BMO ENGAGED TO GIVE FAIRNESS OPINION ON JIEN OFFERS TO BOTH SHAREHOLDERS
AND DEBENTURE HOLDERS
BMO PROVIDED FAIRNESS OPINION ON ORIGINAL OFFER FOR DEBENTURE HOLDERS YET
FAILED TO GIVE FAIRNESS OPINION ON REVISED OFFER
JAGUAR QUESTIONS WHY BMO FAILED TO CARRY OUT SIGNED MANDATE WITH CANADIAN
TORONTO, Oct. 23 /CNW/ - Jaguar Financial Corporation (TSX: JFC) ("Jaguar" or the "Company") today criticized the directors of Canadian Royalties Inc. (TSX: CZZ) ("Canadian Royalties" or "CZZ") for their failure to obtain a fairness opinion from BMO Capital Markets ("BMO") for the holders of CZZ debentures (the "Debenture Holders") on the revised offer ("Revised Offer") by Jien Mining Canada Ltd. ("Jien"). Jaguar also questioned how the CZZ directors discharged their fiduciary duties owed to Debenture Holders.
Fiduciary Duty to Debenture Holders Publicly Recognized by CZZ Directors
in Original Offer
In the press release dated August 11, 2009, the CZZ Board recognized its fiduciary duties owing to the shareholders of CZZ (the "Shareholders") and the Debenture Holders in the original offer ("Original Offer") by Jien as follows:
"Consistent with its fiduciary duties and after receiving the Special
Committee's report and recommendation, the Company's Board of Directors
will carefully review and consider the Offers and will advise Canadian
Royalties shareholders and debentureholders of the Board's
The CZZ Board repeated its recognition of fiduciary obligations to both the Shareholders and the Debenture Holders in its August 25 press release, which stated that the Original Offer was "not in the best interests of Canadian Royalties Securityholders". The term "Securityholders" was defined to mean both the Shareholders and Debenture Holders of CZZ.
In the September 8 press release, the CZZ Board stated that it adopted the Rights Plan "to ensure fair treatment of all Canadian Royalties' securityholders in connection with any take-over bid", again securityholders referring to both Shareholders and the Debenture Holders. In the same press release, the Board stated that in adopting the Rights Plan, "the Board of Directors is solely and legitimately concerned with maximizing securityholder value."
As stated in the August 25 Directors' Circular, the Special Committee of the CZZ Board engaged BMO to act as its financial advisor for the purpose of providing an opinion "as to the adequacy, from a financial point of view, of the consideration offered to the holders of Shares ("Shareholders") and holders of Debentures ("Debentureholders")."
BMO stated in its opinion on the Original Offer "that the consideration offered pursuant to the Offers is inadequate, from a financial point of view, to the holders of Shares and Debentures of Canadian Royalties..." This opinion was consistent with the requirement in BMO's engagement with CZZ to address financial fairness for the Debenture Holders and the Shareholders.
The August 25 Directors' Circular consistently referred to the need to maximize value for both the Shareholders and the Debenture Holders. In that circular the CZZ Board recommended that both Shareholders and Debenture Holders reject the Original Offer.
Unquestionably the CZZ Board had publicly recognized several times its fiduciary duty to both the Shareholders and the Debenture Holders in considering the Original Offer.
Fiduciary Duty to Debenture Holders Ignored in Revised Offer
Jaguar questions how the CZZ Board discharged its fiduciary duty to the Debenture Holders in its support of the Revised Offer. In announcing its support of the Revised Offer in its October 16 press release, the CZZ Board ignored the interests of the Debenture Holders by stating it had:
"determined that the Share Offer is fair to its Shareholders and that it
is in the best interests of Canadian Royalties and its Shareholders".
The October 16 press release gave no explanation why the BMO fairness opinion was limited to the Shareholders:
"The Special Committee and (sic) has received an opinion of BMO Capital
Markets, the financial advisor to the Special Committee of the Canadian
Royalties Board, that the consideration to be received under the Share
Offer is fair, from a financial point of view, to all Shareholders of
There is no recommendation from the CZZ Board to the Debenture Holders on the Revised Offer, either in the October 16 press release or the revised Directors' Circular dated October 19. The BMO fairness opinion in the Directors Circular does not state that the Revised Offer is fair from a financial point of view to the Debenture Holders.
BMO's mandate to provide a fairness opinion on the adequacy of the consideration offered to the Debenture Holders, as well as the Shareholders, was not limited to the Original Offer. Despite this, BMO delivered a fairness opinion on the Revised Offer only for the Shareholders and not the Debenture Holders. In stark contrast, BMO's fairness opinion on the Original Offer stated that the Original Offer consideration was not fair to both the Shareholders and the Debenture Holders.
Vic Alboini, Chairman and Chief Executive Officer of Jaguar stated: "the CZZ directors cannot cherry pick their fiduciary duties by initially focusing on both the Shareholders and the Debenture Holders in the Original Offer and then dropping its focus on the Debenture Holders in the Revised Offer. There is a stunning and mysterious silence by the CZZ Board in failing to address the financial fairness of the Revised Offer for the Debenture Holders. The reason for this is obvious: it is not financially fair to pay the Debenture Holders 80% of their principal amount rather than 101% as required in the Indenture and BMO clearly could not give an opinion that the Revised Offer was fair to the Debenture Holders."
"Was the BMO engagement agreement changed to permit BMO not to address the financial fairness to the Debenture Holders? If so, why was this not disclosed in the BMO fairness opinion on the Revised Offer and in the Directors Circular? If the engagement agreement was not changed, why is BMO not carrying out its mandate to address financial fairness to the Debenture Holders in the Revised Offer? Why was CZZ's Special Committee willing to accept a fairness opinion from BMO that did not include an opinion on the Debentures?" added Mr. Alboini.
Jaguar also believes that BMO is conflicted in providing a fairness opinion to the Shareholders and intentionally omitting an unfavourable opinion to the Debenture Holders, when BMO is entitled to receive a success fee "contingent on a change of Control of Canadian Royalties or certain other events." Jaguar believes that BMO's failure to provide an opinion for the Debenture Holders, together with the BMO success fee, raise serious concerns about BMO's independence.
About Jaguar Financial Corporation
Jaguar is a Canadian merchant bank that invests in undervalued small capitalization 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.
SOURCE Jaguar Financial Corporation
For further information: For further information: on this press release, please contact: Vic Alboini, Chairman & Chief Executive Officer, (416) 644-8110 - or - Kyler Wells, General Counsel & Corporate Secretary, (416) 644-8177