Stock market symbol
TSX: MKP
TORONTO, March 26, 2013 /CNW/ - MCAN Mortgage Corporation
("MCAN", the "Company" or "we") announced today that it has entered
into a definitive agreement (the "Arrangement Agreement") to
acquire all of the issued and outstanding common shares of Xceed
Mortgage Corporation ("Xceed") for $1.75 per share, for a total consideration of
approximately $53.0 million (the
"Transaction") paid with a combination of cash and common shares of
MCAN. The Transaction will be effected pursuant to a plan of
arrangement under Section 182 of the Business Corporations
Act (Ontario) and is expected
to close within approximately 90 days. The Transaction is
subject to Xceed shareholder approval, court and regulatory
approvals and other closing conditions as described below.
Under the terms of the Arrangement Agreement,
Xceed shareholders will, for each share held, receive at their
election, subject to adjustment: (i) 0.118 MCAN common shares or
(ii) $1.75 in cash, or a combination
thereof, subject to a maximum of $30.3
million in aggregate cash being paid. The
consideration represents a premium of 16.67% to Xceed's closing
price per share on the Toronto Stock Exchange (the "TSX") as at
March 25, 2013 and a 7.03% premium to
Xceed's 30-day volume weighted average price per share as at close
of markets on March 25, 2013.
Assuming the maximum cash consideration is elected to be received
by the Xceed shareholders, the equity component of the purchase
price will be approximately $22.7
million and, upon completion of the Transaction, existing
Xceed shareholders will own approximately 7.54% of MCAN on a fully
diluted basis.
This Transaction provides MCAN with a unique
opportunity to acquire an established mortgage origination and
underwriting platform that is expected to deliver incremental asset
growth and potential for increased income for MCAN. Cash and
other liquid assets, including Canada Mortgage and Housing
Corporation ("CMHC") insured mortgages, are expected to represent a
significant proportion of Xceed's assets at closing. In addition,
the acquisition provides new equity for MCAN on a cost effective
basis, providing it with capacity to achieve its growth
objectives.
"We are pleased to announce this strategic
acquisition that will add scale to our operating platform and
expand our origination capability for single family residential
mortgages," said William Jandrisits,
MCAN's President and Chief Executive Officer. "We expect the
addition of Xceed's CMHC origination and underwriting capabilities
combined with MCAN's existing operations and superior access to
capital will contribute to long-term, sustainable earnings. In
addition, the acquisition of Xceed will allow MCAN to work more
closely with MCAP Commercial LP to further lever MCAN's single
family residential operations. MCAP is currently the
sub-servicer of Xceed's mortgages."
Michael Misener,
MCAN's Vice President and Chief Investment Officer, commented: "We
are pleased to welcome Xceed's team of experienced underwriting
professionals who will work with us through all phases of the
origination, funding and portfolio management of the single family
mortgage business."
Xceed is an attractive acquisition target as it
has wound down its securitization vehicles in recent years,
decreasing its exposure to capital markets. MCAN expects the
acquisition to benefit the Company in the following key ways:
- Xceed's origination and underwriting infrastructure and
technology will provide support to MCAN's existing growth
plans.
- Xceed's database management and reporting capabilities will
enhance MCAN's portfolio management.
- The acquisition of Xceed's CMHC approved lender status (subject
to regulatory approval) will provide MCAN with the opportunity to
expand the scope of its operations.
MCAN expects that the ongoing management of the
Xceed business will be integrated quickly following completion of
the Transaction, as renewal and underwriting services will continue
to be provided by Xceed (as a wholly owned subsidiary of MCAN), and
subservicing services will continue to be provided by MCAP.
The Board of Directors of Xceed, acting on the
unanimous recommendation of a special committee of independent
directors and a fairness opinion provided by Canaccord Genuity
Corp., has unanimously approved the Transaction and recommended
that Xceed shareholders vote in favour of the Transaction.
Xceed's directors, senior management and certain other major
shareholders, representing, in aggregate, approximately 48.54% of
Xceed's outstanding shares, have entered into customary lock-up
agreements pursuant to which, among other things, they have agreed
to vote their shares in favour of the Transaction.
