TORONTO, April 13 /CNW/ - Jaguar Nickel Inc. ("Jaguar" or the "Company")
(TSX: JNI) announced that it did not tender its common shares of Engenuity
Technologies Inc. ("Engenuity") (TSX:EGY) in the take-over bid made by a
subsidiary of CAE Inc. ("CAE"). As reported on March 19, Jaguar owns 1,745,000
common shares of Engenuity, representing approximately 9.9% of the total
issued common shares.
Following its review of the public disclosure material, Jaguar believes
the Engenuity directors should not have permitted the substantial shareholders
of Engenuity who were also directors to drive the take-over bid process rather
than the independent directors. Jaguar considers the result was a flawed
process which led to a very inadequate price, no serious canvass of competing
offers, and no fiduciary out in the transaction documents on the CAE offer.
Depending on market and other conditions, Jaguar may acquire additional
common shares of Engenuity or may sell any or all of its common shares. Jaguar
may take other measures to hold the directors of Engenuity accountable for
their actions and to oppose the going private transaction.
Engenuity entered into a support agreement ("Support Agreement") with CAE
under which CAE made an offer to acquire all the issued common shares of
Engenuity at a price of $1.20 per share. Under hard lock-up agreements
("Lock-Up Agreements") entered into with CAE, eleven shareholders of Engenuity
(the "Committed Shareholders") tendered a total of 13,282,780 shares into the
CAE offer representing 76% of the issued shares. Of the remaining 24% of the
issued shares held by independent shareholders, only 9% was tendered to the
expired CAE offer.
Jaguar has concerns about the actions of the Engenuity directors in
approving the CAE offer as a result of the following:
1. Engenuity stated in its Directors' Circular that the CAE offer is
"attractive" when it clearly is not given the 4% premium to the closing
price on the day prior to announcement of the CAE offer and the
14% premium to the 20-day average closing price. The average price/sales
multiple for technology companies in recent mergers and acquisition
transactions is 1.84 and the average enterprise value/sales multiple for
such transactions is 2.06 which if applied to Engenuity would result in a
bid price between $1.79 and $1.97 per share, rather than $1.20. The CAE
offer price is therefore well below a realistic value for Engenuity. This
has been confirmed by the meagre 9% response to the CAE offer by the
2. Several of the Committed Shareholders are directors, or affiliated
with directors, of Engenuity including (i) Claude Roy, a director and
holder of 4,054,995 shares or 23.2% of the issued shares; (ii) Thale
Corporate Ventures S.A. ("Thale") which owns 1,737,478 shares or 10% of
the issued shares, and of which Jean Dufour, President of Thale and
Pierre Jeanniot, Chairman of Thales Canada Inc. are directors of
Engenuity; and (iii) Marcel Cote, Chairman of the Board of Engenuity and
holder of 624,300 shares or 3.6% of the issued shares.
As directors, Messrs. Roy, Dufour, Jeanniot and Cote approved a Support
Agreement with a fiduciary out which enabled a superior competing offer
to be accepted if not matched by CAE, but as substantial shareholders or
representatives of substantial shareholders, they entered into Lock-Up
Agreements which precluded acceptance of a superior competing offer.
Therefore the fiduciary out preserved by the Board was rendered
meaningless by the substantial shareholders who were also directors.
Faced with an irrelevant fiduciary out, prior to approving the Support
Agreement there should have been a well-crafted process led by the
independent directors with the assistance of an investment bank to
seriously canvass the market for alternative competing offers. In
addition, the independent directors should have ensured that the price
offered represented a large premium to the market price or provided a
comparable company value. None of this occurred.
Instead the Engenuity directors obtained a fairness opinion on the CAE
offer, which was of no value because one of the items considered in the
opinion in determining the fairness of the offer was the "existence of
potential acquirers in the market". Since there was no chance of a
competing offer, the CAE offer being the only possible offer on the table
could by default be viewed as "fair", when in fact it is not fair.
3. The dominance of the substantial shareholders was also evident in the
special committees established by the Engenuity Board. The Merger and
Acquisition Committee of the Engenuity Board consisted of Messrs. Roy,
Jeannoit and Cote, all of whom were Committed Shareholders or
representatives of Committed Shareholders. There were no independent
directors on this committee whose role was to negotiate the terms of a
transaction with CAE. All or a majority of the directors on the Merger
and Acquisition Committee should have been independent directors given
the absence of an effective fiduciary out in the CAE transaction.
Similarly, the four person Independent Committee of the Engenuity Board,
formed to review the transaction and assess fairness, should not have had
two Committed Shareholders as members. With only two truly independent
directors on this committee, there was no opportunity for such
independent directors to drive an independent process.
4. CAE indicated its intention to complete a second step going private
transaction which among other matters requires a majority of minority
vote of the independent shareholders.
As a result of Messrs. Roy, Dufour, Jeanniot and Cote dominating the
process as substantial shareholders which precluded a truly independent
process by the Engenuity directors, Jaguar believes that the 85% of
Engenuity shares tendered in the take-over bid should not be counted as
minority shares in the majority of minority vote in the second step going
private transaction. This would secure a truly independent vote on the
going private transaction at the Engenuity shareholders meeting to
replace the missing independent process at the Engenuity Board level.
Jaguar is a Canadian merchant bank that invests in undervalued small
capitalization companies in a variety of industry sectors.
For further information:
For further information: