Kingsway Financial Services Inc. Requisitions Shareholder Meeting of Kobex Capital Corp.

  • Kobex's shares have languished for years without a clear strategy to enhance value for all shareholders;

  • Kobex's self-interested directors have enriched themselves at the expense of shareholders;

  • Kingsway's experienced management has a strong, proven track record of creating shareholder value through the use of vehicles similar to Kobex (e.g., Atlas Financial Holdings Inc. (NASDAQ: AFH) which began as a TSX Venture Exchange Capital Pool Company);

  • Kingsway's shareholder-focused nominees are committed to reducing expenses and exploring strategic alternatives that will eliminate the discount between share price and intrinsic value;

  • Kingsway nominees will consider implementing a share repurchase program to assist shareholders seeking immediate liquidity (Kingsway does not intend to participate in any such buyback);

  • Kingsway's nominees are aligned with shareholders and will vote to reduce director pay from current levels to $10,000 per director annually and pledge to vote against any compensation package that provides stock options below intrinsic value;

  • Kingsway invites Kobex shareholders to learn more about its views on Kobex at http://bit.ly/upgradeKXM

TORONTO, Sept. 17, 2015 /CNW/ - Kingsway Financial Services Inc. ("Kingsway"), owner of approximately 13.24% of the outstanding common shares of Kobex Capital Corp. ("Kobex") (TSXV:KXM), announced today that it has formally requisitioned the Kobex Board of Directors (the "Board") to call a general meeting of shareholders (the "Meeting") for the purposes of reconstituting the Board with five new independent Directors (the "Requisition"). Kingsway has requested that the Board hold the Meeting by no later than November 13, 2015.

BACKGROUND TO THE REQUISITION

The actions of the incumbent Board clearly demonstrate a deficient and unaccountable structure that lacks the necessary direction, vision and incentives to create shareholder value.  This lack of stewardship and supervision are visibly apparent in Kobex's share price, which has languished for years.  In addition to their outrageous fees, which are unconscionable for an entity with no revenue or cash flow, the Board has granted itself stock options to purchase Kobex's shares at a price that is well below cash and marketable securities value.  Rather than articulate a strategy to build long term value for all stakeholders, the Board has, in essence, chosen to put more of Kobex's money into its own pockets. 

It has been over one year since Kobex changed its business from that of a mineral exploration company to an investment issuer and shareholders have little or nothing to show for it.  Kobex's sole investment under its new "strategy" is a $5.7 million investment in a diamond property that won't begin production until the second half of 2016.  Despite their self-described pivot away from mineral exploration, the rout in global mining stocks and falling diamond prices, Kobex made a follow-on investment earlier this year in the same issuer.  Needless to say, this investment has experienced significant impairment in a very short time.  We believe shareholders deserve a better strategy than to build a portfolio of illiquid non-income producing investments in speculative companies.

Kingsway believes that replacing the Board is necessary to reduce operating expenses and explore strategic alternatives for Kobex.

KINGSWAY'S INDEPENDENT AND EXPERIENCED BOARD NOMINEES

Kingsway believes that it is time for new independent leadership on the Board. The Requisition proposes to remove each of Michael J. Atkinson, E. Kenneth Paul, David M. Schmidt and Paul P. van Eeden (or their respective appointed successor(s)) (collectively, the "Current Kobex Directors") as Directors of Kobex and elect the following five (5) new directors to the Board (collectively, the "Kingsway Nominees"):

  • John T. Fitzgerald - Mr. Fitzgerald is founder and Managing Partner of Argo Management Partners and Managing Member of Argo Holdings Fund I, LLC. He is the Chairman of Hunter MFG, LLP, and serves on the board of directors of each of Oak Patch Gifts, Progressive Bronze Products, Atlas Financial Holdings Inc. (NASDAQ: AFH) and 1347 Capital Corp (NASDAQ: TFSC);

  • Gregory P. Hannon - Mr. Hannon is Vice-President and Director of Oakmont Capital Inc., a Toronto-based private investment company. He previously was Founding Partner of Lonrisk, a Toronto-based specialty insurer and subsidiary of the London Insurance Group, where he was the Vice-President. He has been a member of the board of directors of Kingsway since 2009;

