THE GOLDFARB CORPORATION ANNOUNCES PROPOSED GOING PRIVATE TRANSACTION

TORONTO, April 21 /CNW/ - The Goldfarb Corporation (NEX: GDF.H) (the "Corporation") announced today that it intends to seek shareholder approval for a proposal by Martin Goldfarb, President and CEO of the Corporation, and Stanley Goldfarb, a director of the Corporation (collectively, the "Majority Shareholders") to take the Corporation private.

The Corporation plans to structure the going-private transaction as a consolidation (the "Consolidation") of the Class A subordinate voting shares in the capital of the Corporation (the "Subordinate Voting Shares") on the basis of one post-Consolidation Subordinate Voting Share for every 1,597,578 Subordinate Voting Shares held immediately prior to the Consolidation (the "Going Private Transaction"). Upon completion of the Consolidation, 2282173 Ontario Limited ("Acquireco"), a company wholly-owned and controlled, directly or indirectly, by the Majority Shareholders, will be the sole shareholder of the Corporation. The Majority Shareholders, together with their associates, collectively beneficially own, or exercise control or direction over, directly or indirectly, 1,597,578 Subordinate Voting Shares, representing 27.76% of the currently outstanding Subordinate Voting Shares and 100% of the currently outstanding Class B Shares in the capital of the Corporation, which shares represent, in the aggregate, approximately 51.0% of the votes attaching to all issued and outstanding Subordinate Voting Shares and Class B Shares.

Shareholders who hold fractional shares upon completion of the Consolidation (collectively, the "Minority Shareholders" and for greater certainty does not include a dissenting shareholder or Acquireco) will receive for each pre-Consolidation Subordinate Voting Share a cash payment equal to (i) their pro-rata share of the cash and cash equivalents of the Corporation net of all liabilities on the date that is one business day prior to the effective date of the Consolidation (the "Net Cash") and (ii) the Premium (collectively, the "Consideration").

The "Premium" payable to the Minority Shareholders consists of $0.10 per Subordinate Voting Share plus the Incremental Costs which shall be distributed to the Minority Shareholders on a pro rata basis. The "Incremental Costs" represent the actual fees, costs and expenses plus applicable non-recoverable taxes which are attributable to the cost of the Going Private Transaction and which exceed the costs otherwise attributable to a wind-up of the Corporation in the ordinary course, such amount not to exceed $75,000.

Concurrent with the completion of the Going Private Transaction, the Corporation will apply to have its Subordinate Voting Shares de-listed from the NEX Board of the TSX Venture Exchange. It will also apply to the securities regulatory authorities to cease to be a reporting issuer in each province in which it is currently a reporting issuer.

A special meeting (the "Meeting") of the Corporation's shareholders has been called for Thursday June 9, 2011, at which time shareholders will be asked to consider and, if deemed advisable, approve the Going Private Transaction. All shareholders of record as of Monday May 9, 2011 (the "Record Date") will be entitled to receive notice of and to vote at the Meeting on the basis of one vote for each Subordinate Voting Share held. In connection with the Meeting, the Corporation will distribute a management information circular and accompanying meeting materials, including the audited annual financial statements of the Corporation and related management's discussion and analysis for the financial year ended December 31, 2010, to all shareholders of record as of the Record Date.

Under the Business Corporations Act (Ontario), the Going Private Transaction requires the approval of two-thirds of the votes cast by shareholders at the Meeting. In addition, because the going private transaction constitutes a "business combination" for the purposes of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101"), the Going Private Transaction must also be approved by the Minority Shareholders by a simple majority of the votes cast by the Minority Shareholders at the Meeting.

The Going Private Transaction is exempt from the formal valuation requirement of MI 61-101 because the Corporation is not listed on a "specified market" within the meaning of section 4.4(a) of MI 61-101.

On January 5, 2011, the Board of Directors of the Corporation (the "Board") established a special committee of independent directors (the "Special Committee") comprised of Irving Abella (Chair) and Robert Sutherland. The Board, acting on the recommendation of the Special Committee, has unanimously approved the Going Private Transaction and determined it to be in the best interests of the Corporation and fair to Minority Shareholders. In reaching its conclusions, the Special Committee and the Board considered a number of factors in evaluating the Going Private Transaction, including, but not limited to, the following:

  • Fairness Opinion - The receipt of a fairness opinion from its financial advisor, Meyers Norris Penny LLP, that concludes the Going Private Transaction is fair, from a financial point of view, to the Minority Shareholders.

  • Amount and Form of Consideration - The Consideration provides immediate liquidity and certainty to the Minority Shareholders. The Premium, which forms part of the Consideration, represents an opportunity to receive additional cash consideration compared to an ordinary wind-up of the Corporation.

  • Costs of Executing the Going Private Transaction - The Support Agreement provides that the Incremental Costs, which shall not exceed $75,000, are payable to the Minority Shareholders.

