PASSPORT CONTINUES TO URGE SHAREHOLDERS TO REPLACE THE CURRENT DIRECTORS
OF WGI AT THE UPCOMING MEETING OF SHAREHOLDERS
SAN FRANCISCO, CA, June 16 /CNW/ - PASSPORT CAPITAL, LLC (Passport) today
stated that it views WGI Heavy Minerals, Inc.'s announcement of the proposed
sale of Transworld Garnet India (Pvt.) Limited (TGI) to V.V. Mineral, the
signing of a three-year distribution agreement with V.V. Mineral, and the
potential dividend of US$0.80 per share in cash to WGI's shareholders as
positive developments for WGI.
In a letter being delivered to all WGI shareholders, Passport continues
to urge shareholders to replace WGI's current directors at the upcoming
shareholders' meeting on June 25, 2008. Passport also confirms that its slate
of proposed directors would support the completion of the announced
transactions, provided that the transactions are bona fide and in the best
interests of WGI.
Passport urges shareholders to vote the YELLOW proxy distributed with the
letter issued today as soon as possible and prior to 5:00 p.m. (EDT) on June
20, 2008. For more information, Passport directs shareholders to please
contact Passport's proxy solicitation agent:
Kingsdale Shareholder Services Inc.
North American Toll Free Phone (1-800-775-4067);
Outside North America, Banks and Brokers Call Collect (416-867-2272)
The full text of Passport's letter to shareholders follows:
June 16, 2008
Dear fellow WGI Shareholder:
Re: WGI Heavy Minerals, Incorporated - A Need for Change
As WGI's largest shareholder and with our long-standing investment in WGI
at stake, we asked you earlier this month to vote to replace WGI's current
board with a new board of directors. After careful consideration, we concluded
that a change of leadership is necessary in order for WGI to realize on its
potential and deliver appropriate returns to all shareholders.
We welcome the announcement of the Transworld Garnet India (Pvt.) Limited
(TGI) transaction and the potential dividend of US$0.80 per share in cash.
However, the announcement of a long overdue transaction does not absolve the
current board of its responsibility for past decisions that have resulted in
dismal operating performance and a significant drop in the value of WGI's
shares. Our fundamental belief remains that our proposed shareholder-focused
board is more capable of delivering substantial upside for WGI's shareholders
over the long-term.
Despite the announcement of the TGI transaction, we vigorously disagree
that the current WGI board has dealt with our concerns. We remain as concerned
as ever with the current board's inability to act in the best interests of the
company and to create significant future value for WGI's shareholders. As a
result, we continue to urge all shareholders to vote the accompanying YELLOW
form of proxy to elect our director nominees (the "Passport Nominees").
- Passport's interests are entirely aligned with your interests.
Passport is not attempting to take "control of the board" as WGI's
current board suggests. We simply want WGI to be led by directors whom
we fundamentally believe can unlock value in WGI for all shareholders.
- WGI's statement that Passport wants control over WGI's board so as to
take control over the company's cash resources is ludicrous. WGI's
cash and cash equivalents only represent one-third of one percent of
Passport's assets under management.
- WGI's current board must be held accountable for the dismal status quo
of WGI's non-performance. From the day Covell Brown took on his
responsibilities as WGI's Chairman until the day we launched our
dissident proxy circular, WGI's share price had fallen from C$6.11 to
- WGI's current board must be held accountable for unjustifiable
executive compensation decisions. "Independent" members of WGI's
executive compensation committee saw fit in 2006 to approve
C$1.1 million in cash compensation to Mr. Brown, including a whopping
$789,009 cash bonus. WGI's share price plummeted 70% (C$2.96 to
C$0.90) in that same period. Mr. Brown and those members of the
executive compensation committee currently remain on WGI's board.
- WGI's current directors are patting themselves on the back for the TGI
transaction, and it is true that it is the only positive thing for
shareholders that they have done during their tenure. But we ask, why
did it take three and a half years for this transaction to be
announced? Between the time Mr. Brown took over in November 2004 until
the creation of WGI's special committee in May 2007, what did the WGI
Board do to protect shareholders' interests? Why did it take two and a
half years for the WGI board to realize that a strategic review was
necessary? Once the WGI board decided to deal with the TGI situation,
why did it take over a year to negotiate a sale of the TGI assets? We
do not believe that the WGI board has any valid answers to these
questions. The WGI board must be held responsible for its inaction and
inability to protect shareholders' interests.
