H.O. Financial Limited announces signing of amalgamation agreement in connection with going private transaction



    
    /NOT FOR DISSEMINATION IN THE UNITED STATES OR EUROPE OR OVER UNITED
    STATES OR EUROPEAN WIRE SERVICES/

                 TSX Venture Exchange Trading Symbol: "HOF"
    

    TORONTO, Jan. 31 /CNW/ - H.O. Financial Limited (the "Corporation") today
announced that the Corporation has entered into an amalgamation agreement
providing for a going private transaction involving the indirect acquisition
by Mandukwe Inc. ("Mandukwe"), a corporation wholly-owned by Geoffrey Matus,
the Chairman of the Corporation's board of directors, and members of his
immediate family, of all of the issued and outstanding common shares of the
Corporation not already held by Mandukwe at a price of $1.03 per common share.
    The price of $1.03 per common share offered by Mandukwe represents a
premium of approximately 14.4% over the closing price of the common shares on
the TSX Venture Exchange on January 16, 2007, the last day on which the common
shares traded prior to the announcement of the approach by Mandukwe.
    Following the receipt of the expression of interest from Mandukwe, the
board of directors of the Corporation established a Special Committee of
independent members of the board of directors of the Corporation consisting of
Lionel Schipper (Chair), Craig Rimer and Justin Kramer. The Special Committee
had a mandate to, among other things, pursue discussions regarding any
proposal from Mandukwe to the extent the Special Committee considered
advisable, to report its findings with respect to any proposed transaction to
the board of directors and to make such recommendations to the board of
directors as the Special Committee considered appropriate in the
circumstances.
    The Special Committee retained independent legal counsel, Stikeman
Elliott LLP, and engaged LECG, LLC, to provide financial advice to the Special
Committee in connection with the proposed transactions. At a meeting of the
Board of Directors held today, the Special Committee unanimously recommended
to the Board of Directors that that shareholders vote in favour of the special
resolutions approving the amalgamation and subsequent delisting of the
Corporation's common shares from the TSX Venture Exchange, despite the opinion
of its financial advisor that the consideration offered to shareholders under
the transaction is inadequate, from a financial point of view, to public
shareholders.
    Despite the fact that the Special Committee is of the view that the
consideration offered to minority shareholders pursuant to the going private
transactions is inadequate, from a financial point of view, there are a number
of factors that led the Special Committee to the unanimous recommendation that
the board of directors nonetheless recommend that shareholders vote in favour
of the amalgamation and subsequent delisting of the common shares from the TSX
Venture Exchange. The material factors which supported this conclusion were:

    
    -   The common shares are extremely illiquid. The transactions may be the
        only meaningful liquidity event available to minority shareholders in
        the foreseeable future.

    -   While a sale of the common shares to a third party or some other
        similar transaction could result in greater consideration being paid
        to the minority shareholders than the consideration under the
        transactions, no such transaction could occur without the approval of
        Mandukwe and Apollo Nominees Inc., the Corporation's largest
        shareholder, as they have a controlling interest in the Corporation.
        Mandukwe has advised the Special Committee it knows of no such sale
        opportunity and that it has no current intention of divesting any of
        its common shares to a third party.

    -   The transactions allow minority shareholders to dispose of their
        common shares at a premium to the pre-announcement price without the
        payment of brokerage commissions.

    -   The following procedural protections are in place in connection with
        the approval of the transactions:

        -  in order to be effective, the transactions must be approved by at
           least two-thirds of the votes cast at a special meeting of
           shareholders and by a majority of the votes cast at the special
           meeting by minority shareholders; and

        -  shareholders will have the right to dissent in respect of the
           transactions and receive the fair value of their common shares, in
           cash, through a court proceeding. In such a court proceeding, a
           court could determine that the fair value of the common shares is
           more than, equal to, or less than the value of the consideration
           offered under the transactions.

    -   Shareholders (other than Apollo Nominees Inc.) will be receiving cash
        consideration.

    -   In the event that the transactions do not go ahead because
        shareholders holding more than five percent of the common shares
        exercise their rights of dissent, half of the Special Committee's
        legal costs and half of the costs of the financial advisor to the
        Special Committee will be paid by Mandukwe.

    -   The directors of the Corporation, including the chair of the Special
        Committee, have all indicated that they propose to vote in favour of
        the transaction.
    

    A special meeting of shareholders of the Corporation will be held on or
about February 27, 2007 to consider the proposed amalgamation and subsequent
delisting of the Corporation's common shares from the TSX Venture Exchange.
The proposed transactions are subject to the approval of 66 2/3% of the votes
cast at the special meeting by shareholders present in person or by proxy, and
a separate vote of a majority of the votes cast by the shareholders of the
Corporation other than Geoffrey Matus, Mandukwe, Apollo Nominees Inc. and
their respective affiliates and any other parties not eligible to vote in
connection with minority approval of the amalgamation and the delisting as
provided for in Ontario Securities Commission Rule 61-501.
    The terms and conditions of the proposed transactions, including copies
of the opinion prepared by LECG, will be detailed in a management information
circular to be mailed to shareholders of the Corporation as soon as
practicable.

    The TSX Venture Exchange does not accept responsibility for the adequacy
    or accuracy of this release.

    This document contains statements about expected or anticipated future
events and financial results that are forward looking in nature and, as a
result, are subject to certain risks and uncertainties, such as general
economic, market and business conditions, the regulatory process and actions,
new legislation, competitive and general economic factors and conditions,
uncertainties resulting from potential delays, the occurrence of unexpected
events and the Corporation's capability to execute and implement its future
plans. Actual results may differ materially from those projected by
management. The Corporation undertakes no obligation to publicly update or
revise any forward-looking statements or information, whether as a result of
new information, future events or otherwise, except as required by law. There
can be no assurance that the expression of interest, which is non-binding,
will result in an offer for the outstanding shares of the Corporation on the
basis described herein or otherwise, nor, should any formal offer be made for
the shares of the Corporation, that the Special Committee will conclude that
it is best interest of the Corporation or fair to shareholders from a
financial perspective or otherwise, or that any such transaction would be
completed.

    %SEDAR: 00007871E




For further information:

For further information: H.O. Financial Limited, Mr. Michael A. Eustace,
Secretary, (416) 964-6200, (416) 964-8779 (FAX)

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H.O. FINANCIAL LIMITED

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