SYMBOL: HIS (TSXV)
LAVAL, QC, Dec. 23, 2014 /CNW Telbec/ - Hart Stores Inc. (TSXV: HIS) is pleased to announce that it has entered into a Merger Agreement and related agreements with 9102221 Canada Inc. (the "Purchaser"), a newly-incorporated corporation owned by a third party at arm's-length from Hart Stores, in order to sell, in effect, all of the 13,662,296 issued and outstanding shares of Hart Stores to the Purchaser at a price of $0.20 per share. The transaction will be effected by way of an amalgamation of Hart Stores and the Purchaser under the Canada Business Corporations Act (the "Amalgamation"). Under the Amalgamation, all of the 13,662,296 common shares of Hart Stores will be cancelled and shareholders will receive $0.20 in cash for each share held in consideration for the cancellation of the shares. The total purchase price is approximately $2.73 million. Immediately after the Amalgamation, it is expected that the Purchaser will continue to carry on the operations of Hart Stores.
The Amalgamation is subject to approval by the shareholders of Hart Stores. In this regard, Hart Stores has called a special meeting of shareholders, to be held at Hart Stores' head office in Laval, Quebec on February 6, 2015, to vote on the Amalgamation. Hart Stores will mail a detailed management information circular to shareholders shortly after the record date of January 6, 2015 for the special meeting.
If shareholders approve the Amalgamation, it is expected to take effect on or about February 9, 2015. As a result, shareholders will cease to hold shares of Hart Stores.
H & N Family Subco Inc., which holds 7,998,900 shares of Hart Stores, and Mr. Harry Hart, who holds 278,240 shares, representing in the aggregate 8,277,140 shares or 60.6% of the outstanding shares of Hart Stores, have entered into a Support and Voting Agreement with the Purchaser under which they have agreed irrevocably to support and vote their shares in favour of the Amalgamation. Mr. Harry Hart, the founder, Executive Chairman and Chief Executive Officer of Hart Stores, and members of his immediate family directly or indirectly own H & N Family Subco Inc. Under the Support and Voting Agreement, H & N Family Subco Inc. and Mr. Hart have agreed, among other things, not to take any action which may in any way adversely affect the success of the Amalgamation.
The Board of Directors of Hart Stores, after consultation with its financial and legal advisors, unanimously approved entering into the Merger Support. In doing so, the Board of Directors determined that the Amalgamation is fair to the shareholders of Hart Stores and in the best interests of Hart Stores, and authorized the submission of the Amalgamation to shareholders for their approval at the special meeting to be held on February 6, 2015.
In making its determination, the Board of Directors considered, among other things, an opinion from Burkman Capital Corporation to the effect that, as of December 23, 2014 and based upon and subject to the limitations, assumptions and qualifications contained therein, the consideration of $0.20 cash per share to be received by the shareholders in the Amalgamation is fair, from a financial point of view, to the shareholders. A copy of the fairness opinion will be included in the management information circular to be mailed to shareholders.
To be effective, the Amalgamation must be approved by a special resolution of the shareholders. The requisite approval for the special resolution will be two-thirds of the votes cast on the special resolution by shareholders present in person or represented by proxy and entitled to vote at the special meeting. The Amalgamation is also subject to satisfaction of certain conditions set out in the Merger Agreement. The Board of Directors unanimously recommends that shareholders vote for the special resolution.
The Amalgamation is fully funded. In this regard, the Purchaser has placed approximately $2.73 million, representing the aggregate amount of all payments to shareholders, in escrow with Fasken Martineau DuMoulin LLP, counsel to Hart Stores, as escrow agent, pursuant to an Escrow Agreement. In the event that the Amalgamation is completed, Fasken Martineau DuMoulin LLP, as escrow agent, will deliver the escrowed funds to the party acting as depositary for the Amalgamation, which will use the escrowed funds to make the cash payment of $0.20 per share to Hart Stores shareholders pursuant to the Amalgamation.
The Merger Agreement contains customary deal-protection provisions in favour of Hart Stores for a transaction of this kind. The Purchaser and Hart Stores are at arm's-length. Hart Stores will file a copy of the Merger Agreement and related agreements on SEDAR.
The shares of Hart Stores have been subject to cease-trade orders issued by five Canadian provincial securities commissions since August 2012. In connection with the Amalgamation, Hart Stores has obtained partial revocation orders from the five provincial securities commissions, as a result of which the Amalgamation may be completed. Copies of the five partial revocation orders will be included in Hart Stores' management information circular.
Burkman Capital Corporation is acting as financial advisor and Fasken Martineau DuMoulin LLP is acting as legal counsel to Hart Stores in connection with the Amalgamation.
Hart Stores also announces its financial results for the third quarter ended November 2, 2014.
For the third quarter, sales reached $18.2 million compared to $19.7 million for the same period in the previous year. Comparable store sales decreased by 7.8% over the same period in the previous year. The Company reported a net loss of $2,388,000 or $0.17 per share compared to a net loss of $1,386,000 or $0.10 per share for the same period in the previous year.
For the nine-month period ended November 2, 2014, sales reached $53.5 million compared to $57.9 million for the comparable period in the previous year. Comparable store sales decreased by 7.8% over the same period in the previous year. The Company reported a net loss of $6,237,000 or $0.46 per share for this period compared to a net loss of $3,892,000 or $0.28 per share for the same period last year.
As of November 2014, $4.5 million of the total $6.0 million in payments agreed under the terms of the Company's CCAA Plan of Arrangement have been paid to the Company's unsecured creditors as scheduled under the Plan of Arrangement. The final payment of $1.5 million is scheduled for February 2015.
ABOUT HART STORES INC.:
Hart Stores Inc. operates a network of 61 mid-sized department stores located in secondary and tertiary markets in Eastern Canada, where the Company has established a dominant position in many of the communities that it serves. The stores offer an extensive and differentiated selection of national and exclusive fashion apparel brands as well as family footwear, home furnishings, electronics, appliances, giftware, toys and seasonal goods.
Certain statements included in this news release may constitute "forward-looking statements" within the meaning of the Canadian securities legislation and regulations. Such forward-looking statements involve assumptions, known and unknown risks, uncertainties and other factors that may affect our ability to implement our strategies and plans, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. You should not place undue reliance on these forward-looking statements, which are made only as of the date of this press release. In particular, the timing and completion of the proposed Amalgamation are subject to certain conditions, termination rights and other risks and uncertainties. Accordingly, there can be no assurance that the proposed Amalgamation will occur, or that it will occur on the timetable or on the terms and conditions contemplated. We refer you to the Company's filing with the Canadian securities regulatory authorities for a discussion of other factors and risks that may affect the Company's future results.
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 the release.
SOURCE: Hart Stores Inc.
For further information: Mr. Franco Messina, VP Finance and CFO, (450) 661-4155