CALGARY, July 30, 2013 /CNW/ - Genesis Land Development Corp. (TSX: GDC)
(the "Corporation" or "Genesis") released the following letter to
Genesis shareholders in response to a statement from dissident
shareholder Smoothwater Capital Corp. ("Smoothwater").
Dear Fellow Shareholders:
Just a few days ago, we warned that a dissident group led by activist
investor Smoothwater was preparing an action to seize control of your
Board and your company. Smoothwater is led by Stephen Griggs and
Garfield Mitchell, the brother of current Genesis Board member Mark
Mitchell. After being exposed by Genesis, Smoothwater finally issued a
statement on July 26, 2013 acknowledging its plan to wage a proxy
contest against Genesis and overpower the Genesis Board of Directors
(the "Board").
Smoothwater's pretext for waging this contest is misguided and
disingenuous.
For up-to-date information and developments as we approach the August
8th proxy deadline, we encourage all shareholders to visit www.DefendGenesis.com. Casting your vote is easy, simply click the "Vote Here Now" button
and enter the control number located on your WHITE proxy.
Even if you have voted a dissident proxy, a later dated WHITE proxy revokes any previously submitted vote. Vote your WHITE proxy prior to the cut-off regardless if you plan to attend the meeting
in person.
In its statement, Smoothwater presents a number of unfounded assertions
and ambiguous intentions that raise unsettling questions about its true
motives.
Governance
The dissidents claim to have concerns about Genesis' governance
practices. It should be noted that their own nominee, Mark Mitchell,
currently serves as the chair of the Corporation's Compensation and
Governance Committee and has been a member of the Board since June,
2010. Their attack on the Corporation's governance practices is
clearly without basis and any deficiency was already within their
control to rectify if they saw it fit to do so.
In a report dated July 23, 2013, Glass Lewis, an independent third-party
proxy advisory firm, recommended shareholders withhold their votes from
Mark Mitchell. The report stated: "We believe that Mr. Mitchell, the chairman of the [Compensation and
Governance] committee, bears responsibility for this lack of
transparency."
The dissidents also criticize Genesis for not inviting our CEO to join
the Board, yet, oddly, his name does not appear on their proposed
slate. Fundamentally, we do not object to having the Genesis CEO on the
Board, however, the dissidents' made this request late in our
negotiation process with them, and a majority of the Board thought it
inappropriate to involve Management in a distracting proxy contest.
The Board intends to deal with this issue in due course, but in the
meantime, Shareholders should rest assured that the CEO is very
involved with deliberations at the Board level and is regularly invited
to Board meetings, as appropriate.
Lack of Independence or Relevant Experience
Smoothwater's suggested slate of nominees should raise considerable
concern among Genesis shareholders. Smoothwater Chairman Garfield
Mitchell is the brother of Mark Mitchell, a current director, head of
the Compensation and Governance Committee and dissident nominee. They
serve together as trustees of the W. Garfield Weston Foundation.
Dissident nominees, Edwin Nordholm and Loudon Owen, led a dissident
action against Genesis in July, 2012, claiming the support of Garfield
Mitchell and other shareholders. Mr. Owen and Mr. Nordholm appear to be
co-investors in at least one business venture, and serve together on
the board of TSX-listed Hangfeng Evergreen Inc.
The Special Committee of the Board continues to review whether and to
what extent the Mitchells, Smoothwater and Mr. Nordholm's Liberty
Street Capital Corp. are acting jointly and/or in concert to determine
whether these shareholders have provided the Corporation's minority
shareholders with adequate disclosure regarding their relationships and
plans with respect to the Corporation.
We believe Smoothwater initiated this costly and distracting proxy
contest in part because one of its nominees, Mr. Nordholm, was denied a
spot on the management slate, thereby denying Smoothwater total control
of the Board. Bearing all this in mind, how well will shareholders be
served by a Board run by dissident nominees who appear to be connected
via family, business, or social ties? How independent and
representative is a Board controlled by the hand-picked nominees of a
group of minority shareholders?
The Genesis Board has been very responsive to its shareholders,
including the Mitchells, over the years, and has experienced
significant renewal over the last year, with three new directors
joining the Board in 2012, and the remaining four joining during the
last three years. In a good faith effort to be responsive to
Smoothwater, the current Management slate includes four nominees at
Smoothwater's request.
The Management nominees include at least two individuals with
operational land and housing experience, three with real estate
experience and two who bring public company CFO experience to our Audit
Committee. The slate proposed by Smoothwater appears to include only
one nominee with operational real estate experience and, notably, none
with operational land development experience. These gaps in relevant
industry experience are critical to note.
What is Their Agenda and Where is Their Plan?
Your Board has worked tirelessly to accommodate the dissident group,
going so far as to offer four seats to dissident nominees, which would
represent 50% of the Genesis Board and could have avoided a costly
proxy battle.
The Board's offers were rejected.
