TORONTO, May 20 /CNW/ - Jaguar Financial Corporation (TSX: JFC)
("Jaguar") today announced that it has commenced an application in the Ontario
Superior Court of Justice against Kinbauri Gold Corp. ("Kinbauri", TSX-V: KNB)
and its wholly owned subsidiary Kinbauri Espana S.L. ("Kinbauri Espana"), the
directors of Kinbauri, Glen Eagle Resources Inc. ("Glen Eagle", TSX-V: GER)
and Paradise Peak Holdings on the basis, among other things, that the business
and affairs of Kinbauri have been conducted in a manner that is oppressive,
unfairly prejudicial to, and which unfairly disregards the interests of,
Jaguar owns 4,830,500 common shares of Kinbauri, representing
approximately 9.1 percent of Kinbauri's issued and outstanding shares.
Basis for Oppression Claim
On the morning of May 11, 2009, Orvana Minerals Corp. ("Orvana", TSX:
ORV) announced its intention to commence an all cash take-over bid for
Kinbauri for $0.55 per Kinbauri share (the "Orvana Offer").
Later that morning, Kinbauri issued a press release indicating that its
Board had unanimously rejected the Orvana Offer. There was no evidence that
the Kinbauri Directors obtained a fairness opinion or other independent
financial or legal advice on which to base their rejection of the Orvana
On May 12, 2009, Kinbauri announced that it had entered into a definitive
agreement to complete a transaction on or about May 29, 2009, with Glen Eagle,
essentially a public shell company, whereby Kinbauri will sell up to half of
its subsidiary and affiliate, Kinbauri Espana, to Glen Eagle (the "Glen Eagle
Transaction") for $5.9 million and the advance of a shareholder loan by Glen
Eagle to Kinbauri Espana in the amount of $31.1 million. Kinbauri made this
decision notwithstanding that Orvana had publicly announced that the Orvana
Offer would be conditional upon Kinbauri not completing the Glen Eagle
Transaction. Kinbauri does not plan to seek shareholder approval of the Glen
As a result of the proposed condition of the Orvana Offer, Kinbauri
shareholders will be deprived of the opportunity to respond to the Orvana
Offer if the Glen Eagle Transaction is completed. Jaguar therefore believes
that the decision to proceed with the Glen Eagle Transaction in the face of
the Orvana Offer constitutes an impermissible defensive tactic designed to
defeat the Orvana Offer. Jaguar believes that this is contrary to the
reasonable expectations of all Kinbauri shareholders that are unrelated to
management, and is therefore oppressive.
Because the Glen Eagle Transaction would entail the disposition of 50
percent of the El Valle Project, Jaguar also believes that the completion of
this transaction would deter any other otherwise interested parties from
making a competing bid for Kinbauri.
Jaguar therefore seeks orders from the court, among other things,
restraining or setting aside the Kinbauri Transaction so as to ensure that
shareholder value is maximized through an appropriate competitive bidding
process, now that Kinbauri is "in play".
The Private Placement
On May 13, 2009, the Kinbauri Board announced that it intended to
complete a proposed private placement of up to 6 million units comprising one
common share and one-half of one common share purchase warrant at a price of
$0.50 per unit. Without allocating any value to the warrants, this is a 9%
discount to the Orvana Offer. If completed, up to 9 million additional common
shares would be issued under the proposed private placement. Jaguar believes
that making such a proposal in the face of the Orvana Offer is inappropriate.
The Proposed Glen Eagle Financing is Inadequate
Virtually no disclosure has been made about the proposed Glen Eagle
Transaction. Given that Kinbauri proposes to sell up to 50% of Kinbauri
Espana, Kinbauri's primary asset, Jaguar believes that it is inappropriate for
shareholders to be kept in the dark about the terms of the financing and to
have no vote on a transaction that involves significantly diluting Kinbauri's
interest in its primary asset.
Glen Eagle, which has a market capitalization of less than $3.5 million,
has disclosed that it intends to fund its proposed investment in Kinbauri
Espana by borrowing at least $32 million from an unnamed "European consortium"
in the form of a credit facility to Glen Eagle and its partner, Paradise Peak.
Kinbauri has not publicly disclosed essential terms of its agreement with
Glen Eagle, nor has Glen Eagle publicly disclosed the material terms of its
agreement with the unnamed "European consortium".
Based on Kinbauri's public disclosure, Glen Eagle will invest up to $37
million to acquire a 50% stake in Kinbauri Espana. Approximately $5.9 million
of this amount will be used to acquire a 50% equity stake in Kinbauri Espana
while the remainder will be advanced in the form of shareholder loans. As
Kinbauri has disclosed that Espana has approximately 2.6 million ounces of
gold equivalent resources, this means that Kinbauri is selling 1.3 million
ounces of gold to Glen Eagle for $5.9 million in cash, a cost per ounce of
less than $4.60. The disclosure by Kinbauri that "Glen Eagle will invest C$32M
to acquire a 45% interest in Kinbauri Espana S.L." is inaccurate at best. The
fact that 84% of the $37 million will be in the form of shareholder loans
poses a significant risk to Kinbauri shareholders, particularly given the
paucity of disclosure about the source of Glen Eagle's funding.
Vic Alboini, Chairman and Chief Executive Officer of Jaguar stated: "It
is highly inappropriate that the Kinbauri Board would try to force the Glen
Eagle financing through on these terms without a shareholder vote,
particularly when the company is in play. The Directors should focus their
efforts on conducting an auction to maximize value for all shareholders."
About Jaguar Financial Corporation
Jaguar is a Canadian merchant bank that invests in undervalued small and
mid-cap companies in a variety of industry sectors.
The Toronto Stock Exchange does not accept responsibility for the
adequacy or accuracy of this news release. This news release may contain
certain forward looking statements which involve known and unknown risks,
delays, and uncertainties not under Jaguar's control which may cause
actual results, performances or achievements of Jaguar to be materially
different from those implied by such forward looking statements.
For further information:
For further information: For additional information on this press
release, please contact: Vic Alboini, Chairman & Chief Executive Officer,
(416) 644-8110; or Kyler Wells, General Counsel & Corporate Secretary, (416)