IOU Financial Inc. (“IOU” or the “Company”) (TSXV: IOU) today announced that it has entered into an arrangement agreement (the “Arrangement Agreement”) with 9494-3677 Québec Inc. (the “Purchaser”), a corporation created by a group composed of funds managed by Neuberger Berman (“Neuberger”), Palos Capital (“Palos”) and Fintech Ventures (“FinTech”) for the acquisition of IOU through a statutory plan of arrangement (the “Arrangement”).
Under the terms of the Arrangement Agreement, the Purchaser has agreed to acquire all of the issued and outstanding common shares in the capital of IOU (the “Shares”) other than Shares (the “Rolling Shares”) to be re‐invested by Neuberger, Palos, FinTech and certain representatives of management of IOU (collectively, the “Rolling Shareholders”), for an all-cash consideration of C$0.22 per Share (the “Consideration”). The Consideration represents a 83.3% premium to the closing price of the Shares on the TSX Venture Exchange (the “TSX-V”) on July 13, 2023, the last trading day immediately prior to the announcement of the Arrangement, and a 90.6% premium to the 30-day volume-weighted average price of the Shares on the TSX-V for the period ended on July 13, 2023, the last trading day immediately prior to the announcement of the Arrangement. The Rolling Shareholders, taken together, own, control or direct an aggregate of 48,621,313 Shares (representing approximately 46.1% of the issued and outstanding Shares on a non-diluted basis) and will be re-investing in IOU an aggregate of 42,487,414 Rolling Shares (representing approximately 40.3% of the issued and outstanding Shares on a non-diluted basis).
Evan Price, Chairman of IOU, stated “This transaction provides our shareholders with immediate liquidity at a compelling premium to our current trading price, and serves to unlock the long-term value that we have been building through the elaboration of our solid business model.”
Robert Gloer, President and Chief Executive Officer of IOU, added “We are excited about this vote of confidence from our business partner Neuberger Berman and our long-term shareholders, and about the prospects for taking this partnership to the next level by developing new market opportunities together.”
Peter Sterling, head of Neuberger’s Specialty Finance team, said “We are excited to expand our relationship with Robert and the entire IOU team. We believe our collective strengths and funding stability will enable IOU to unlock significant market opportunities.”
Philippe Marleau, the CEO of Palos, a founder of the Company, expressed “We are proud to continue participating in the success of IOU.”
“We see this as an important opportunity for IOU to provide a meaningful return to its shareholders and to position itself for future growth as a private company,” added Lucas Timberlake, Co-Founder and General Partner of FinTech.
Special Committee and Board Recommendations
The Arrangement Agreement was approved unanimously by the IOU board of directors (the “Board”) (with Philippe Marleau and Lucas Timberlake abstaining from voting due to their relationships with Palos and FinTech, respectively, and Robert Gloer abstaining from voting due to his participation in the Arrangement as a Rolling Shareholder), after taking into account, among other things, the unanimous recommendation of a special committee (the “Special Committee”) of the Board comprised of Evan Price, Yves Roy, Neil Wolfson and Kathleen Miller, each an independent director of the Company. The Special Committee and the Board (with the abstentions referred to above) determined that the Arrangement is in the best interests of IOU and recommend that shareholders of IOU (other than the Rolling Shareholders) vote in favour of the Arrangement at the Meeting (as defined below). In making their respective determinations, the Special Committee and the Board each considered, among other factors, a valuation from Evans & Evans, Inc. and an opinion of Evans & Evans, Inc. to the effect that the cash purchase price of C$0.22 per Share to be received by IOU shareholders (other than the Rolling Shareholders) under the Arrangement is fair, from a financial point of view, to the IOU shareholders (other than the Rolling Shareholders).
Details of the Arrangement
The Arrangement is to be effected by way of a court-approved plan of arrangement pursuant to the Business Corporations Act (Québec) and is expected to close in the third quarter of 2023, subject to shareholder, court and regulatory approvals and other customary closing conditions. Completion of the Arrangement is not subject to any financing condition.
The Arrangement Agreement includes customary provisions relating to non-solicitation, subject to customary “fiduciary out” provisions that entitle the Board to consider and, subject to certain conditions, accept a superior proposal if the Purchaser does not match the superior proposal. A termination fee of C$885,000 (representing approximately 3.5% of undiluted equity value of the Company) will be payable by IOU to the Purchaser in certain customary circumstances.
A special meeting of IOU shareholders to consider and, if deemed advisable, approve the Arrangement (the “Meeting”) is expected to be held on or about September 15, 2023. In order to be approved by IOU shareholders at the Meeting, the Arrangement will need the approval of at least two‐thirds (66 ⅔%) of the votes cast at the Meeting in person or by proxy by holders of Shares and by a simple majority of the votes cast at the Meeting in person or by proxy by holders of Shares (other than Shares required to be excluded under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions and applicable TSX-V rules). Additional details regarding the Arrangement, the background to the Arrangement, the reasons for the Board’s and Special Committee’s recommendations of the Arrangement, and how IOU shareholders can participate in and vote at the Meeting, together with a copy of the Evans & Evans, Inc. valuation and fairness opinion, will be set out in IOU’s management information circular and other proxy-related materials to be prepared, filed and sent to IOU shareholders in connection with the Meeting. Copies of the Arrangement Agreement and the management information circular will be filed by the Company under its profile on SEDAR at www.sedar.com (and following the launch of SEDAR+ on July 25, 2023, at www.sedarplus.ca).
In connection with the Arrangement, the Rolling Shareholders and certain other shareholders, directors and officers of IOU, who hold in aggregate 50,808,054 Shares (or approximately 48.1% of the issued and outstanding Shares (on a non‐diluted basis)), have entered into voting support agreements with the Purchaser providing for such shareholders to vote all Shares beneficially owned by them in favour of the Arrangement.
Source: Company Press Release