  • Joshua S. Horowitz - Mr. Horowitz is Managing Director at Palm Ventures where he is solely focused on investments in the public markets and helps oversee the Palm Global Small Cap Fund. Mr. Horowitz previously served as Director of Research for both Inverlochy Capital and Berggruen Holdings. He has been appointed to the board of directors of each of Lincoln General Insurance Company, 1347 Capital Corp. (NASDAQ: TFSC) and 1347 Property Insurance Holdings, Inc. (NASDAQ: PIH);

  • Andrew McIntyre - Mr. McIntyre is a Managing Director of Segwin Consulting Ltd., a consultancy specializing in M&A advisory, business valuation, strategy and business development. Previously, Mr. McIntyre was Vice President, Corporate Development at Vicwest Inc.; and

  • R. Michael Powell - Mr. Powell serves as Managing Director in the Investment Banking Department at EarlyBirdCapital, Inc., where he focuses primarily on Special Purpose Acquisition Company ("SPAC") IPOs and SPAC business combinations. Prior to joining EarlyBirdCapital, Mr. Powell served as Managing Director at Pali Capital, Inc.

If elected, each Kingsway Nominee would serve until the next annual general meeting of shareholders or until their successors are elected or appointed. In the event that the special resolution removing each of the Current Kobex Directors is not passed, the Requisition proposes to fix the number of directors of Kobex at nine (9) and elect each of the Kingsway Nominees (in each case to hold office until the next annual general meeting of shareholders or until their successors are elected or appointed).

ABOUT KINGSWAY FINANCIAL SERVICES INC.

Kingsway is a holding company functioning as a merchant bank with a focus on long-term value-creation. Kingsway owns or controls stakes in several insurance industry assets and utilizes its subsidiaries, 1347 Advisors LLC and 1347 Capital LLC, to pursue opportunities acting as an advisor, an investor and a financier. The common shares of Kingsway are listed on the Toronto Stock Exchange and the New York Stock Exchange under the trading symbol "KFS".

KINGSWAY'S ADVISORS

Kingsway has engaged Norton Rose Fulbright Canada LLP as its legal advisor and Kingsdale Shareholder Services as its strategic advisor and proxy solicitor.

INFORMATION CONCERNING THE KINGSWAY NOMINEES

As set out in the Requisition, the Kingsway Nominees are John T. Fitzgerald, Gregory P. Hannon, Joshua S. Horowitz, Andrew McIntyre and R. Michael Powell. The table below sets out, in respect of each Kingsway Nominee, his name, province or state and country of residence, his principal occupation, business or employment within the five preceding years, and the number of common shares of Kobex beneficially owned, or controlled or directed, directly or indirectly, by such Kingsway Nominee.

Name, Province or
State and Country of
Residence

Present Principal Occupation, Business or Employment and Principal
Occupation, Business or Employment During the Preceding Five Years

Number of
Common
Shares
Beneficially
Owned or
Controlled or
Directed
(Directly or
Indirectly)

John T. Fitzgerald

Illinois, USA

 

Managing Member of Argo Holdings Fund I, LLC since January 2015.

Chairman and Chief Executive Officer of Hunter MFG, LLP since January 2006.

Principal of Argo Management Partners since June 2002.

 

Nil

Gregory P. Hannon

Ontario, Canada

Vice-President and Director of Oakmont Capital Inc. since December 1997.

 

Nil

Joshua S. Horowitz

New York, USA

 

Portfolio Manager and Managing Director of Palm Ventures/Palm Global Small Cap
Fund since January 2012.

Independent Consultant (Investment Management) from October 2011 until
December 2011.

Director of Research at Inverlochy Capital from September 2010 until
September 2011.

Nil

Andrew McIntyre

Ontario, Canada

Managing Director of Segwin Consulting Ltd since July 2015.

Vice-President, Corporate Development of Vicwest Inc. from October 2007 until
May 2015.

Nil

R. Michael Powell

Connecticut, USA

 

Managing Director of EarlyBirdCapital, Inc. since August 2010.