- The Passport Nominees are comprised of six individuals that, together,
possess the required financial, operational and industry experience to
provide the strategic direction that WGI needs to protect and increase
shareholder value. Each of the Passport Nominees is truly independent
and will represent your interests.
We support a transaction in WGI's best interests but we reject management
- As a significant shareholder of WGI, Passport's interests in the
completion of the TGI transaction are entirely aligned with your
interests. Based solely on the information that has been made
available to the public, Passport welcomes the announcement of the
- Passport strongly urges shareholders to carefully consider the
following statement made by WGI's incumbent board in its letter of
June 13, 2008:
"...a change at this time jeopardizes the completion of the TGI
transaction since carefully established and maintained relationships
are particularly important to doing business in Asia."
This statement has been made in a blatant attempt to confuse and
mislead you. It is a patent display of management entrenchment of the
worst order. If the transaction is the result of an "extensive review
and negotiation by a special committee of WGI's independent
directors" then why is the transaction so tenuous as to require the
entrenchment of WGI's current directors? If the transaction is bona
fide and reflects a deal concluded by arm's length parties for their
respective benefit, then why would it be jeopardized by a change of
directors? Do you really believe that a sophisticated purchaser would
walk away from an announced deal concluded in its best interests
because a change of directors would disrupt "carefully established and
maintained relationships which are particularly important to doing
business in Asia?" This simplistic statement about doing business in
Asia does not warrant serious consideration and is not a reason to
allow WGI's current directors to entrench themselves.
- Passport has been informed by its director nominees that they are
prepared to support the completion of the proposed transaction. The
Passport Nominees intend for WGI to honour all of its commitments
provided that same are in WGI's best interests.
- Although it supports the transaction, Passport stresses that a sale of
problematic assets can hardly be hailed as a milestone achievement for
WGI's board. We remind you that WGI's board has stated that "by the
end of 2004, it was becoming apparent that WGI was having difficulty
with its operations in Andhra Pradesh", and we know that by March
2005, WGI had to declare force majeure on certain supply contracts as
its government licenses in India had been revoked.
- Given these events why did WGI's Chairman, Mr. Brown, and his team
do nothing for two and a half years?
- Why did the strategic review by WGI's special committee only
commence in May 2007? Why was a transaction only announced in June
- As the process dragged on, how much value was lost to the detriment
of WGI's shareholders while unjustifiable compensation was being
paid to WGI executives?
- As no transaction has been announced until now, why did Mr. Brown
deserve a $789,009 cash bonus for the period of April 17, 2005 to
April 17, 2006, a period in which WGI's share price continued to
plummet from C$2.96 to C$0.90?
- Has WGI only finally taken action now in response to the filing of
our dissident proxy circular?
- As has been admitted by WGI's board, Passport's complaints are
justified. However, they are not "outdated and irrelevant" as WGI's
board suggests. It is never out-of-date or irrelevant to replace a
board that deserves to be held accountable for poor performance under
its watch. It is never out-of-date or irrelevant to act as a catalyst
for improved performance and sustainable growth.
We support the cash distribution but we reject scare tactics.
- As a significant shareholder of WGI, Passport's interests in a
potential dividend of US$0.80 per share are entirely aligned with your
interests. Passport welcomes the announcement of this potential
- Passport has been informed that the Passport Nominees are prepared to
support a cash distribution to WGI's shareholders premised on the
successful completion of the TGI transaction.
- Passport does not want control over WGI's cash resources. Our course
of action is driven by one simple factor. We want WGI to be led by
directors whom we fundamentally believe can unlock value in WGI for
all shareholders and who have a superior track record of producing
results for shareholders.
- WGI's statement that Passport wants control over WGI's board so as to
take control over the company's cash resources is ludicrous. The
statement is a transparent scare tactic that does not warrant serious
consideration as a reason to entrench WGI's current directors.
