has consistently
declined every month, falling by an aggregate of approximately 60.8%;
Dacha's current board and management have demonstrated that they neither
understand the intricacies of the rare earth element business nor have
the expertise or experience to properly manage Dacha's business or
create value for Dacha's shareholders. Their track-record is one of
destroying shareholder value, while enriching themselves at the expense
of Dacha's shareholders; and
- Dacha's business and affairs are being conducted without sufficient regard to its timely disclosure and other regulatory obligations. Certain share trading undertaken by a director of Dacha in the context of the failed Aberdeen transaction also raises concerns that Dacha's compliance policies are inadequate.
Dacha's Board Must be Independent of Stan Bharti and Forbes & Manhattan
Currently, Dacha's board and management consists exclusively of individuals with bonds to Stan Bharti and Forbes & Manhattan. In response to shareholder demands for change, that same Stan Bharti-dominated board is now purporting to shuffle the deck by introducing four new director nominees, hand-chosen by the same failed board, in a hollow effort to show greater distance between Dacha's board and Forbes & Manhattan. The reality, however, is quite different. Each of the proposed new directors, like each of the current directors who are not standing for re-election, is tied to Stan Bharti and Forbes & Manhattan. While it may suit the purposes of Stan Bharti and Forbes & Manhattan to have Dacha's board and management stacked with individuals beholden to Stan Bharti and Forbes & Manhattan, it has not well served the interests of Dacha or its shareholders in the past and will not well serve their interests in the future.
In the Management Circular, Stan Bharti and Forbes & Manhattan try to create the impression that their involvement with Forbes & Manhattan portfolio companies adds value for shareholders. The reality is that their involvement often enriches only Stan Bharti, Forbes & Manhattan and the stable of related individuals that they install as directors and officers, and not shareholders. We found a clear and disturbing trend when we reviewed the aggregate compensation paid to Stan Bharti and Forbes & Manhattan, and to other Forbes & Manhattan associates, by various Forbes & Manhattan portfolio companies in their last fiscal year, and compared that to the last 12 months' shareholder returns at those companies. During the relevant period, Stan Bharti and Forbes & Manhattan collectively were paid compensation of approximately $20.8 million by these companies. Other Forbes & Manhattan associates took out compensation of approximately $31 million. At the same time, the median shareholder return at these companies was negative 48.2%.
The Goodwood Nominees will Protect Your Interests and Enhance Value
At the meeting of Dacha's shareholders on November 28, 2012, shareholders finally have the opportunity to elevate Dacha out of the world of penny-stock behaviour and related party dealings that have been harming the interests of its shareholders over the past several years.
The seven new director nominees being proposed by Goodwood (the "Goodwood Nominees") have the skills, knowledge and experience to finally provide Dacha with the leadership, governance and strong board oversight that Dacha's complex business requires and its shareholders deserve. As importantly, they have earned the trust and respect of shareholders and capital markets participants through proven track records of honest leadership, building businesses and creating shareholder value. The Goodwood Nominees are as follows:
Ian W. Delaney
One of Canada's most accomplished and respected business leaders with a
track record of significant long-term value creation at some of
Canada's most successful businesses, including Sherritt International
Corporation, Viridian Inc., The Horsham Corporation and Merrill Lynch
Chairman of The Westaim Corporation, whose principal asset JEVCO
Insurance Company was sold to Intact Financial Corporation on September
5, 2012 representing a gain of over 55% to Westaim's shareholders who
financed Westaim's acquisition of JEVCO in February 2010
- Has served as a director on some of Canada's largest and most respected companies
Highly respected former Chief Executive Officer of several successful
international metals trading businesses with more than 25 years
experience in selling and trading a wide variety of non-ferrous metals
Significant success in the international metals trading business and
extensive knowledge of London Metals Exchange and non-exchange traded
- Created new price discovery mechanisms in the cobalt market to generate better transparency for all market participants
Timothy E. Thorsteinson
A leading turn-around and restructuring specialist with numerous
instances of outsized returns to investors
