Torstar Corporation (“Torstar”) (TSX:TS.B) today announced that the Torstar board of directors (the “Board”) has determined to continue to recommend the proposed acquisition by NordStar Capital LP (“NordStar”) of all of the issued and outstanding Class A shares and Class B non-voting shares of Torstar (the “Shares”) by way of a statutory plan of arrangement at a price of $0.74 per Share.
On July 11, 2020, Torstar announced that it had entered into an amendment (the “Amendment”) to the arrangement agreement dated May 26, 2020 (the “NordStar Agreement”) between Torstar and NordStar to provide for the increased purchase price, which constitutes an increase of 17.5% from the $0.63 per Share payable under the original NordStar Agreement.
Revised Proposal from Canadian Modern Media Holdings Inc.
Earlier today, Canadian Modern Media Holdings Inc. (“CMMH”) submitted a proposal (the “CMMH Proposal”) to acquire all of the issued and outstanding Shares at a price of $0.80 per Share in cash. As previously announced by Torstar, CMMH had submitted an unsolicited, conditional proposal to Torstar to acquire the Shares for a combination of $0.72 per Share in cash and the issuance of one non-transferable contingent value right per Share. The CMMH Proposal does not include any contingent value right as part of the consideration to holders of Shares. In addition, the CMMH Proposal does not provide any information regarding the proposed financing of the CMMH Proposal or include any financing commitment letter.
Board Determination
As disclosed in Torstar’s press release on July 11, 2020, the trustees of the Torstar Voting Trust and Hamblin Watsa Investment Counsel Ltd. (“HWIC”), a wholly-owned subsidiary of Fairfax Financial Holdings Limited (“Fairfax Financial”), advised the Board of their intent not to support the prior CMMH offer and, conditional upon execution of the Amendment, to enter into new hard lock-up voting support agreements with NordStar. These voting support agreements, which were entered into on July 11, 2020, obligate the Torstar Voting Trust and HWIC to vote in favour of the transaction with NordStar and to vote against any resolution or transaction that would in any manner prevent or delay the completion of the NordStar transaction. The obligations of the Torstar Voting Trust and HWIC under these voting support agreements continue and do not terminate even if the NordStar Agreement is terminated in accordance with its terms as a result of the Board’s acceptance of a superior proposal.
Following Torstar’s receipt of the CMMH Proposal earlier today, the Board determined in good faith, after consultation with its financial and outside legal advisors, that (1) the CMMH Proposal does not constitute and could not reasonably be expected to constitute or lead to a “Superior Proposal” under the NordStar Agreement, as amended, including because such proposal would not be reasonably capable of being completed without undue delay relative to the NordStar transaction, and (2) the transaction contemplated by the NordStar Agreement, as amended, is in the best interest of the company and to continue to recommend that Torstar shareholders vote in favour of the NordStar transaction, as amended, at the special meeting of Torstar shareholders scheduled for July 21, 2020 (the “Special Meeting”).
John Honderich, Chair of the Board, commented: “We believe that CMMH’s submission of a proposal today is disingenuous and made for the purpose of confusing shareholders and obfuscating its own missteps. The terms of the voting support agreements entered into with the Torstar Voting Trust and Fairfax have been publicly disclosed and make it impossible for their proposal to be considered a superior proposal. These facts are all well known to CMMH.”
“Until this morning, the only proposal we had received from CMMH was for $0.72 plus a contingent value right. Prior to entering into our agreement with NordStar last week, we urged CMMH to put forward its best proposal. Specifically, we asked them to increase the cash component. They declined to do so. It was only after the higher deal with NordStar was publicly announced that CMMH suggested it would have increased the cash component to $0.80. The Board continues to believe the NordStar transaction is in the best interests of Torstar and all its stakeholders, and looks forward to a successful completion.”
Update on Special Meeting
Torstar also announced today preliminary voting results for the Special Meeting, which indicate that over 98% of the votes cast on the special resolution approving the NordStar transaction have been voted in favour of the transaction. In addition, based on such preliminary results, over 80% of votes cast by holders of Shares excluding those held by members of the Torstar Voting Trust and by HWIC have been voted in favour of the special resolution approving the NordStar transaction.
Further details regarding the terms of the transaction are set out in the NordStar Agreement, which is publicly filed by Torstar under its profile at www.sedar.com. Additional information regarding the transaction is also provided in the information circular delivered to Shareholders in connection with the Special Meeting.
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