Board of Directors Unanimously Recommends that Shareholders Vote FOR the Arrangement
Reasons for the Arrangement
- Premium to Share Trading Price. The Consideration represents a premium of (i) approximately 83.3% to the closing price per Share on the
TSX Venture Exchange (the "TSX-V") onJuly 13, 2023 , the last trading day prior to the announcement of the Arrangement, and (ii) approximately 90.6% to the volume-weighted average price of the Shares on the TSX-V over the 30 trading days up to and includingJuly 13, 2023 , the last trading day prior to the announcement of the Arrangement. - Independent Valuation and Fairness Opinion. The independent valuation of the Shares prepared by
Evans & Evans, Inc. concludes that the Consideration is above the$0.168 to$0.185 per Share range of the fair market value of the Shares, as ofApril 30, 2023 . The fairness opinion prepared byEvans & Evans, Inc. in respect of the Arrangement concludes that the Arrangement is fair, from a financial point of view, to the Shareholders (other than the Rolling Shareholders). - Procedural Safeguards; Required Shareholder and Court Approvals. The Arrangement was reviewed and evaluated by the special committee of the Board of Directors of the Company (the "Special Committee"), which is comprised solely of independent directors who are unrelated to the management of the Company and the Rolling Shareholders and which was advised by independent financial advisors and legal counsel. The Arrangement will become effective only if it is approved by (i) at least two-thirds of the votes cast at the Meeting by Shareholders virtually present or represented by proxy and entitled to vote at the Meeting, and (ii) a simple majority of the votes cast at the Meeting by Shareholders virtually present or represented by proxy and entitled to vote at the Meeting, excluding the votes attached to Shares that are required to be excluded pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (in
Québec , Regulation 61-101 respecting Protection of Minority Security Holders in Special Transactions). The Arrangement must also be approved by theSuperior Court ofQuébec (the "Court"), which will consider, among other things, the fairness and reasonableness of the Arrangement to the Shareholders (other than the Rolling Shareholders) and the holders of options to purchase Shares ("Options"). - Shareholder and Director & Officer Support. The Purchaser has entered into (i) irrevocable voting support agreements with each member of the
Purchaser Group and certain other Shareholders ("Irrevocable VSAs"), thereby securing irrevocable support for the approval of the Arrangement by Shareholders representing approximately 48.6% of the issued and outstanding Shares (on a non-diluted basis), and (ii) voting support agreements with certain directors or officers of the Company ("D&O VSAs"), thereby securing support for the approval of the Arrangement by Shareholders representing approximately an additional 0.6% of the issued and outstanding Shares (on a non-diluted basis), subject to customary exceptions. - Dissent Rights. The registered Shareholders have been granted dissent rights and, subject to certain conditions, may have their Shares transferred to the Purchaser against payment by the Purchaser of their fair value.
- Purchaser Group Commitment to the Proposed Transaction.
The Purchaser Group beneficially owns, or exercises control or direction over, directly or indirectly, an aggregate of approximately 46.1% of the issued and outstanding Shares (on a non-diluted basis) and has secured irrevocable support for the approval of the Arrangement by Shareholders representing approximately 48.6% of the issued and outstanding Shares (on a non-diluted basis). On many occasions throughout the negotiation of the Arrangement, thePurchaser Group has reconfirmed their commitment to the Arrangement. As ofJuly 13, 2023 , the last trading day prior to the announcement of the Arrangement, to the knowledge of the Special Committee, no third party had entertained with the Company any credible strategic alternatives other than the Arrangement. The Company subsequently received an unsolicited, non-binding, conditional proposal fromNorth Mill Equipment Finance LLC ("NMEF"), which thePurchaser Group has confirmed it will oppose. Given that the Purchaser has secured irrevocable support for the approval of the Arrangement by Shareholders representing approximately 48.6% of the issued and outstanding Shares (on a non-diluted basis), thePurchaser Group's rejection of NMEF's unsolicited non-binding, conditional proposal means that such proposal is unable to be consummated. To be successfully consummated, it would need, among other things, to gather the support of more than two-thirds of the Shareholders, which would not be possible in the present circumstances without the support of thePurchaser Group . - Immediate Liquidity. The trading volume of the Shares has historically been relatively limited given the Company's market capitalization and public float, thereby making it difficult for Shareholders to realize meaningful liquidity through the public markets on which the Shares trade. The all-cash Consideration provides the Shareholders (other than the Rolling Shareholders in respect of the Rolling Shares) with certainty of value and immediate liquidity for their Shares at a price that may not otherwise be available in the market in the absence of the Arrangement.
- Debentures. The Arrangement is not detrimental to the interests of the holders of the outstanding debentures of the Company given the existing features of such debentures negotiated at the time of their issuance, which provide the holders thereof with the right to require the repurchase of their debentures at a premium in the event of a change of control of the Company.
- Options. The Arrangement is not detrimental to the interests of the holders of Options as such holders will receive a cash payment equal to the "in-the-money" amount in respect of all vested and unvested Options.
- Dependence of the Company on a Member of the
Purchaser Group . The Company depends on a member of thePurchaser Group as a principal source of capital for its ongoing business activities. - Deal Certainty. The completion of the Arrangement is subject to a limited number of conditions, which in the view of the Special Committee, after receiving legal and financial advice, are reasonable in the circumstances and can reasonably be expected to be satisfied, and is not subject to any financing condition. Accordingly, it offers relative deal certainty.
- Strategic Alternatives relative to the Status Quo. The Special Committee and the Board of Directors of the Company assessed the current and anticipated future opportunities and risks associated with the business, operations, assets, financial performance and condition of the Company should it continue as a public corporation. In that regard and in considering the status quo as an alternative to pursuing the Arrangement, the Special Committee and the Board of Directors of the Company (with the Non-Participating Directors (as defined below) abstaining from participating in the deliberation) assessed the historical and continued weak performance of the Shares from a market price and liquidity perspective. After considering all available alternatives, the Special Committee and the Board of Directors of the Company determined (with the Non-Participating Directors abstaining from voting) that entering into the Arrangement was in the best interests of the Company and is fair to the Shareholders (other than the Rolling Shareholders).
- Going Private. The Company's business is very likely to be more effective as a private entity in that limited management resources will be more properly focused on its business operations rather than on public reporting and related obligations and costs.
- Continuity of Operations.
The Purchaser Group has expressed its intention to maintain the operations of the Company, as well as its workforce, substantially intact following the completion of the Arrangement, providing continuity for the Company's stakeholders. - Risks. The business, operations, assets, financial condition, operating results and prospects of the Company continue to be subject to significant uncertainty, including prevailing market conditions in technology and finance.
- Ability to Respond to Unsolicited Superior Proposal. If, at any time prior to the approval of the Arrangement Resolution at the Meeting, the Company receives an unsolicited bona fide written Acquisition Proposal (as defined in the Circular) and, among other things, the Board of Directors of the Company (with the Non-Participating Directors abstaining from voting) first determines, in good faith, upon the recommendation of the Special Committee, the Company's financial advisors and legal counsel, that such Acquisition Proposal constitutes, or is reasonably expected to result in, a Superior Proposal (as defined in the Circular) and that the failure to engage in such discussions or negotiations would be inconsistent with its fiduciary duties, the Company may enter into or participate in discussions or negotiations with such person regarding the Acquisition Proposal. In that event, the Company is nevertheless required to hold the Meeting and cause the Arrangement to be voted on at the Meeting. The
$885,000 Termination Fee (as defined in the Circular) payable by the Company in certain circumstances is reasonable and consistent with prevailing market terms. Further, in the view of the Special Committee and the Board of Directors of the Company, the Termination Fee would not preclude a third party from making a Superior Proposal.
Additional information related to the benefits and related risks of the Arrangement are contained in the Circular.
