Kingsway will replace the self-interested, unqualified directors who
have presided over years of value destruction and implement a plan to
create long-term value for all shareholders including a share buyback.
Kingsway's five new independent Director nominees are aligned with
shareholders and committed to reducing expenses and exploring strategic
alternatives that will eliminate the discount between Kobex's share
price and intrinsic value and return money to shareholders as quickly
Once Kingsway's independent nominees are elected the nominees support
providing shareholders with the opportunity to participate in a share
repurchase program at a $0.65 per share 18% premium.
Because Kingsway is confident in its plan to create value, and has heard
from many shareholders who are frustrated by being held hostage in an
underperforming investment, Kingsway is commencing a $0.65 per share
18% premium tender offer now, on an extremely limited basis, to provide
the liquidity shareholders have been denied by the current board.
TORONTO, Oct. 13, 2015 /CNW/ - Kingsway Financial Services Inc. ("Kingsway") launches its campaign to upgrade Kobex Capital Corp. ("Kobex") by releasing a compelling letter to shareholders outlining Kingsway's
case for change and commencing a premium tender offer at $0.65 per
In connection with the Meeting that has been scheduled by Kobex to take
place on Tuesday, November 17, 2015 (the "Meeting"), Kingsway filed a dissident proxy circular dated October 13, 2015
(the "Information Circular") and BLUE form of proxy that will be mailed to the shareholders of Kobex as of
October 1, 2015 (the "Record Date"). The Information Circular and letter to shareholders provides
detailed information about Kingsway's director nominees and
shareholder-focused agenda for change at Kobex. The Information
Circular and the shareholder letter set out below may be viewed at www.kobexupgrade.com.
Shareholders with questions about the premium tender offer, or who
require assistance tendering their shares or voting their BLUE proxy for Kingsway's nominees are encouraged to call Kingsway's proxy
solicitation agent and depositary Kingsdale Shareholder Services at
1-855-683-3113 (North American Toll Free Number) or 1-416-867-2272
(collect outside North America) or email at email@example.com.
Below is the full text of Kingsway's letter to shareholders:
Dear Fellow Shareholder,
If you are anything like me, you are frustrated with the inability to
create change in companies that put money in the hands of management
and the board while you receive nothing in return. In fact, you've
lost money -- and if the current Kobex board remains in place we
wouldn't expect anything to change!
We've decided to do something about it.
We're going to replace the self-interested, unqualified directors who
have presided over years of value destruction, implement a plan to
create long-term value for all shareholders and initiate a strategy to
provide you with an opportunity for the liquidity you have been denied.
STEP 1: UPGRADE THE KOBEX BOARD
A better Kobex starts with better leadership. As the desperate, shrill
letter the Kobex board sent to you shows, the truth is never easy to
handle, even if it is long overdue. The truth is the current
directors of Kobex have failed miserably at creating value for
shareholders. Instead of giving you pages and pages of irrelevant
graphs and charts about how bad managers can destroy value before new
leadership comes in, only one matters and tells the truth:
To view the graphic, please click http://files.newswire.ca/1437/kingsway.pdf
For far too long, Kobex's current management has taken fees from the company without any
results. This shouldn't come as a surprise since most of the directors don't
actually own any shares of the company. In August, we learned the current board approved stock options at over 20% below the per share value of cash and marketable securities held by Kobex. Even if the company continues to lose our money, they could earn a
return for themselves by just giving us our capital back.
While they have used our capital to pay themselves, share price has
languished because this board has no plan. Their investment strategy consists of lurching from one-off investment
to one-off investment with no plan to build long-term value. This too
shouldn't come as a surprise given the expertise of the current board
is limited to investing in minerals. While the business model for Kobex has changed, the qualifications of
its directors have not.
It is clear that the board that got Kobex to where it is today cannot
get it to where it needs to go. Kingsway's qualified, independent
nominees have the experience and track record needed to create value
for all shareholders.
It's time for a change. It's time to upgrade Kobex.
