All amounts in Canadian dollars unless otherwise
noted
Difference Capital Financial Inc. ("
Difference" or
the "
Company")
(
TSX: DCF) is pleased to
announce that it has entered into an arrangement agreement (the
“
Arrangement Agreement”) pursuant to which
Difference will acquire all of the issued and outstanding common
shares of Mogo Finance Technology Inc. ("
Mogo")
(
TSX: MOGO, NASDAQ: MOGO), which it does not
already own (the "
Transaction").
The Transaction will be carried out by way of a
statutory plan of arrangement of Mogo under the Business
Corporations Act (British Columbia), which will involve, among
other things, a three-cornered amalgamation whereby Mogo will
amalgamate with a wholly-owned subsidiary of Difference to form a
new British Columbia Difference subsidiary.
Difference and certain of its directors and
officers currently own approximately 23% of the issued and
outstanding common shares of Mogo (the "Mogo
Shares") (on a basic basis). Under the terms of the
Arrangement Agreement, holders of Mogo Shares (the "Mogo
Shareholders") will be entitled to receive one common
share of Difference (the "Difference Shares") for
each Mogo Share they hold (the "Consideration").
The Consideration represents an aggregate equity value, on a
fully-diluted-in-the-money basis of approximately C$110
million1 for Mogo and represents approximately a 43% premium to the
closing traded price of the Mogo Shares on the Toronto Stock
Exchange (the "TSX"), and approximately a 38%
premium to the 20-day volume weighted average trading price of
Mogo’s common shares on the TSX, each as of April 12, 2019.
Upon the completion of the Transaction, existing holders of
Difference Shares (the "Difference Shareholders")
and Mogo Shareholders will each hold approximately 20% and 80% of
the then-issued and outstanding Difference common shares,
respectively.
Henry Kneis, CEO and co-founder of Difference,
will continue to operate the Company through the Transaction and
will ensure an orderly transition to Mogo’s management team
thereafter. Once such transition is complete, Mr. Kneis will retire
from the Company. In anticipation of his departure, Mr. Kneis
resigned from Difference’s board of directors. The Company wishes
to thank Mr. Kneis for his dedicated service since 2012.
Transaction
Highlights:
- The combination of Difference and Mogo creates a
well-capitalized Canadian financial technology
(“FinTech”) leader with a strong organic growth
trajectory.
- Participation for Difference Shareholders in the growth
potential offered by Canada’s premier non-bank FinTech
leader.
- Continued participation for Difference Shareholders in the
potential upside offered by future exits from Difference’s
investment portfolio.
- The Transaction will result in anticipated operational
efficiencies through lower corporate, public company, and Board
costs of the combined entities.
- Strong, supportive combined corporate, retail and institutional
shareholder base for the combined entity providing enhanced market
visibility and liquidity.
“We are very pleased with the outstanding
opportunity presented by the combination of Difference and Mogo,”
stated Michael Wekerle, Executive Chairman of Difference. “Since
its formation in 2012, Difference has made numerous investments in
emerging technology and growth companies, and we are very excited
about the next evolution and prospects of Difference with the
combination with Mogo, the Canadian non-bank FinTech leader,” Mr.
Wekerle continued.
Board Approvals and
Recommendations
Difference's board of directors (the
"Board"), after receiving the unanimous
recommendation of a special committee of the Board comprised solely
of non-management directors (the "Special
Committee"), and in consultation with its financial and
legal advisors, has unanimously determined that the Transaction is
in the best interests of Difference and is unanimously recommending
that Difference Shareholders vote in favour of the Transaction.
Canaccord Genuity, independent fairness opinion
provider to the Special Committee, has delivered a fairness opinion
to the effect that, as of April 14, 2019, the consideration to be
paid pursuant to the Arrangement Agreement by Difference
Shareholders is fair, from a financial point of view, to
Difference, subject to certain assumptions, limitations, and
qualifications set out therein. The full text of the fairness
opinion, which describes, among other things, the assumptions made,
procedures followed, factors considered and limitations and
qualifications on the review undertaken, and the term and
conditions of the Transaction, will be included in the management
information circular of Difference.
Certain Difference Shareholders, including
Difference's directors and officers, which collectively control
approximately 49.8% of the outstanding Difference Shares (on a
basic basis), have entered into voting support agreements pursuant
to which they have agreed, subject to the terms and conditions
thereof, to vote in favour of the Transaction.
Transaction Details
Pursuant to the terms of the Arrangement
Agreement, each Mogo Shareholder will be entitled to receive one
Difference Share in exchange for each Mogo Share held (the
"Exchange Ratio"). The outstanding stock options,
restricted stock units and warrants of Mogo will remain outstanding
and will be exchanged for stock options, restricted stock units and
warrants of Difference, as adjusted by the Exchange Ratio as
appropriate in accordance with their respective terms. Mogo’s
outstanding convertible debentures will continue to remain
outstanding and will be adjusted by the Exchange Ratio.
The Arrangement Agreement is subject to
customary non-solicitation provisions, including each party’s right
to consider and accept unsolicited superior proposals that may be
submitted by arm’s length third-parties. The Arrangement Agreement
also provides for break-fee, reverse break-fee and expense
reimbursement payments in certain circumstances.
