Metro Vancouver Properties Corp. (“
Metro
Vancouver” or the “
Company”), a
Vancouver-based real estate company, wishes to provide its
shareholders with an update and additional information with respect
to the previously announced going private transaction (the
“
Transaction”) by way of a share consolidation.
Under the share consolidation, all Class B
voting common shares (“Class B Shares”) are being
consolidated on the basis of one post-consolidation Class B Share
for each 1,941,489 pre-consolidation Class B Shares, without any
entitlement to receive fractional shares (including any beneficial
shareholder). In lieu of receiving a fractional share, minority
shareholders will be paid cash consideration of $0.36 per
pre-consolidation Class B share (with no amount payable to
registered shareholders who would be entitled to receive, net of
withholding taxes, less than $5). Upon completion of the
Transaction, Madison Pacific Properties Inc. (“Madison
Pacific”), which currently owns 99.75% of the equity
interests of the Company, would be the sole remaining shareholder
of the Company. Minority shareholders of the Company will vote on
the share consolidation at a shareholder’s meeting scheduled for
June 27, 2024. Further details of the Transaction are contained in
the information circular of the Company dated May 21, 2024 (the
“Circular”), which has been mailed to
securityholders and filed on SEDAR+ at www.sedarplus.ca in
connection with the shareholder meeting.
Additional Background to the
Transaction
Metro Vancouver’s reporting issuer status
derived from a plan of arrangement transaction in 2010 that
resulted in Metro Vancouver becoming the successor to a
biotechnology company, Migenix Inc. The assets of the biotechnology
company, as well as its TSX listing, were transferred to a new
biotechnology company in which Metro Vancouver has no interest.
Since 2010, Metro Vancouver has not undertaken any material capital
markets transactions, and its shares have remained unlisted. Metro
Vancouver has continued to incur significant public company costs
each year, which are disproportionate to the value of the minority
interests in the Company.
At the time of and subsequent to the 2010 plan
of arrangement, management of Metro Vancouver was considering a
subsequent recapitalization or reorganization transaction involving
the Company. However, recent developments, including challenges to
the dual share structure of the Company and similar companies in
the real estate industry by the Canada Revenue Agency, have
complicated any potential recapitalization or reorganization of the
Company. As a result, no recapitalization or reorganization
transaction has materialized to date and it is unlikely that any
such transaction will occur in the future.
In July 2023, John DeLucchi was appointed as
Chief Executive Officer of Metro Vancouver (and Madison Pacific)
following the retirement of the previous CEO. One of Mr. DeLucchi’s
tasks as the new CEO was to review the corporate structure and
consider cost efficiencies. Mr. DeLucchi initiated consideration of
a going private transaction as a means to address the inefficient
public company structure of the Company, which at this point has
become long overdue.
John DeLucchi, along with Dino Di Marco,
Chairman of Metro Vancouver and the former CFO of Madison Pacific,
initiated discussions surrounding a potential going private
transaction with external legal counsel in early 2024.
Transaction Proposal and Special
Committee
On March 7, 2024, John DeLucchi and Dino Di
Marco made a proposal to the Board of Directors of the Company to
effect a going private transaction by way of a share consolidation
with minority shareholders to be paid fair value. There was no
specific transaction price included as part of this proposal, other
than minority shareholders were to be paid fair value. This
proposal was formally presented at the March 7, 2024 board meeting
of Metro Vancouver.
At the March 7, 2024 board meeting, the Board of
Directors formed a committee of independent directors (the
“Special Committee”), consisting of Robert Wiens
and Alistair Duncan, Jr., to consider the proposed Transaction. The
mandate of the Special Committee did not include a consideration of
alternative sale transactions. An alternative sale transaction was
not considered possible given that Madison Pacific owns 99.75% of
the equity value of the Issuer, and Madison Pacific would not
consider a sale of the entire company or the bulk sale of its
assets or property portfolio. Given the very small minority equity
interest as compared to other public market transactions that are
typically of a much larger value, the mandate of the Special
Committee only reflected consideration of a going private
transaction that would result in Madison Pacific owning 100% of the
Company. However, the Special Committee was not restrained in terms
of determining fair value for minority shareholders or the specific
structure of the Transaction in order to ensure that minority
shareholders were treated fairly.
The Special Committee received asset value and
financial information materials from members of management,
including Bernice Yip and Peter Grippo who are both employees of
Madison Pacific. The Special Committee was comfortable that the
involvement of such Madison Pacific employees did not raise any
material conflicts of interest issues. The members of the Special
Committee are experienced directors of the Company who are very
familiar with the assets of the Company and its financial statement
disclosure, and reviewed the work of the Madison Pacific employees
very closely. In addition, the Transaction is not a material
transaction to Madison Pacific, and the Special Committee was of
the view there was no particular financial incentive for the
Madison Pacific employees to act unfairly. Mr. DeLucchi was not
involved in the determination of fair value or negotiation of the
other terms of the Transaction.
The Board and the Special Committee considered
alternatives to the Transaction in terms of transaction structure
such as an insider bid by Madison Pacific, a plan of arrangement
with Madison Pacific or an amalgamation. Other sale transactions
were not considered in light of the small minority interest and
Madison Pacific’s unwillingness to sell the Company as a whole or
to sell the assets or property portfolio of the Company in
bulk.