STEP 2: IMPLEMENT A PLAN TO CREATE REAL LONG-TERM VALUE FOR ALL
Kobex is in a unique position to create value. The significant cash position and the deferred tax asset
(unfortunately created through the significant losses incurred by Kobex
over many years) along with a TSXV listing could be utilized to provide
value to all shareholders. Unfortunately, the current management and board are equally unmotivated
and unqualified to take advantage of this opportunity.
Our philosophy for change starts by creating an alignment between the
owners and managers of a business. We believe our company should be managed for all shareholders, not a
select few who have conflicts and other relationships outside of
Kobex. Here is our plan to upgrade Kobex and rapidly return cash to
Replace the conflicted, self-interested incumbent directors with five
highly-qualified, independent directors.
Leverage the strong, proven track record of Kingsway's principals to
create value for all shareholders.
Reduce corporate expenses and ensure alignment with all shareholders by
reducing director pay from current levels to $10,000 per director
annually, and committing to vote against any compensation package that
provides stock below intrinsic value.
Explore strategic alternatives that will eliminate the discount between
share price and intrinsic value.
You should know that the management team at Kingsway and our independent
director nominees have a long proven track record of creating value for
all shareholders. Below are a few examples:
Atlas Financial Holdings (NASDAQ: AFH) was initiated as a merger with a
capital pool company (CPC) that has created significant value for
United Insurance Holdings (NASDAQ: UIHC) was a reverse merger organized
by principals of Kingsway and has created significant value for
Kingsway was involved in providing the capital to Concordia Healthcare
(TSX: CXR) to help it prepare for a merger with a CPC and providing a
665.76% return for subscription right buyers.
In fact, even before we've had a chance to lend our management and
leadership expertise to Kobex, we have already provided the catalyst
for results. Before we started investing in Kobex it was trading at
$0.45 per share. It is our purchases, not the decisions of management,
that have moved the share price up to $0.55 per share.
STEP 3: PROVIDE THE LIQUIDITY YOU HAVE BEEN DENIED
We understand the many shareholders who are frustrated by being held
hostage in an underperforming investment. Once the Kingsway nominees
are elected and our plan for Kobex is underway, our plan is to provide
you with a choice by initiating a share repurchase program.
We plan to provide shareholders who want to leave their investment in
Kobex with a future opportunity for liquidity at a $0.65 per share 18%
We understand how important liquidity is to shareholders and believe in
our plan to create value so much that we are providing shareholders who
want to exit their Kobex investment now with an immediate $0.65 per
share 18% premium tender offer. Unfortunately, due to the oppressive Shareholder Rights Plan put in
place by the entrenched Kobex board, we may only able to take up an
extremely limited number of shares until the full board is replaced.
Once the board is replaced, our independent director nominees, acting
in accordance with their fiduciary duties to Kobex, support providing
shareholders with a more fulsome liquidity at the same 18% premium.
BE PART OF THE KOBEX UPGRADE
Choosing to remain with me as a Kobex shareholder and voting to replace
the current board means you will benefit from our plan to create value
for all shareholders. Kingsway's nominees are committed to reducing expenses, exploring all
value creation opportunities and incentivizing proven managers that
will work diligently to find us opportunities.
It is important you vote your BLUE proxy by 9:00 am (Toronto time) on November 13, 2015. If you need
help voting or want to participate in our $0.65 per share premium
tender offer, please call our proxy solicitation agent and depositary
Kingsdale Shareholder Services at 1-855-683-3113 (North American Toll
Free Number) or 1-416-867-2272 (collect outside North America) or email
Larry G. Swets, Jr.
Kobex shareholder and President, CEO and Director of Kingsway Financial
ABOUT KINGSWAY'S INDEPENDENT AND EXPERIENCED BOARD NOMINEES
Kingsway believes that it is time for new independent leadership on the
board of directors of Kobex (the "Board"). As set out in the Information Circular, Kingsway 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
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 Information Circular
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 THE PREMIUM TENDER OFFER
Kingsway is pleased to announce its premium tender offer to purchase
from shareholders of Kobex, at a price of $0.65 per common share of
Kobex (each, a "Share") up to the greater of: (i) the number of Shares (and associated SRP
Rights (as defined in the Rights Plan)) that Kingsway will be permitted
to take-up without triggering Kobex's shareholder rights plan dated
October 8, 2015 (the "Rights Plan"); or (ii) in the event that the Rights Plan is cease-traded, waived, or
otherwise not in effect at the time of take-up under the Premium Tender
Offer (as defined below), the number of Shares (and associated SRP
Rights) that will result in Kingsway owning not more than 19.9% of the
issued and outstanding Shares (or such lesser number of Shares that
will not otherwise trigger the formal take-over bid requirements of
applicable securities laws) upon the terms and subject to the
conditions set out below (the "Premium Tender Offer"). The Premium Tender Offer is open for acceptance until 5:00 p.m.