Appointed to the board of Miranda Technologies Inc. in March 2012, and
instrumental in the sale of Miranda to Belden Inc. generating a return
for shareholders of approximately 60% in under one year
Joined Leitch Technology Corporation in November 2003 and led a highly
successful turnaround of the company culminating in a sale to Harris
Corporation in 2005 resulting in a return of over 290% for shareholders
- Part of a buyout group of Grass Valley Inc. in 2000 culminating in a sale of the company to Thomson Corp. in 2002 generating a return of approximately 80% over two years
Gregory M. Cameron
Extensive experience raising capital for both resource and non-resource
Grew CUB Energy Inc. from no production in late 2011 to over 1,500
barrels of oil equivalent and a market capitalization of approximately
$90 million today
The hydrocarbons produced by CUB Energy Inc. today represent a greater
volume of hydrocarbon production than ever achieved within Forbes &
Manhattan's energy holdings
- CUB Energy's current market capitalization represents a greater market value than all of Forbes & Manhattan's energy holdings combined
Tye W. Burt
Chief Executive Officer of Kinross Gold Corp. from March 2005 to August
At Kinross, grew production from 1.65 million ounces of gold to 2.6
million ounces of gold - an increase of approximately 58%; grew gold
reserves from 19.4 million ounces to 62.6 million ounces - an increase
of over 220%; grew operating cash flow ten-fold; top-performing senior
gold producer on NYSE during each of 2006, 2007 and 2008
Growth in production and reserves is more gold produced or discovered
than by all Forbes & Manhattan precious metals companies combined over
the past 10 years
- Current and prior directorships include ArcelorMittal, Barrick Gold Corporation, the Ontario Financing Authority and MacDonald, Dettwiler and Associates Ltd.
Significant micro/small capitalization investing and turn-around
experience and success
Orchestrated the management and board revamp of Pacific Safety Products
Inc. that solidified the balance sheet, through a financing and merger
with Zuni Holdings Inc., and moved the company from recurring losses
back to profitability
- Was the catalyst on the board of MTI Global Inc. that initiated a strategic review culminating in the sale of the main operating unit to 3M in June 2010 taking the company from near insolvency to providing a substantial return of capital to shareholders
Peter H. Puccetti
16 year track record of successful management of Goodwood Fund -
compounded annual returns of 10.34% since inception in 1996,
outperforming the S&P/TSX Total Return Index by 2.96% over that period
- Director of The Westaim Corporation, whose principal asset JEVCO Insurance Company was sold to Intact Financial Corporation on September 5, 2012 representing a gain of over 55% to Westaim's shareholders who financed Westaim's acquisition of JEVCO in February 2010
In discharging their responsibilities as directors of Dacha, the Goodwood Nominees also expect to have the benefit of the services of Peter V. Gundy. Mr. Gundy was a founder of Neo Material Technologies Inc. ("Neo") and served as the Chairman and President of Neo from 1993 to 2006, and then as its Chairman until 2008. Mr. Gundy is widely regarded as one of the foremost world experts in the rare earth element business, with unparalleled sourcing, trading and other relationships. Under Mr. Gundy's direction, Neo was one of the few non-Chinese firms in the world to succeed in generating consistent significant profits in the rare earth element business. During the period in which Mr. Gundy was a senior officer and/or director of Neo, he was instrumental in orchestrating a strategy of organic growth initiatives and transformative acquisitions, growing Neo's revenue from $46.9 million to $266.6 million between 2003 and 2008 and Neo's net income from $302,000 in 2003 to $23.3 million in 2008 - representing compound annual growth rates of 41.6% and 139%, respectively. Based on the solid business foundation developed by Mr. Gundy, Neo was acquired by Molycorp, Inc. in 2012 for $1.3 billion.
Upon their election, the Goodwood Nominees intend to conduct a thorough review of Dacha's metals inventory and the opportunities and prospects to create shareholder value from both Dacha's existing inventories and its rare earth element business going forward. The Goodwood Nominees' sole focus in conducting this review, which is expected to be undertaken with the assistance of Mr. Gundy, will be to maximize value for Dacha's shareholders. As part of that review, the Goodwood Nominees will also consider and assess Dacha's overall corporate strategy and all strategic and other alternatives available to it, with a view to implementing that corporate strategy and direction which maximizes long-term shareholder value for the benefit of Dacha's shareholders.
