HALIFAX, July 16, 2015 /CNW/ - Clarke Inc. ("Clarke" or the "Company") (TSX: CKI) delivered today a letter to Northern Frontier Corp. regarding its recently announced agreement to acquire the construction services division of Black Diamond Group Limited. A full copy of the letter is reproduced below.
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July 16, 2015
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Northern Frontier Corp.
400, 435-4th Avenue SW
Calgary, AB T2P 3A8
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Attention:
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Chris Yellowega, President and CEO
Darin Coutu, Chair of Audit Committee
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Re:
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Transaction to Acquire Construction Services Division of Black Diamond Group Limited
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Dear Sirs:
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As you know, Clarke Inc. ("Clarke") is currently the largest shareholder of Northern Frontier Corp. ("Northern Frontier" or the "Company"). We were interested to learn of the Company's agreement, announced yesterday, to acquire the construction services division (the "Construction Business") of Black Diamond Group Limited ("Black Diamond").
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We would like to congratulate management and the Board for sourcing and negotiating what appears to be an attractive and accretive transaction for Northern Frontier and its shareholders. We believe the transaction offers the Company the opportunity to enter a complementary business, improve the Construction Business' performance due to an expansion of its customer base and improved utilization of its assets and provide additional work to the NEC and possibly Central Water divisions within Northern Frontier.
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Notwithstanding the potential benefits associated with the acquisition of the Construction Business, we are troubled that the Company is issuing approximately 4.6 million shares or almost 20% of the Company at a price of $0.54 per share. Our concern is compounded by the fact that this almost 20% interest in the Company is being issued without the input of shareholders (i.e. a shareholder vote).
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We believe the issuance of shares at $0.54 per share undervalues the Company and there is a better alternative for all shareholders. Clarke is prepared to subscribe for $2.4 million of shares of Northern Frontier (i.e. the value of the shares that Northern Frontier is issuing to Black Diamond as partial consideration for its sale of the Construction Business) at a subscription price of $0.62 per share. The proceeds from Clarke's subscription could then be used to satisfy in cash the stock component of the purchase price for the Construction Business. Clarke's proposed subscription price represents a 15% premium to the price at which Northern Frontier is issuing shares to fund this transaction and also represents a 29% premium to Northern Frontier's closing share price today. Moreover, Clarke's proposed subscription will result in fewer shares being issued by Northern Frontier and, therefore, is less dilutive to existing shareholders.
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Clarke's proposed subscription is subject only to customary conditions for a transaction of this nature and also to the conditions that (i) the terms of the proposed acquisition (other than the share issuance) remain the same as announced on July 15, 2015 and (ii) the Company waive the application of its shareholder rights plan in respect of Clarke's share subscription. We note that we do not need to conduct any diligence on the Company nor we do require any financing to complete this subscription. We further note that there are no fees or other payments required in connection with our proposed share subscription.
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Alternatively, Clarke is prepared to backstop a rights offering at a price of $0.62 per share. Such a rights offering would be open to all shareholders and would permit this transaction to be completed on a non-dilutive basis to all shareholders that choose to participate.
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We reiterate that we believe the proposed acquisition of the Construction Business is beneficial to Northern Frontier. However, it is clear that Clarke's proposal to subscribe for shares of Northern Frontier or backstop a rights offering at a 15% premium to Black Diamond's implied subscription price and reduce the dilution to existing shareholders is a substantially better deal for all shareholders.
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We would be pleased to discuss this proposal with you further. Please do not hesitate to contact the undersigned at mrapps@clarkeinc.com or (416) 855-1925.
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Sincerely,
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(signed) Michael Rapps
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Michael Rapps
President and CEO
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About Clarke
Clarke invests in a variety of private and publicly-traded businesses and participates actively where necessary to enhance the performance of such businesses and increase its return. Clarke's common shares trade on the Toronto Stock Exchange under the trading symbol "CKI". For more information about Clarke, please visit our website at www.clarkeinc.com.
Note on Forward-Looking Statements and Risks
This press release may contain or refer to certain forward-looking statements relating, but not limited to, Clarke's expectations, intentions, plans and beliefs with respect to Clarke. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "does not expect", "is expected", "budget", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or equivalents or variations, including negative variations, of such words and phrases, or state that certain actions, events or results, "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved.
Forward-looking statements rely on certain underlying assumptions that, if not realized, can result in such forward-looking statements not being achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of Clarke to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. Risks and uncertainties include, among others, the Company's investment strategy, legal and regulatory risks, general market risk, potential lack of diversification in the Company's investments and interest rates and foreign currency fluctuations. Although Clarke has attempted to identify important factors that could cause actual actions, events or results or cause actions, events or results not to be estimated or intended, there can be no assurance that forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Other than as required by applicable Canadian securities laws, Clarke does not update or revise any such forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events. Accordingly, readers should not place undue reliance on forward-looking statements.
SOURCE Clarke Inc.
Michael Rapps, President and CEO, at (416) 855-1925; Andrew Snelgrove, CFO, at (902) 442-3987Copyright CNW Group 2015