Passport has approximately US$4.5 billion of assets under management.
As at March 31, 2008, WGI had cash and cash equivalents of
approximately US$16 million. WGI's cash and cash equivalents represent
only one-third of one percent of Passport's assets under management.
- Simply put, Passport has no interest in controlling WGI's cash
resources. However, Passport wants directors in place that will
safeguard WGI's cash and whom we trust will use the cash in the best
interests of the company. Given the WGI board's track record of paying
unjustifiable executive and director compensation in a period of
shareholder value erosion, we urge shareholders to strongly consider
from whose hands WGI's cash needs protecting?
- The track record of WGI's board raises legitimate and serious
questions about the safety of WGI's cash in its hands. Passport will
not support the current board as we believe they have spent too much
of WGI's cash on management and on themselves. If for no other reason,
we believe that the current board needs to be replaced to ensure that
a CEO of the company will not be awarded a $789,009 cash bonus in a
period in which WGI's shares lost approximately 70% of their value.
- Passport is not attempting to take "control of the board" as WGI's
current board suggests. Passport is a value investor with a long-term
investment horizon seeking to increase WGI's value for the benefit of
all shareholders. If the Passport Nominees are elected, there will be
no "change of control of the board" of WGI. Passport will have no
greater ownership or financial interest in WGI than it has today and
no greater ability to determine the outcome of future board elections.
Contrary to what WGI's board may suggest, the primary way that
Passport can benefit from the election of the Passport Nominees is by
increasing WGI's share price, an improvement that will benefit all
shareholders. Do not allow the scare tactics of WGI's current board
dissuade you from supporting the changes that are desperately needed
to protect the value of your investment. WGI is at a critical juncture
and the strength of its leadership will have a significant impact on
WGI's ability to deal with the significant challenges it faces and to
generate value for shareholders.
- If the Passport Nominees are elected, the new WGI board will act
independently of Passport and management and in the best interests of
all shareholders. Passport will not control the board. Each director
will have a fiduciary duty to act honestly and in good faith with a
view to the best interests of WGI and all of its shareholders.
We propose a new strategic and value-oriented direction and a clean break
from past stagnation.
- The Passport Nominees intend to change the strategic direction of WGI
by refocusing the company on the fast-growing global waterjet market.
The global waterjet market is believed to exceed $1.0 billion in
annual sales potential or twice the current level with many market
segments and regions recording double digit annual revenue growth
rates. Utilizing WGI's waterjet parts manufacturing and distribution
assets as a base, the new corporate mission will be to grow WGI into a
world leader in the waterjet cutting industry. WGI would seek to
become a vertically integrated manufacturer of waterjet cutting
systems by pursuing an aggressive consolidation of the waterjet
systems industry. Details of this strategy are outlined in Passport's
dissident proxy circular previously mailed to you (the circular is
currently available under WGI's company profile at www.sedar.com).
- WGI's current board now conveniently claims that its strategy for WGI
is fundamentally consistent with our proposed strategy. It claims to
have been carefully analyzing an expansion into the waterjet business.
WGI's past shareholder communications do not bear out this claim.
While WGI has had a special committee in place for over a year, prior
to WGI's response to our dissident proposal, we had not seen a single
communication from WGI to the effect that it would seek to become a
vertically integrated manufacturer of waterjet cutting systems. One
only has to look at WGI's June 11, 2008 announcement of the TGI
transaction. WGI's President and Interim CEO, Mr. Greg Emerson, stated
that the TGI transaction "will allow WGI to focus on its core business
of marketing and selling garnet." Mr. Emerson's very recent statement
on WGI's focus is not consistent with WGI's subsequent statement that
it has established concrete plans to expand into the waterjet
- Passport does not believe WGI's current board has the necessary in-
house experience to successfully transform WGI into a vertically
integrated manufacturer of waterjet cutting systems. Upon the election
of the Passport Nominees, Mr. Donald Siemens will be appointed as Non-
Executive Chairman of the new WGI board. Mr. Siemens, a past director
of WGI, has a detailed knowledge of the waterjet industry obtained
through various merger & acquisition assignments, including the
negotiation and recommendation of WGI's acquisition of International
Waterjet Parts, Inc. We believe Mr. Siemens is eminently qualified to
guide WGI in a new and successful direction.