  • Liquidity and Comparison with Open Market Share Prices - The Subordinate Voting Shares are thinly traded and it is unlikely that significant amounts of Subordinate Voting Shares could be offered on the public market without causing some downward pressure on pricing, and/or delays in finding buyers for the shares. As a result, selling the Subordinate Voting Shares on the open market is likely an unattractive alternative for the Minority Shareholders.

  • Utilization of Tax Losses - The Corporation has unused non-capital and net capital losses (collectively, the "Tax Losses"). Since the Corporation was not carrying on active business prior to the Going Private Transaction, the business which gave rise to the non-capital losses of the Corporation cannot be carried on by a third party acquirer of control of the Corporation for profit or with a reasonable expectation of profit throughout the particular taxation year in which the deduction is sought. Furthermore, the Corporation's net capital losses also cannot be utilized by a third party acquirer of control of the Corporation. In the context of a divestiture, the Tax Losses can only be utilized by the Corporation if control is maintained by the Majority Shareholders and, as a result, the Tax Losses are not readily marketable to third parties.

  • Contingent Litigation - As at the date hereof, the outcome of certain litigation instigated by the Corporation (the "Litigation") cannot be estimated with any level of certainty. Furthermore, additional legal fees, which are also difficult to estimate, need to be incurred. Any interest in any future settlement of the Litigation has little market value to a third party acquirer given the uncertainty related to the outcome.

  • The NEX Listing - The Corporation's Subordinate Voting Shares are listed on the NEX board of the TSX Venture Exchange.  A NEX listing has limited market value given that alternative entities exist on more prominent exchanges (e.g., capital pool corporations listed on the TSX Venture Exchange).

  • Alternatives to the Going Private Transaction - The Special Committee also considered that:

    • actual open market alternatives for realizing value are uncertain given the uncertain outcome of the Litigation and the lack of transferability of the Tax Losses. There is also uncertainty about alternative arm's length transactions related to timing, transaction structure, consideration, risk of future changes to market, economic, and company specific conditions, etc.;

    • in the absence of the Going Private Transaction or an alternative transaction, the Corporation would continue to incur operating costs including administration, management, occupancy and compliance; and

    • the Majority Shareholders have voting control and, therefore, may reject any alternative transaction.

  • No Brokerage Fees or Commissions - The Going Private Transaction will allow each Minority Shareholder to dispose of his, her or its Subordinate Voting Shares for the Consideration without incurring brokerage fees or commissions.

  • Dissent Rights - The Going Private Transaction will provide Minority Shareholders with the right to dissent in respect of the Going Private Transaction and to be paid the fair value of his, her or its Subordinate Voting Shares upon strict compliance with the provisions of Section 185 of the Business Corporations Act (Ontario).

  • Shareholder Approvals - The Going Private Transaction will be approved by: (a) not less than two-thirds of the votes cast in respect thereof by shareholders  attending the special meeting of the shareholders to approve the Going Private Transaction (the "Meeting"); and (b) a "majority of the minority" of the votes cast in respect thereof, for purposes of MI 61-101, by the Minority Shareholders (which for greater certainty will exclude the votes of the Majority Shareholders) attending the Meeting in person or represented by proxy.

  • Fiduciary Out -  The terms of the Support Agreement do not include any provision that requires the Corporation to cause any of its directors to take any action, or refrain from taking any action, that would prevent such individual from fulfilling his fiduciary obligations as a director of the Corporation.

  • No Termination Fee - The terms of the Support Agreement permit the Corporation to terminate the Support Agreement (in the circumstances described therein) without the payment of a termination fee while still requiring Acquireco and the Majority Shareholders to pay the Incremental Costs in such circumstances.

Forward-looking Statements
Certain statements included in this release contain words such as "could", "expects", "expectations", "may", "anticipates", "believes", "intends", "estimates" and "plans" (and similar expressions) and constitute "forward-looking statements" within the meaning of applicable securities law. These statements are based on the Corporation's current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which the Corporation and its subsidiaries operate. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which are difficult to predict and may cause the actual results, performance or achievements of the Corporation, or outcomes or results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, such factors which are described in the Corporation's management's discussion and analysis of operations and other filings with Canadian regulatory authorities. These statements, although considered reasonable by the Corporation at the date of this press release, may prove to be inaccurate and consequently the Corporation's actual results could differ materially from its expectations as set out or implied in this release. Unless otherwise required by applicable securities laws, The Corporation disclaims any intention or obligation to update or revise any forward-looking statements.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

The Goldfarb Corporation trades on the NEX Board of the TSX Venture Exchange under the symbol GDF.H.

SOURCE Goldfarb Corporation

For further information:

Ms. Karen Killeen, Chief Financial Officer of the Corporation at 416-928-3710

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Goldfarb Corporation

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