Don't Settle for More of the Same
The Goodwood Nominees will also, upon their election, implement an appropriate corporate policy requiring minimum share ownership by all Dacha directors so as to properly align the interests of Dacha's directors with its shareholders. This will avoid a repeat of the current situation, where two of the three incumbent directors being proposed by Dacha's management for re-election own not a single common share of Dacha despite having served as Dacha directors for more than two years. Similarly, during the more than three years that Stan Bharti has been a director of Dacha, he has never reported purchasing a single common share of Dacha, and in fact early in 2012 he sold approximately 33% of his shares such that he currently owns only approximately 1.3% of Dacha's outstanding shares. Dacha shareholders should ask themselves why it is that Stan Bharti and his nominees want to control Dacha, but don't want to own its shares?
We encourage you to carefully review the full biographies of the Goodwood Nominees included in our circular, and to form your own judgment about who will provide the best leadership for Dacha going forward. We also encourage you to carefully review the information included in our circular regarding the nominees being proposed by Dacha's current Stan Bharti-dominated board. Ask yourself why it is that Stan Bharti so wants James Rogers, a member of the Forbes & Manhattan Advisory Board, to succeed him as Chairman of Dacha. Mr. Rogers is not an expert in rare earth elements and, with the greatest of respect for him, neither is he a logical choice to be Chairman of a Canadian-listed reporting issuer whose shareholders wish to separate from Stan Bharti and Forbes & Manhattan. Further, while Dacha's current board claims in its circular that Mr. Rogers currently serves as a director of King's Bay Gold Corporation and QRS Capital Corp., those claims with respect to Mr. Rogers' experience are simply not true.
It is also troubling that Dacha's current board does not appear to understand Dacha's own by-laws, as the director nominees being put forward by the current board would not appear to satisfy the requirement in Dacha's by-laws that a majority of its directors be resident Canadian.
The Goodwood Nominees Already Have Substantial Shareholder Support
Investment funds managed by Goodwood Inc. collectively own 4,826,000 common shares of Dacha, representing approximately 6.4% of Dacha's outstanding common shares. Unlike Stan Bharti and Forbes & Manhattan, our interests are completely aligned with yours in maximizing value for all shareholders of Dacha.
As indicated in our circular, five other significant public shareholders of Dacha, collectively owning or controlling a further 21,596,500 common shares of Dacha, or approximately 28.7% of Dacha's outstanding shares, have confirmed to us they also have lost trust and confidence in the current directors of Dacha and their ability to act in the best interests of Dacha's shareholders. Those other shareholders have also confirmed to us that they intend to vote all their Dacha shares for the election of the Goodwood Nominees at the November 28, 2012 shareholders' meeting. Accordingly, we believe that the Goodwood Nominees already have the support of holders of approximately 35.2% of Dacha's outstanding shares.
Seize this Important Opportunity for Change
We ask that you join us in freeing Dacha from Stan Bharti and Forbes & Manhattan and voting FOR a new board of directors that will act in the best interests of Dacha and all its shareholders. We urge you to seize this opportunity by voting the enclosed YELLOW form of proxy or voting instruction form in accordance with the instructions thereon. You may do this even if you have previously signed a form of proxy or given voting instructions in support of management - your latest dated form of proxy or voting instruction form automatically revokes the earlier one.
If you have any questions concerning this Circular, please call me directly at 416-203-2022. If you have questions in connection with the completion and delivery of your YELLOW proxy or voting instruction form, please contact our proxy solicitation agent, Georgeson Shareholder Communications Canada, Inc., at 1-888-605-8415 (toll-free in North America) or email@example.com and they will assist you.
"Peter H. Puccetti"
PETER H. PUCCETTI, CFA
Chairman and Chief Investment Officer
SOURCE: Goodwood Inc.For further information:
Peter H. Puccetti, CFA,
Chairman and Chief Investment Officer