- WGI stated in its recent letter to you that Mr. Siemens is an
illogical choice as a Passport Nominee given that he served as a
director of WGI in 2004-2005. What WGI failed to mention to you is
that WGI's current President and Interim CEO, Mr. Emerson, actually
contacted Mr. Siemens as recently as May 31, 2008, practically on the
eve of the filing of our dissident proxy circular, to see if Mr.
Siemens would assist WGI with its new waterjet consolidation strategy.
- Passport believes that if WGI's current board is left to its own
devices, WGI will let the growth opportunities available in the
waterjet systems industry slip away. We remind you that this is the
same board that now asks you to give it a pat on the back for a sale
of assets that was over three years in the making. It seems clear that
the current board is likely to continue to make large mistakes if
given the latitude to do so. In fact, other than the conveniently
recently announced TGI transaction, WGI's current board does not seem
to have a single example that it can provide of actions that have made
money for WGI's shareholders. How can shareholders trust the current
board to successfully embark WGI on a new strategic direction?
Passport is right to demand change. Support Passport's proposals. It is
not too late.
- Passport urges shareholders to carefully consider the following
statement made by WGI's incumbent board in its letter of June 13,
"Passport was not wrong to demand change. It was just too late. The
current Board has dealt with their concerns and positioned WGI for
enhanced shareholder value."
We vigorously disagree that the current WGI board has dealt with our
concerns. We remain as concerned as ever with the current board's
ability to act in the best interests of the company and create
significant future value for WGI's shareholders. As a result, we
continue to urge all shareholders to vote the accompanying YELLOW form
of proxy to elect the Passport Nominees.
- As conceded by WGI's board itself: "Passport was not wrong to demand
change". We would respond that we are right to continue to demand
change. WGI's incumbent board, over which Mr. Brown has presided as
Chairman since November 3, 2004, simply cannot be absolved of its
responsibility for WGI's deplorable performance over the past few
years. The fact remains that from the day Mr. Brown became Chairman
until the day we launched our dissident proxy circular, WGI's share
price had fallen from C$6.11 to C$0.78.
- The fact remains that the "independent" members of WGI's compensation
committee saw fit in 2006 to approve C$1.1 million in cash
compensation to Mr. Brown, including a whopping $789,009 cash bonus.
The fact remains that WGI's share price continued to plummet from
C$2.96 to C$0.90 in that same period.
- The "independent" members of WGI's executive compensation committee
who approved Mr. Brown's compensation at that time were Mr. Kitson
Vincent and Mr. G. Mark Curry. The fact remains that Mr. Vincent and
Mr. Curry are both part of WGI's management slate for re-election to
the WGI board, and, to our knowledge, Mr. Vincent would presumably
continue to serve on WGI's executive compensation committee.
- The WGI board's recent lip service to fixing poor corporate governance
practices, instituting changes in management and having "positioned
WGI for enhanced shareholder value" has certainly not convinced us
that WGI's board deserves to serve for another year. We believe that
management's nominees have been handpicked by Mr. Brown and can be
expected to be sympathetic to the interests of Mr. Brown and to the
entrenchment of management even to your (and our) continued detriment.
We believe that any recent changes in corporate governance reflect a
hollow last minute attempt to try to placate shareholders.
- We remind you that Mr. Brown owns less than 1% of WGI's shares. We
remind you that the current President and Interim CEO of WGI, Mr.
Emerson, owns approximately one-hundredth of 1% of WGI's shares
despite having joined the company in 1994. Lastly, we remind you that
three current directors do not own a single share of WGI.
- Passport does not normally act as a dissident shareholder. It only
embarked on this process after careful deliberation and due diligence.
Passport has concluded that it can no longer tolerate the dismal
status quo of WGI's non-performance. As a significant shareholder of
WGI, Passport's interests are entirely aligned with your interests and
it will only benefit from its current actions if you also benefit.
Most importantly, we remind you that the Passport Nominees are comprised
of six individuals, namely, Donald Siemens, Robert Atkinson, Daniel Burns,
John Nugent, Timothy Ryan and Johann Tergesen, that, together, possess the
required financial, operational and industry experience to provide the
strategic direction that WGI needs to protect and increase shareholder value.