The Board and Special Committee did not consider
the status quo to be a desirable option. The status quo situation
has been in place since 2010 which has provided no liquidity to
minority shareholders while the Company has incurred substantial
public company costs. Given that no recapitalization or
reorganization transaction is likely to occur, it was the Board and
Special Committee’s view that no other liquidity transaction for
minority shareholders is evident other than a going private
transaction that would result in Madison Pacific becoming the sole
owner of the Company.
Ultimately, the Special Committee determined
that the Transaction should take the form of a share consolidation
at a consolidation ratio set that would result in Madison Pacific
becoming the sole holder of the Class B Shares. The Special
Committee determined that the fair value to be paid to minority
shareholders would be at net asset value as adjusted to reflect
fair value and to include a 20% premium (further information with
respect to the fair value is described in the Circular). The
Special Committee did not retain any financial advisors to assist
in determining the quantum of the premium, although an independent
fairness opinion was obtained from Evans & Evans as described
in the Circular.
The premium was determined by the Special
Committee through consideration of the premium in other public
company transactions (which typically involved listed companies).
The Special Committee was of the view that its members had
sufficient experience with public market transactions to assess a
proper range for a premium. The Special Committee viewed 20% as
being on the high range of a typical premium. The Special Committee
was also of the view that the premium was a “true premium” in the
sense that the assets were fully and fairly valued with a premium
applied on top of this and that this was not a situation where
there was an asset with a contingent value that made valuation
difficult. The Special Committee was also of the view that a
premium may be necessary in order to obtain shareholder support for
the Transaction, and as a factor as to why dissent rights were not
necessary (the rationale for lack of dissent rights is described in
the Circular). The Special Committee was also of the view that the
Class B Shares, as voting securities, should be entitled to a
premium in the context of the dual share structure of the Company,
even though the economic rights with the non-voting shares are
equal.
The Special Committee did not identify any
materially concerning features of the Transaction to the minority
shareholders. The Special Committee’s understanding is that most of
the minority shareholders have held their shares since the 2010
plan of arrangement described above as previous investors in
Migenix. The Special Committee was of the view that most of the
minority holders had either written off their investment in the
Company or forgotten about their investment altogether. Given the
unlikelihood of achieving any sort of alternative liquidity
transaction, and that the tax consequences of the Transaction were
expected to be similar to any alternatively structured going
private transaction (the tax consequences of the Transaction are
described in the Circular), the Transaction represents a liquidity
opportunity for all shareholders to recover fair value plus a
premium.
The Special Committee’s authority under its
mandate authorized the Special Committee to retain independent
legal counsel. Norton Rose Fulbright Canada LLP was retained by the
Special Committee on a stand-by basis. The Special Committee
subsequently determined that no formal legal advice from Norton
Rose was required and Norton Rose was not involved in negotiation
of the Transaction.
Ownership of Securities of the
Company
The following table sets forth the number,
designation and percentage of the outstanding securities of any
class of securities of the Company beneficially owned or over which
control or direction is exercised (a) by each director and officer
of the Company, (b) if known after reasonable enquiry, by (i) each
associate or affiliate of an insider of the Company, (ii) each
associate or affiliate of the Company, (iii) an insider of the
Company, other than a director or officer of the Company, and (iv)
each person acting jointly or in concert with the Company.
Name |
Relationship |
Class B Sharesand percentage ofclass |
Class C Non-VotingShares and percentage
ofclass |
Madison Pacific |
Insider |
1,941,489 (41.1%) |
1,124,295,307(1) (100%) |
John DeLucchi |
Director and officer |
Nil |
Nil |
Robert Wiens |
Director |
Nil |
Nil |
Roger Francke |
Director |
Nil |
Nil |
Paul Brennan |
Director |
Nil |
Nil |
Robert S. Pringle |
Director |
Nil |
Nil |
Alistair Duncan, Jr. |
Director |
50 (0.0001%) |
Nil |
Dino Di Marco |
Director and Chairman |
Nil |
Nil |
Bernice Yip |
Officer |
Nil |
Nil |
(1) 85,145,092 Class C Shares
are held by Madison Pacific and 1,039,150,215 Class C Shares are
held by Madison Pacific’s subsidiary 1073774 Properties Inc.
No securities of the Company were purchased or
sold by the Company or Madison Pacific or their associates,
affiliates, insiders or joint actors during the previous twelve
months.
Additional Information
Additional information relating to the Company
may be found on SEDAR+ at www.sedarplus.ca. Additional financial
information is contained in the Company’s audited consolidated
financial statements and related Management’s Discussion and
Analysis for the year ended August 31, 2023 and its unaudited
consolidated interim financial statements and related Management’s
Discussion and Analysis for the six-month period ended February 29,
2024. Copies of those financial reports will be sent without charge
to any security holder requesting them.
For more information or to request a copy of the
most recent financial reports please contact:
Contact: |
Mr. John Delucchi |
Ms. Bernice Yip |
|
President & CEO |
Chief Financial Officer |
Telephone: |
(604) 732-6540 |
(604) 732-6540 |
|
|
|
Address: |
389 West 6th Avenue |
|
|
Vancouver, B.C. V5Y 1L1 |
|