Pursuant to the Arrangement Agreement, the
Transaction is subject to certain customary conditions, including:
(i) court approval; (ii) the approval of not less than 66⅔%
of the votes cast by Xceed shareholders at a meeting to consider
the Transaction; (iii) stock exchange and regulatory approvals; and
(iv) the satisfaction of certain other closing conditions customary
for transactions of this nature. The Arrangement Agreement provides
for, among other things, a non-solicitation covenant on the part of
Xceed, subject to customary "fiduciary out" provisions and a right
in favour of MCAN to match any superior proposal. The
Arrangement Agreement also provides for a termination fee of
$2 million payable by Xceed or MCAN
in certain specified circumstances and reciprocal expense
reimbursement payments of $750,000 in certain specified
circumstances. Xceed shareholders are expected to vote on the
Transaction at the end of May
2013.
A material change report, which provides more
details on the Transaction and the Arrangement Agreement will be
filed with the Canadian securities regulators and will be available
under MCAN's profile on SEDAR at www.sedar.com and on MCAN's
website at www.mcanmortgage.com. The terms and conditions of the
Arrangement Agreement will be summarized in Xceed's management
information circular and proxy circular, which will be filed and
mailed to Xceed shareholders and available under Xceed's profile on
SEDAR at www.sedar.com.
Forward-Looking Information
This press release may contain forward-looking
statements, including statements regarding the proposed acquisition
by MCAN of all of the issued and outstanding shares of Xceed and
certain strategic benefits and operational, competitive and cost
efficiencies expected to result from the Transaction. These
forward-looking statements can generally be identified as such
because of the context of the statements and often include words
such as MCAN "believes", "anticipates", "expects", "plans",
"estimates" or words of a similar nature. These statements
are based on current expectations, and are subject to a number of
risks and uncertainties that may cause actual results to
differ materially from those contemplated by the forward-looking
statements. Some of the factors that could cause such
differences include legislative or regulatory developments,
competition, technology change, global market activity, interest
rates, changes in government and economic policy and general
economic conditions in geographic areas where MCAN operates.
Reference is made to the risk factors disclosed in MCAN's Annual
Information Form dated March 21, 2012
which are incorporated herein by reference. The completion of
the Transaction is subject to customary closing conditions,
termination rights and other risks and uncertainties including,
without limitation, court, shareholder and regulatory
approvals. Accordingly there can be no assurance that the
Transaction will occur, or that it will occur on the terms and
conditions contemplated in this press release. The
Transaction could be modified, restructured or terminated.
There can also be no assurance that the strategic benefits and
operational, competitive and cost efficiencies expected to result
from the Transaction will be fully realized. These and other
factors should be considered carefully and undue reliance should
not be placed on MCAN's forward-looking statements. Subject to
applicable securities law requirements, MCAN does not undertake to
update any forward-looking statements.
About MCAN
MCAN is a public company listed on the TSX under
the symbol MKP and is a reporting issuer in all provinces and
territories in Canada. MCAN
also qualifies as a mortgage investment corporation ("MIC") under
the Income Tax Act (Canada)
(the "Tax Act").
MCAN's primary objective is to generate a
reliable stream of income by investing its corporate funds in a
portfolio of mortgages (including single family residential,
residential construction, non-residential construction and
commercial loans), as well as other types of financial investments,
loans and real estate investments. MCAN employs leverage by issuing
term deposits eligible for Canada Deposit Insurance Corporation
("CDIC") deposit insurance up to a maximum of five times capital
(on a non-consolidated tax basis) as permitted by the Tax
Act. The term deposits are sourced through a network of
independent financial agents. As a MIC, MCAN is entitled to deduct
from income for tax purposes 100% of dividends, except for capital
gains dividends, which are deducted at 50%. Such dividends
are received by the shareholders as interest income and capital
gains dividends, respectively.
MCAN also participates in the Canada Mortgage
Bonds program, and other securitizations of insured mortgages.
SOURCE MCAN Mortgage Corporation