(Toronto time) on Monday, November 2, 2015 (the "Expiry Time"), or until such later or earlier time that the Premium Tender Offer may
be extended or varied, or until the Premium Tender Offer is withdrawn
by Kingsway, subject to the terms of the Premium Tender Offer.
As of today's date, Kingsway owns 14.87% of the issued and outstanding
Shares. If the Rights Plan remains in effect at the time of take up, Kingsway
may only be entitled to acquire a very small number of Shares under the
Premium Tender Offer.
The purchase price under the Premium Tender Offer of $0.65 is equal to a
18.2% premium to the $0.55 closing price of the Shares on the TSXV on
October 9, 2015 (the last trading day prior to the announcement of the
Premium Tender Offer) and on September 8, 2015 (being the day prior to
Kingsway's early warning report dated September 9, 2015 related to the
acquisition of Shares at $0.65).
In order to validly deposit Shares to the Premium Tender Offer,
shareholders must deliver a proxy or otherwise provide evidence
acceptable to Kingsway that such depositing shareholder shall have
voted in favour of the election of Kingsway's director nominees for
election to the board of Kobex, and the other resolutions proposed by
Kingsway at the special meeting of Kobex shareholders to be held on
November 17, 2015 or any adjournments or postponements thereof in
respect of all Shares deposited to the Premium Tender Offer (the "Deposited Shares"), regardless of the number of Deposited Shares actually taken up and
paid for by Kingsway under the Premium Tender Offer. Such proxy may be
revoked as set out in the Premium Tender Offer.
Subject to the conditions to the Premium Tender Offer being satisfied or
waived at the Expiry Time: (i) if the Rights Plan remains in place as
of the Expiry Time of the Premium Tender Offer, Kingsway will take up
all Shares deposited to the Premium Tender Offer up to the limit of
which it is permitted to acquire under the Rights Plan; or (ii) in the
alternative, if the Rights Plan has been cease-traded, waived, or is
otherwise inapplicable to the Premium Tender Offer (as determined by
Kingsway, acting reasonably), then Kingsway reserves the right to
extend, vary or withdraw the Premium Tender Offer unless a minimum of
5% of the issued and outstanding Shares is tendered to the Premium
Tender Offer, in which case Kingsway will take up to a maximum of
2,289,296 Shares or such lesser number of Shares that will not
otherwise trigger the formal take-over bid requirements of applicable
ADDITIONAL INFORMATION ON THE PREMIUM TENDER OFFER
Full details of the Premium Tender Offer are included in the offer
document that will be mailed to all Kobex shareholders and the
accompanying letter of transmittal, complete with instructions for the
tendering and delivery of Shares. In order to deposit their Shares to
the Premium Tender Offer, shareholders must complete the documentation
and follow the instructions provided in the Premium Tender Offer or by
their investment dealer, broker or other nominee. Investment dealers,
brokers and other nominees may set a deadline for the delivery of
deposit instructions that is earlier than the Expiry Time, and as such,
shareholders should contact their investment dealer, broker or other
nominee for assistance at their earliest convenience.
The Premium Tender Offer will be subject to certain conditions set out
in the letter to shareholders which, unless waived, must be satisfied.
Shareholders are directed to read the Premium Tender Offer in its
Pro Rata Take Up
If more than the maximum number of Shares for which the Premium Tender
Offer is made are delivered in accordance with the Premium Tender Offer
and not withdrawn at the time of take up of the Shares, the Shares to
be purchased from each depositing shareholder will be determined on a
pro rata basis according to the number of Shares delivered by each
shareholder, disregarding fractions, by rounding down to the nearest
whole number of Shares.