The Transaction constitutes a “related party
transaction” within the meaning of Multilateral Instrument 61-101 -
Protection of Minority Security Holders in Special Transactions
(“MI 61-101”) given that a Difference control
person and certain of Difference’s directors and officers hold Mogo
Shares, which will be acquired by Difference pursuant to the
Transaction. The Transaction is exempt from the MI 61-101
formal valuation requirement pursuant to section 6.3(2) of MI
61-101. Minority Approval (as such term is defined in MI
61-101) will be sought at a special meeting of Difference
shareholders, which is expected to occur in June 2019 (the
“Difference Meeting”).
Closing of the Transaction is subject to certain
customary closing conditions, including court approval, certain
third-party consents and the approval of:
- 66⅔% of the votes cast by the Difference Shareholders at the
Difference Meeting;
- a majority of the votes cast by Difference Shareholders,
excluding Difference related parties that hold Mogo securities and
any other votes that are required to be excluded in determining
such approval in accordance with applicable securities laws and TSX
rules, at the Difference Meeting;
- 66⅔% of the votes cast by the Mogo Shareholders at a special
meeting expected to take place in June 2019;
- a majority of the votes cast by the Mogo Shareholders,
excluding Difference, its affiliates and any other votes that are
required to be excluded in determining such approval in accordance
with applicable securities laws; and
- TSX approval.
Further information regarding the Transaction
will be provided in a management proxy circular which Difference
expects to mail to their shareholders in May. Copies of the
Arrangement Agreement, the management proxy circular and the voting
support agreements will be available on the SEDAR profile of
Difference at www.sedar.com. Difference anticipates that the
Transaction will be completed in the summer of 2019.
Advisors
Eight Capital is acting as exclusive financial
advisor to the Board. DLA Piper (Canada) LLP is acting as legal
advisor to the Special Committee, and Canaccord Genuity is acting
as independent fairness opinion provider to the Special
Committee.
About Difference Capital Financial Inc.
Difference Capital Financial Inc. invests in and
advises growth companies. It leverages its capital market expertise
to help unlock value in technology, media and healthcare companies
as they approach important milestones in their business
lifecycle.
Forward Looking Statements
Certain statements contained in this news
release constitute forward-looking information. These statements
relate to future events or future performance, including statements
as to the likelihood and timing of completing the Transaction,
likelihood of receiving shareholder and other third-party approvals
for the Transaction, ability to receive court approvals in respect
of the Transaction, timing for mailing of the management
information circular, the shareholder meeting dates and the timing
for closing of the Transaction. The use of any of the words
“could”, “anticipate”, “intend”, “expect”, “believe”, “will”,
“projected”, “estimated” and similar expressions and statements
relating to matters that are not historical facts are intended to
identify forward-looking information and are based on the current
belief or assumptions of Difference as to the outcome and timing of
such future events. Whether actual results and developments will
conform with the expectations of Difference is subject to a number
of risks and uncertainties including factors underlying
management's assumptions, such as risks related to: the potential
risk that the Transaction will not be approved by shareholders or
that the Arrangement Agreement could be terminated in certain
circumstances; failure to, in a timely manner, or at all, obtain
the required regulatory, court, stock exchange or other third party
approvals for the Transaction or any ancillary transaction; failure
of the parties to otherwise satisfy the conditions to complete the
Transaction; the possibility that the board of directors of Mogo or
Difference could receive an acquisition proposal and approve a
superior proposal; significant Transaction costs or unknown
liabilities; the risk of litigation or adverse actions or awards
that would prevent or hinder the completion of the Transaction;
failure to realize the expected benefits of the Transaction;
compliance with all applicable laws and other customary risks
associated with transactions of this nature; and general economic
conditions. If the Transaction is not completed
and Difference continues as an independent entity, there are
serious risks that the announcement of the Transaction and the
dedication of substantial resources of Difference to the completion
of the Transaction could have an adverse impact on its business,
strategic relationships, and operating results. Failure to comply
with the terms of the Arrangement Agreement on the part of
Difference may, in certain circumstances, also result in Difference
being required to pay a termination fee or expense reimbursement to
Mogo, the result of which could have a material adverse effect on
the financial position, operating results and ability to fund
growth prospects of Difference. Readers are cautioned that the
foregoing list is not exhaustive. Actual future results may differ
materially. The forward-looking information contained in this
release is made as of the date hereof and Difference is not
obligated to update or revise any forward-looking information,
whether as a result of new information, future events or otherwise,
except as required by applicable securities laws. Because of the
risks, uncertainties and assumptions contained herein, investors
should not place undue reliance on forward-looking information. The
foregoing statements expressly qualify any forward-looking
information contained herein.
Contact Information
Henry Kneis Chief Executive Officer (416) 649-5090
hkneis@differencecapital.com www.differencecapital.com
_________________________1 Excludes existing Difference
ownership
Mogo (TSX:MOGO)
Historical Stock Chart
From Mar 2024 to Apr 2024
Mogo (TSX:MOGO)
Historical Stock Chart
From Apr 2023 to Apr 2024