MONTREAL, July 14,
2023 /CNW/ - 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.
Additional Disclosure, including
under National Instrument 62-103 – The Early Warning System and
Related Take-Over Bid and Insider Reporting Issues
In connection with the Arrangement Agreement, in addition to the
voting support agreements described above, the Purchaser and the
Rolling Shareholders have entered into a letter agreement and
rollover agreements, each dated July 13,
2023, whereby each of NB Specialty Finance Fund LP ("NBSF
1") (an entity managed by Neuberger Berman Investment Advisers
LLC ("NBIA")), Palos IOU Inc. (an entity formed by certain
affiliates of Palos and representatives of management of IOU,
"Palos IOU") and Fintech Ventures Fund, LLLP ("Fintech
Ventures Fund"), acting jointly, have agreed to contribute
15,665,839 Rolling Shares, 14,321,575 Rolling Shares and 12,500,000
Rolling Shares, respectively, to the Purchaser in exchange for
common shares of the Purchaser upon the completion of the
Arrangement.
Both immediately before and immediately after the execution of
the Arrangement Agreement: (i) NBIA, through NBSF-1, held or
exercised control or direction over 15,665,839 Shares, representing
approximately 14.8% of the issued and outstanding Shares (on a
non-diluted basis); (ii) Palos and its affiliates (collectively,
the "Palos Group") held or exercised control or direction
over 19,362,803 Shares, representing approximately 18.3% of the
issued and outstanding Shares (on a non-diluted basis), and
Philippe Marleau, Robert Gloer, Madeline
Wade and Carl Brabander, each
an affiliate, associate and/or joint actor of Palos IOU, held
options to acquire an aggregate of 4,785,000 Shares, and (iii)
Fintech Ventures Fund held or exercised control or direction over
13,592,671 Shares, representing approximately 12.9% of the issued
and outstanding Shares (on a non-diluted basis), and Lucas Timberlake, principal of Fintech Ventures
Fund, held options to acquire an aggregate of 185,000 Shares. The
Shares held by Palos and Fintech Ventures Fund that are not Rolling
Shares will be disposed of pursuant to the Arrangement under the
same terms as for the other IOU shareholders.
In connection with the Arrangement Agreement, on July 13, 2023, Palos IOU entered into a share
exchange agreement (the "Share Exchange Agreement") with
certain shareholders of the Company (collectively, the "Palos
IOU Rolling Shareholders") whereby Palos IOU acquired from the
Palos IOU Rolling Shareholders 14,321,575 Shares (including 240,433
Shares from Robert Gloer) at a price
of $0.22 per Share in exchange for
common shares in the capital of Palos IOU ("Palos IOU
Shares") at a deemed price of C$0.22 per Palos IOU Share on a one-for-one basis
(the "Acquisition"). Prior to the Acquisition, the Palos
Group owned, controlled or directed, directly or indirectly,
10,041,228 Shares, representing approximately 9.5% of the issued
and outstanding Shares (on a non-diluted basis). After giving
effect to the Acquisition, the Palos Group owned, controlled or
directed, directly or indirectly, 19,362,803 Shares, representing
approximately 18.3% of the issued and outstanding Shares (on a
non-diluted basis).
In addition, NBSF 1 and IOU are party to an Investor Rights
Agreement dated as of December 3, 2020, pursuant to which,
among other things, (i) for such time as NBSF 1 (collectively with
its affiliates) owns at least 7.5% of the issued and outstanding
Shares, NBSF 1 has the right, subject to customary requirements, to
nominate one (1) nominee to be included in the list of nominees
proposed as directors by IOU, and (ii) for such time as NBSF 1
(collectively with its affiliates) owns at least 7.5% of the issued
and outstanding Shares or continues to purchase loans under and in
accordance with the terms of that certain loan purchase agreement
dated October 22, 2020 between NBSF
2018-2 and IOU Central Inc., a subsidiary of the Company, NBSF 1
has the right, subject to customary requirements, to designate one
(1) individual to attend meetings of the Board as a non-voting
observer.