Withdrawal of Premium Tender Offer
If the Premium Tender Offer is withdrawn by Kingsway, Kingsway shall
immediately cause all Shares delivered pursuant to the Premium Tender
Offer to be returned to shareholders and all proxies associated with
such Shares will be deemed to be revoked.
Withdrawal of Deposited Shares
Unless otherwise required or permitted by applicable law, any Deposited
Shares may be withdrawn by or on behalf of the depositing shareholder
at any time before such Deposited Shares are taken up by Kingsway. If
payment for Shares taken up by Kingsway is not made within three
business days of take up, shareholders may withdraw the Shares they
deposited to the Premium Tender Offer. In either circumstance, all
proxies associated with such withdrawn Shares will be deemed to be
Revocation of Proxies
Any proxies solicited by Kingsway in connection with the Meeting, other
than proxies in respect of Shares taken up and paid for by Kingsway
under the Premium Tender Offer, may be revoked at any time before the
start of the Meeting by following the instructions for revocation set
out in Kingsway's Circular, providing instructions to the shareholder's
investment dealer, broker or other nominee, or by simply subsequently
submitting a vote in favour of management of Kobex. After take up,
shareholders will also be provided with a toll free phone number to
facilitate the immediate revocation of any proxies associated with
Shares not taken up by Kingsway under the Premium Tender Offer, if they
Take Up and Payment for Shares
If any Shares are taken up pursuant to the Premium Tender Offer,
Kingsway shall forthwith widely disseminate a press release that states
the number of Shares taken up under the Premium Tender Offer on a
pro-rated basis. Kingsway will pay for Shares not later than three
business days after taking up the Shares.
Extension of Premium Tender Offer
If there is a further extension of the Premium Tender Offer past
November 2, 2015, Kingsway will announce the number of Shares deposited
under the Premium Tender Offer as at the date of extension.
Notices to Shareholders regarding the Premium Tender Offer
Kingsway will continue to provide the market with timely updates by way
of press release, and any material updates to the terms of the Premium
Tender Offer will be disseminated by way of notice mailed to each
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 has engaged Norton Rose Fulbright Canada LLP as its legal
advisor and Kingsdale Shareholder Services as its strategic advisor and
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. In connection with the Meeting, Kingsway
filed the Information Circular and BLUE form of proxy on October 13, 2015 in compliance with applicable
securities laws. The Information Circular and BLUE form of proxy will be mailed to each shareholder of Kobex as of the
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
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.
Any proxies solicited by Kingsway will be solicited pursuant to the
Information Circular to be mailed to shareholders of Kobex as of the
Record Date 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 by the
Kingsway Nominees, or by Kingsdale Shareholder Services, Kingsway's
proxy solicitor, all as more fully described in the Information
Circular. The cost of the solicitation services to be provided by
Kingsdale Shareholder Services is approximately $50,000.
Any proxies solicited by Kingsway in connection with the Meeting may be
revoked (a) by completing and signing a valid form of proxy bearing a
later date and returning it in accordance with the instructions
contained in the form of proxy, or as otherwise provided in the
Information Circular; (b) by depositing an instrument in writing
executed by a registered holder of shares of Kobex or by a registered
holder's attorney authorized in writing (or, if the registered holder
of shares of Kobex is a corporation, by a duly authorized officer or
attorney) and deposited either at the principal business office of the
Kobex (Suite 1703 - 595 Burrard Street, Vancouver, BC V7X 1J1) at any
time up to and including the last business day preceding the day of the
Meeting; (c) by attending the Meeting and reporting to the desk of
Computershare Investor Services Inc. (the transfer agent and registrar
of Kobex) to sign in and revoke any proxy previously given; or (d) in
any other manner permitted by law.
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
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
SOURCE Kingsway Financial Services Inc.
PDF available at: http://stream1.newswire.ca/media/2015/10/13/20151013_C9987_DOC_EN_44310.pdf
For further information:
Shareholders of Kobex:
Kingsway Financial Services Inc.
Kingsdale Shareholder Services
Vice President, Communications
Direct: 416.867.2333; Cell: 647.621.2646