Board Recommendation
The Board of Directors of the Company based in part on the unanimous recommendation of the Special Committee and after receiving legal and financial advice, has unanimously (with (i)
Meeting and Circular
The Meeting is scheduled to be held as a virtual-only meeting conducted by live videoconference at https://web.lumiagm.com/412704157, the password being "iou2023" (case sensitive) on
The Circular provides important information on the Arrangement and related matters, including the background of the Arrangement, the rationale for the recommendations made by the Special Committee and the Board of Directors of the Company, voting procedures and how to virtually attend the Meeting. Shareholders are urged to read the Circular and its appendices carefully and in their entirety. The Circular is being mailed to Shareholders in compliance with applicable Canadian securities laws and the interim order issued by the Court. The Circular is available on IOU's profile on SEDAR+ at www.sedarplus.ca and on IOU's website at www.ioufinancial.com.
In connection with the Arrangement, the Rolling Shareholders and certain other Shareholders, who hold in aggregate 51,245,948 Shares (or approximately 48.6% of the issued and outstanding Shares (on a non‐diluted basis)), have entered into Irrevocable VSAs with the Purchaser providing for such Shareholders to vote all Shares beneficially owned by them in favour of the Arrangement. In addition,
Shareholder Questions and Assistance
Shareholders of IOU with questions regarding the Meeting should contact Morrow Sodali, IOU's shareholder communications advisor, by telephone at 1.888.444.0617 (North American Toll Free) or 1.289.695.3075 (
IOU is a wholesale lender that provides quick and easy access to growth capital to small businesses through a network of preferred brokers across the US and
Fintech is an early-stage venture capital firm founded in 2015 and headquartered in
Certain statements contained in this press release may constitute forward-looking information or forward-looking statements (collectively, "forward-looking statements") under the meaning of applicable securities laws, including, but not limited to, statements or implications with respect to the rationale of the Special Committee and the Board of Directors of the Company for entering into the Arrangement Agreement (as defined in the Circular), the expected benefits of the Arrangement, the terms and conditions of the Arrangement Agreement, the timing of various steps to be completed in connection with the Arrangement, and other statements that are not historical facts. Often but not always, forward-looking statements can be identified by the use of forward-looking terminology such as "may", "will", "expect", "believe", "estimate", "plan", "could", "should", "would", "outlook", "forecast", "anticipate", "foresee", "continue" or the negative of these terms or variations of them or similar terminology.
Although the Company believes that the forward-looking statements in this press release are based on information and assumptions that are reasonable, including assumptions that the parties will receive, in a timely manner and on satisfactory terms, the necessary Court and Shareholder approvals, and that the parties will otherwise be able to satisfy, in a timely manner, the other conditions to the closing of the Arrangement, these forward-looking statements are by their nature subject to a number of factors that could cause actual results to differ materially from management's expectations and plans as set forth in such forward-looking statements, including, without limitation, the following factors, many of which are beyond the Company's control and the effects of which can be difficult to predict: (a) the possibility that the Arrangement will not be completed on the terms and conditions, or on the timing, currently contemplated, and that it may not be completed at all, due to a failure to obtain or satisfy, in a timely manner or otherwise, required Shareholder, regulatory and Court approvals and other conditions of closing necessary to complete the Arrangement or for other reasons; (b) risks related to tax matters; (c) the possibility of adverse reactions or changes in business resulting from the announcement or completion of the Arrangement; (d) risks relating to the Company's ability to retain and attract key personnel during the interim period; (e) the possibility of litigation relating to the Arrangement; (f) credit, market, currency, operational, liquidity and funding risks generally and relating specifically to the Arrangement, including changes in economic conditions, interest rates, or tax legislation or lending regulatory requirement; (g) the potential of a third party making a superior proposal to the Arrangement; (h) risks related to diverting management's attention from the Company's ongoing business operations; and (i) other risks inherent to the business carried out by the Company and factors beyond its control which could have a material adverse effect on the Company or its ability to complete the Arrangement.
The Company cautions investors not to rely on the forward-looking statements contained in this press release when making an investment decision in their securities. Investors are encouraged to read the Company's filings available under its profile on SEDAR+ at www.sedarplus.ca for a discussion of these and other risks and uncertainties. The forward-looking statements in this press release speak only as of the date of this press release and IOU undertakes no obligation to update or revise any of these statements, whether as a result of new information, future events or otherwise, except as required by law.
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