Advisors
Davies Ward Phillips &
Vineberg LLP is acting as legal advisor to the Company and Blake,
Cassels & Graydon LLP is acting as independent legal advisor to
the Special Committee.
Evans & Evans, Inc. is acting as financial advisor to the
Special Committee and has provided a fairness opinion and an
independent valuation in connection with the Arrangement.
Stikeman Elliott LLP is acting as legal advisor to Neuberger and
the Purchaser. McMillan LLP is acting as legal advisor to
Palos.
About IOU
IOU Financial Inc. 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 Canada. Built on its proprietary IOU360
technology platform that connects underwriters, merchants and
brokers in real time, IOU Financial has become a trusted
alternative to banks by originating over US$1 billion in loans to fund small business
growth since 2009. IOU was named one of the 50 Best Places to Work
in Fintech for 2022 by American Banker and trades on the TSX-V
under the symbol "IOU", and on the US OTC markets as "IOUFF". To
learn more about IOU Financial's corporate history, financial
products, or to join our broker network please visit
www.IOUFinancial.com.
About Neuberger Berman
Neuberger Berman, founded in 1939, is a private, independent,
employee-owned investment manager. The firm manages a range of
strategies—including equity, fixed income, quantitative and
multi-asset class, private equity, real estate and hedge funds—on
behalf of institutions, advisors and individual investors globally.
Neuberger Berman's investment philosophy is founded on active
management, engaged ownership and fundamental research, including
industry-leading research into material environmental, social and
governance factors. Neuberger Berman is a PRI Leader, a designation
awarded to fewer than 1% of investment firms. With offices in 26
countries, the firm's diverse team has over 2,700 professionals.
For nine consecutive years, Neuberger Berman has been named first
or second in Pensions & Investments Best Places to Work in
Money Management survey (among those with 1,000 employees or more).
The firm manages $436 billion in
client assets as of March 31, 2023.
For more information, please visit our website at
www.nb.com.
About Palos
Palos Capital, based in Montreal,
Quebec, is a boutique financial services firm that primarily
operates through two subsidiaries: Palos Wealth Management Inc.
(PWM) and Palos Management Inc. (PMI). PWM offers wealth management
services, including discretionary portfolio management and
separately managed account services to individual, corporate and
institutional clients. PMI is an independent, investment fund
manager and portfolio manager. For more information, please visit
the company`s website at www.palos.ca.
About FinTech
Fintech Ventures is an early-stage venture capital firm founded
in 2015 and headquartered in Atlanta,
GA, with offices in New York,
NY. The firm focuses exclusively on investing in and
partnering with entrepreneurs building promising technology-enabled
companies in the banking, capital markets, and lending sectors. The
Fintech Ventures team has multiple decades of collective
operational and investment experience, with numerous successful
exits. For more information, please visit www.fintechv.com.
Caution Regarding Forward-Looking
Statements
Certain statements made in this press release are
forward-looking statements within the meaning of applicable
securities laws, including, but not limited to, statements with
respect to the rationale of the Special Committee and the Board for
entering into the Arrangement Agreement, the expected benefits of
the Arrangement, the timing of various steps to be completed in
connection with the Arrangement, and other statements that are not
material 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 parties
will receive, in a timely manner and on satisfactory terms, the
necessary court, shareholder and U.S. State regulatory 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) the potential of a third party making a superior
proposal to the Arrangement; (g) risks related to diverting
management's attention from the Company's ongoing business
operations; and (h) 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.sedar.com 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.
Neither TSX-V nor its Regulation Services Provider (as that term
is defined in policies of the TSX-V) accepts responsibility for the
adequacy or accuracy of this release.
View original content to download
multimedia:https://www.prnewswire.com/news-releases/neuberger-berman-palos-capital-and-fintech-ventures-to-acquire-iou-at-c0-22-per-share-in-an-all-cash-transaction-301877504.html
SOURCE IOU Financial Inc.