Each of the Passport Nominees is truly independent and will represent your
interests. Under the guidance of Passport's nominees, we are confident that
WGI will be able to complete the announced TGI transaction and fulfill its
stated intention of distributing cash to shareholders. Under the guidance of
Passport's nominees, we are confident that WGI can become a world leader in
the waterjet cutting industry and that this will create significant value for
you, the WGI shareholder.
It simply is in the best interests of WGI shareholders to vote for the
Passport Nominees. You deserve better than the dismal status quo. You deserve
a new shareholder-focused board that can create significant future value.
Demand results. Demand change. Do not settle for mediocrity. It is not too
PASSPORT CAPITAL, LLC
John Burbank III
CAST YOUR VOTE NOW - HERE'S HOW
To ensure your vote counts, vote your YELLOW proxy TODAY. Time is
critical - please act immediately.
THE QUICKEST WAY TO VOTE IS TO LOG-ON TO WWW.PROXYVOTE.COM AND TO ENTER
THE TWELVE DIGIT CONTROL NUMBER THAT IS LOCATED ON YOUR YELLOW PROXY.
Your proxy must be received from you or your intermediary no later than
5:00 p.m. (EDT) on June 20, 2008 in order to ensure it will be
represented at the meeting.
Please note that if you have already voted using management's proxy, you
have every right to change your vote by simply voting the enclosed YELLOW
proxy. This action cancels all previous votes - only your latest dated proxy
ONLY FOLLOW THE DIRECTIONS ON THE YELLOW PROXY
For your proxy vote to count, you must follow the directions on the
How do I vote my YELLOW proxy?
If you are a registered shareholder (i.e. you do not hold your shares
with a broker), sign, date and fax your YELLOW proxy to the number indicated
on the proxy form. If you do not have access to a fax machine, please return
the YELLOW proxy promptly in the postage-paid envelope provided.
If you hold your shares with a broker (i.e. you are a non-registered
holder), sign, date and return your YELLOW proxy or YELLOW voting instruction
form to the FAX number indicated on the YELLOW proxy form or YELLOW voting
instruction form, or otherwise follow the instructions on your YELLOW proxy
form or voting instruction form.
I have multiple holdings. Do I need to return a proxy for each holding?
Yes. If you hold your shares in multiple accounts, you will receive a
YELLOW proxy for each account. In order to ensure that your common shares are
fully represented at the meeting on June 25, 2008, it is important that you
properly execute and return each YELLOW proxy that you receive.
Please contact our proxy solicitor if you have questions about the
Passport materials, or need assistance in voting?
KINGSDALE SHAREHOLDER SERVICES INC.
The Exchange Tower
130 King Street West, Suite 2950, P.O. Box 361
North American Toll Free Phone:
Outside North America, Banks and Brokers Call Collect:
Toll Free Facsimile: 1-866-545-5580
PASSPORT CAPITAL, LLC
Passport Capital, LLC is a San Francisco based global investment firm
with approximately US$4.5 billion of assets under management. Passport and its
principals have extensive experience investing in the Canadian, U.S. and
global capital markets. The funds it manages are long-term, value-oriented
shareholders which, as of the date hereof, collectively own or control an
aggregate of 3,080,500 common shares of WGI, representing approximately 13.1%
of the currently outstanding common shares, making them today the largest
shareholders of WGI.
Certain statements contained in this press release may constitute
forward-looking statements. Such statements reflect Passport's current views
and intentions with respect to future events and are subject to certain risks,
uncertainties and assumptions. Many factors could cause the actual results,
performance, actions or achievements of WGI or others that may be expressed or
implied by such forward-looking statements to vary from those described herein
should one or more of these risks or uncertainties materialize. Such factors
include, but are not limited to, economic, business, technological,
competitive and regulatory factors as well as the terms of contractual
commitments to which WGI is subject of which Passport is not aware.
For further information:
For further information: Kingsdale Shareholder Services Inc.
(1-800-775-4067 or (416) 867-2272 (collect calls accepted))