***********NEWS*************Northern announces further revised offer to acquire Proprietary
11/1/04
(TSX: NFC)
TORONTO, Nov 01, 2004 (Canada NewsWire via COMTEX) --
Northern Financial Corporation (TSX: NFC) ("Northern") today announced a further revised offer ("Revised Offer") to acquire all of the issued common shares of Proprietary Industries Inc. ("PPI"), not already owned by Northern, at a price of $0.85 per PPI share. The price per PPI share is payable as to $0.35 in cash and $0.50 in Northern shares. Northern will issue its shares at $0.04 per share or 12.5 Northern shares for every PPI share.
Northern owns 7,314,000 PPI shares representing approximately 12.2% of the issued PPI shares. If Northern acquires all the remaining 52,521,356 PPI shares, Northern will pay $18,382,474 in cash and issue approximately 656 million shares. Northern currently has 762 million issued shares.
Northern has revised its minimum deposit condition to require that a minimum of 23,934,142 PPI shares or 40% of the issued PPI shares, including the 7,314,000 PPI shares already owned by Northern, are validly deposited in the Revised Offer. Accordingly Northern requires the deposit of 16,620,142 PPI shares under the Revised Offer in order to meet the revised minimum deposit condition.
Northern believes that its Revised Offer will provide more value to PPI shareholders than the $0.64 cash bid (the "PAC Bid") by PPI Acquisition Corp. ("PAC") in which Quest Capital Corp. ("Quest") is a 27% shareholder.
Northern has approximately 23,000 shareholders and its shares trade actively on the Toronto Stock Exchange with an average daily trading volume of 2,637,595 shares since January 1, 2004.
Northern has mailed today a Notice of Variation and Extension to the PPI shareholders. Northern has extended its Revised Offer to November 15, 2004 at 5:00 p.m. (Toronto time), unless further extended. If Northern is successful in acquiring all of the issued PPI shares, Northern anticipates having approximately $24 million in cash and securities including its current cash and securities.
With the extension of the Revised Offer to November 15, the PPI Board has agreed to waive on November 15 the Shareholder Rights Plan of PPI to any take-over bid for PPI including the Revised Offer.
Application to the Alberta Securities Commission
Northern has filed an application with the Alberta Securities Commission requesting an order to cease trade the PAC Bid and an investigation of certain trading in PPI shares in the market and other possible relief or sanctions, as a result of the following matters:
1. The use of improper defensive tactics by the PPI directors and Alliance Pacific Group ("APG"), their financial advisors, due to the following:
a. The PPI directors terminated the Support Agreement with Quest with regard to the Quest private placement and the PPI issuer bid (the "Quest-PPI Transaction") due to concerns that the Quest-PPI Transaction was an illegal take-over bid. The PPI directors entered into a new Support Agreement with PAC, a new party, with a new transaction structure, being a take-over bid rather than a combined private placement and issuer bid. In shifting to a new bidder and to a new transaction structure, the PPI Board failed to open up the bidding process by consulting with Northern, the other bidder in the market. Northern believes that this constitutes a breach of the fiduciary obligations of the PPI directors.
b. By improperly negotiating with PAC, which was a breach of the Support Agreement with Quest, to the exclusion of Northern, which was already in the market with a take-over bid for all the PPI shares, Northern believes the actions of the PPI Board constitute improper defensive tactics.
c. By not complying with their fiduciary obligations, Northern considers the following actions of the PPI directors to be invalid: (i) the entering into of the Support Agreement with PAC; (ii) the agreement to pay a break fee of $1,000,000 to PAC; (iii) the payment of $150,000 to PAC when the PAC Bid was made and the agreement to pay another $300,000 in expenses to PAC, and (iv) the payment of $200,000 in expenses to Quest for the now terminated Quest-PPI Transaction, which was an illegal take-over bid.
d. It is clear the actions of the PPI directors and APG are devoted to favouring Quest, initially as a bidder in an illegal take-over bid, and currently as a 27% shareholder in PAC in the PAC Bid, over Northern in order to avoid accountability and liability for their own actions in granting themselves excessive compensation including success fees and indemnity protection in the form of a $5,000,000 trust fund, and in granting excessive compensation to APG of $5,821,000 in transaction fees.
2. Based on statements provided to Northern by former directors, officers and employees of PPI, Northern has been informed that two PPI directors, namely Stephen Akerfeldt and Patrick Lavelle, participated in an insider trade with knowledge of confidential material information by acquiring options to purchase shares of Canadian Rocky Mountain Properties Inc. ("CRMP"), a public company in which PPI then owned a 73% interest, after such directors had been presented with an offer to acquire all the shares of CRMP at $0.75 per share and then increased to $1.00 per share, both substantial premiums to the then market price of CRMP shares. CRMP was ultimately sold for $2.00 per share.
3. Northern has identified concerns regarding the trading of 14,580,515 PPI shares since September 9, the date of announcement of the since terminated Quest-PPI Transaction, through five different brokers including 2,445,000 PPI shares through the Anonymous symbol and 4,323,000 PPI shares through Dundee Securities, which is acting as independent financial advisor to the Special Committee of the PPI Board.
4. The PPI directors have failed to obtain the approval of the PPI shareholders to the sale of all or substantially all of the assets of PPI, which approval process would have resulted in the disclosure of all asset sales and all compensation paid to APG and others.
Based on its review of public disclosure material and information provided to Northern, Northern believes the PPI directors are engaged in self-dealing together with APG and are attempting to avoid scrutiny and accountability for their actions by their support of the PAC Bid. A review of the Support Agreement for the PAC Bid reveals an extraordinary amount of protection for the current directors and officers of PPI. Northern believes that the PPI directors are focused on providing 100% cash for CPV/CAP Coop Personalversicherung ("CPV") and Pensionkasse der ASCOOP ("ASCOOP"), the two largest Swiss shareholders of PPI, who have agreed to an irrevocable deposit or "hard" lock-up of their PPI shares to the PAC Bid, which is highly unusual in an environment where there are competing bids for PPI, and to the detriment of the remaining shareholders of PPI. Northern is also of the view that the PPI directors and APG are trying to insulate CPV and ASCOOP from liability for their historical involvement with PPI.
Northern Financial Corporation wholly owns Northern Securities, a full service brokerage firm that provides financial advisory services to retail and institutional clients and investment banking services to small capitalization companies.
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VIEW ADDITIONAL COMPANY-SPECIFIC INFORMATION: https://www.newswire.ca/en/releases/orgDisplay.cgi?okey=67803
For further information: Ann Krallisch, Director of Business Development, Northern Securities Inc., (416) 644-8113, Fax: (416) 644-0270, e-mail: akrallisch(at)northernsi.com News release via Canada NewsWire, Toronto 416-863-9350