Nil

Except as provided below, to the knowledge of Kingsway, no Kingsway Nominee is, at the date hereof, or has been, within ten (10) years before the date hereof: (a) a director, chief executive officer or chief financial officer of any company that (i) was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation that was in effect for a period of more than thirty (30) consecutive days (each, an "order"), in each case that was issued while the Kingsway Nominee was acting in the capacity as director, chief executive officer or chief financial officer, or (ii) was subject to an order that was issued after the Kingsway Nominee ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer; (b) a director or executive officer of any company that, while such Kingsway Nominee was acting in that capacity, or within one (1) year of such Kingsway Nominee ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (c) someone who became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or became subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of such Kingsway Nominee.

Mr. Hannon was a director of Delhi Solac Inc., which was placed into bankruptcy on June 6, 2014.

Mr. Horowitz was appointed to the board of directors of Lincoln General Insurance Company ("Lincoln") in October 2011 (Lincoln was previously placed in voluntary runoff in February 2009). Entities operating in runoff may enter liquidation at the direction of their boards, or as requested by the relevant state insurance commission, when doing so is determined to be in the policyholders' best interests.  

To the knowledge of Kingsway, as at the date hereof, no Kingsway Nominee has been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation, or by a securities regulatory authority, or has entered into a settlement agreement with a securities regulatory authority; or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a Kingsway Nominee.

To the knowledge of Kingsway, none of the directors or officers of Kingsway, or any associates or affiliates of the foregoing, or any of the Kingsway Nominees or their respective associates or affiliates, has: (a) any material interest, direct or indirect, in any transaction since the commencement of Kobex's most recently completed financial year or in any proposed transaction which has materially affected or will materially affect Kobex or any of its subsidiaries; or (b) any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted on at the Meeting, other than the election of directors.

*           *           *           *           *           *           *

ADDITIONAL INFORMATION

The information contained in this press release does not and is not meant to constitute a solicitation of a proxy within the meaning of applicable securities laws. Although Kingsway has requisitioned the Meeting, there is currently no record or meeting date set for such Meeting and shareholders are not being asked at this time to execute a proxy in favour of the Kingsway Nominees or any other resolution set forth in the Requisition. In connection with the Meeting, Kingsway intends to file a dissident information circular (the "Information Circular") in due course in compliance with applicable securities laws.

Notwithstanding the foregoing, Kingsway is voluntarily providing the disclosure required under section 9.2(4) of National Instrument 51-102 – Continuous Disclosure Obligations in accordance with securities laws applicable to public broadcast solicitations.

This press release and any solicitation made by Kingsway in advance of the Meeting is, or will be, as applicable, made by Kingsway, and not by or on behalf of the management of Kobex. All costs incurred for any solicitation will be borne by Kingsway, provided that, subject to applicable law, Kingsway may seek reimbursement from Kobex of Kingsway's out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with a successful reconstitution of the Board.

Kingsway is not soliciting proxies in connection with the Meeting at this time, and shareholders are not being asked at this time to execute proxies in favour of the Kingsway Nominees (in respect of the Meeting) or any other resolution set forth in the Requisition. Any proxies solicited by Kingsway will be solicited pursuant to the Information Circular sent to shareholders of Kobex after which solicitations may be made by or on behalf of Kingsway, by mail, telephone, fax, email or other electronic means, and in person by directors, officers and employees of Kingsway or any proxy advisor that Kingsway may retain or by the Kingsway Nominees.

Any proxies solicited by Kingsway in connection with the Meeting may be revoked by instrument in writing by the shareholder giving the proxy or by its duly authorized officer or attorney, or in any other manner permitted by law and the articles of Kobex. None of Kingsway or, to its knowledge, any of its associates or affiliates, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted on at the Meeting, other than the election of directors to the Board.

Kobex's principal business office is Suite 1703, Three Bentall Centre, 595 Burrard Street, PO Box 49131, Vancouver, British Columbia V7X 1J1. A copy of this press release may be obtained on Kobex's SEDAR profile at www.sedar.com.

SOURCE Kingsway Financial Services Inc.

For further information: Shareholders of Kobex: Hassan Baqar, Kingsway Financial Services Inc., 1.847.700.8064, hbaqar@kingswayfinancial.com; Media: Ian Robertson, Kingsdale Shareholder Services, Vice President, Communications, Direct: 416.867.2333; Cell: 647.621.2646, irobertson@kingsdaleshareholder.com

RELATED LINKS
http://www.kingsway-financial.com

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