This leads us to believe that the dissidents want total control of the
Genesis Board. Dissident nominees Mark Mitchell and Loudon Owen, who
both currently serve as directors, have not yet proposed any new
initiatives or strategies to the Board that have not already been
addressed or implemented.
Notably, dissident nominee Mark Mitchell led the search for Genesis'
current CEO, who is now charting the course for the Corporation, along
with the Board. Mr. Mitchell selected the professional search firm,
identified and interviewed candidates, and ultimately recommended a
candidate to the Board for approval. The dissidents' questions
regarding the leadership of the Corporation and the strategic direction
we are pursuing are inconsistent and disingenuous.
Furthermore, Smoothwater's recent press release contains neither a plan
nor a strategy to enhance shareholder value — the dissidents'
oft-stated motive behind this proxy contest. Surely shareholders
deserve to know what the dissident group is planning, particularly
since there are serious questions about the true independence of its
nominees and the incumbent Board has been working with management to
implement the plan that the dissidents' nominees helped to create.
On July 26, 2013, Mr. Griggs was quoted by The Globe and Mail criticizing Genesis' homebuilding business, but in the same breath
admitted, "We've not come to any conclusion since we don't have access
to company documents." Assuming that he has not had such access, how
can Mr. Griggs then assert that the dissidents' slate will be in a
better position than management's slate to direct the Corporation's
strategic plan?
A strategic plan for running the Corporation's complex business is not
something to be mulled during an interview with a national newspaper.
It sounds very much like Mr. Griggs and the dissident group are
grasping at straws to conjure a pretext for their action to assume
control of the Corporation.
We believe the dissident action is tantamount to a creeping takeover -
without paying shareholders a fair premium for control. Genesis adopted
a Shareholder Protection Rights Plan, effective July 28, 2013, to
ensure that all shareholders are treated equally and fairly in
connection with any initiative to acquire control of the Company.
Smoothwater CEO Stephen Griggs told the Calgary Herald on July 29, 2013
that he opposed the Shareholder Protection Plan.
Your Board is Executing a Plan to Enhance Shareholder Value
The current Genesis Board, reconstituted one year ago, has been working
hard to deal with non-core assets and to build a more profitable
housing business. Our activities are improving our credibility in the
marketplace and enhancing our access to credit and capital. We agree
that our full value is not reflected in our market price - and we have
been executing a plan to decrease the valuation gap. Maximizing
shareholder value for a land development company is a longer term
process, and requires a systematic and orderly approach.
In criticizing Genesis' share price performance, Smoothwater cites an
opportunistic timeline, beginning three years ago. Genesis' share price
since the reconstitution of the Board on July 12, 2012 to July 26,
2013, has risen by 15%, vs. a 9% decline of the S&P/TSX Real Estate
Capped Index, over the same period. Melcor Developments Ltd. is cited
as a comparable company to Genesis even though Melcor is almost three
times the size of Genesis, and thus serves as a poor and unhelpful
analogy. Nonetheless, it's worth noting that Genesis outperformed
Melcor from the period beginning July 12, 2012, until Melcor announced
it was considering spinning off a substantial portion of its
income-producing assets into a real estate trust in January 2013.
The Cost to Shareholders
The proxy contest waged by the dissidents threatens to damage and
destabilize Genesis' business development, partnership and sales
activities by bringing uncertainty to the leadership and direction of
your company.
Genesis has already incurred an enormous cost in time and money while
attempting to accommodate — and now defend — our company against the
dissident shareholders. We need your help to send them a definitive
message.
Shareholders, we need your support to keep Genesis' Board independent.
Please cast your vote on the WHITE proxy today in support of the management nominees and disregard any
materials you may receive from the dissidents. In order to be counted,
your vote must be submitted before 9 a.m. (Mountain Daylight time) on August 8, 2013. Vote your WHITE proxy prior to the cut-off regardless if you plan to attend the meeting
in person.
For up-to-date information and developments, we encourage all
shareholders to visit www.DefendGenesis.com. Casting your vote is easy, simply click the "Vote Here Now" button and
enter the control number located on your WHITE proxy. Please disregard any materials you may receive from the
dissidents. Even if you have voted a dissident proxy, a later dated WHITE proxy revokes any previously submitted vote.
If you require assistance in casting your vote, or require replacement
proxy materials, please call Genesis' proxy solicitation agent, CST Phoenix Advisors at 1-800-921-9376, or call collect 201-806-2222, or email inquiries@phoenixadvisorscst.com
Sincerely,
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Michael Brodsky
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William Pringle
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Chairman of the
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Director &
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Board
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Chair of the Special Committee
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About Genesis
Genesis is a Calgary-based real estate development corporation engaged
in the acquisition, development, and sale of land, residential lots and
homes in Alberta and British Columbia. All business activities of the
Corporation are conducted in Western Canada, with development lands
held primarily in and around the cities of Calgary and Airdrie. With a
diversified and substantial land base, the Corporation is well
positioned to focus on developing those projects that offer the best
return in the market going forward.
SOURCE: Genesis Land Development Corp.
