Mosaic Capital Completes $277.3 Million All-Cash Transaction

On August 5, 2021, Mosaic Capital Corporation (“Mosaic”) completed its sale to 2356430 Alberta Inc. (the “Purchaser”), a newly formed private company owned by an entity controlled by Fairfax Financial Holdings Limited and MCC Holdings Ltd. Implemented through a statutory plan of arrangement under the Business Corporations Act (Alberta), the Purchaser acquired all of Mosaic’s outstanding common shares for $5.50 per share and all of its outstanding convertible unsecured subordinated debentures for consideration of $1,000 plus accrued and unpaid interest for each $1,000 principal amount, in an all-cash transaction valued at approximately $277.3 million (inclusive of debt). As part of the transaction, ATB Financial refinanced certain outstanding indebtedness of Mosaic.

Mosaic’s common shares and debentures were each delisted from the TSX Venture Exchange effective as of the close of trading on August 5, 2021.

Farris LLP represented Mosaic with a team led by Brian Canfield, and which included Ron Murray, Daniel Everall and Kurtis Harms (Corporate/M&A); David Selley (Competition); and Mark Chu (Tax).

Fairfax and MCC Holdings Take Mosaic Capital Private for $277M

August 2021 – Osprey Capital Partners Inc. is pleased to announce that on August 5th, 2021, 2356430 Alberta Inc., a company controlled by MCC Holdings Ltd. (“MCC Holdings”) and certain affiliates of Fairfax Financial Holdings Limited (collectively, “Fairfax”), successfully completed the acquisition of Mosaic Capital Corporation (TSXV: M) (TSXV: M.DB). Osprey Capital acted as exclusive financial advisor to MCC Holdings.

The transaction was completed through a statutory plan of arrangement under the Business Corporations Act (Alberta), which was overwhelmingly approved on July 29, 2021, by Mosaic shareholders. 2356430 Alberta Inc. acquired all of the outstanding common shares of Mosaic for $5.50 per share in cash for a consolidated enterprise value (inclusive of debt) of approximately $277.3 million. The common shares and the debentures were delisted from the TSX Venture Exchange effective as of the close of trading on August 5, 2021.

John Mottola, Managing Partner at Osprey Capital, said, “This deal was one where long-standing relationships with both MCC Holdings and Mosaic contributed to the efficiency of the confidential process and the success of the transaction. Structured as a private company, the portfolio of businesses have now been positioned for future success.”

Osprey Capital Partners Inc. acted as financial advisor to MCC Holdings. Fillmore Riley LLP acted as legal counsel to MCC Holdings. MNP acted as accounting advisors to MCC Holdings. Torys LLP acted as legal counsel to Fairfax. Farris LLP acted as legal counsel to the Special Committee and to Mosaic. Evans & Evans, Inc. provided the Special Committee and the Mosaic Board of Directors with a fairness opinion in respect of the transaction.

About Fairfax Financial Holdings Limited

Fairfax Financial Holdings Limited is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and the associated investment management.

About MCC Holdings Limited

MCC Holdings is a private company that owns, directly or indirectly, a number of private businesses throughout Canada and the United States.

About Mosaic Capital Corporation

Mosaic is a Canadian investment company that owns a portfolio of established businesses which span a diverse range of industries and geographies. Its strategy is to create long-term value for its shareholders through accretive acquisitions, long-term portfolio ownership, sustained cash flows and organic portfolio growth.

About Osprey Capital Partners

Founded in 1998, Osprey Capital has established itself as one of Canada’s leading independent mid-market investment banking and financial advisory firms. Osprey offers a range of advisory services focused on the execution of merger, acquisition, business sale, and finance transactions. Osprey Capital’s success in servicing clients’ M&A and financing requirements is a result of its understanding of the unique needs of mid-market companies and their shareholders and its strong relationships with industry players including strategic acquirers, Canadian & international private equity funds, institutional investors, lenders and banks.

2356340 Alberta Inc. completed the acquisition of Mosaic Capital Corporation (TSXV:M).

2356340 Alberta Inc. entered into a letter of intent to acquire Mosaic Capital Corporation (TSXV:M) on May 10, 2021. 2356340 Alberta Inc. entered into an agreement to acquire Mosaic Capital Corporation (TSXV:M) for an enterprise value of approximately CAD 280 million on June 28, 2021. Under the terms of the transaction, 2356340 Alberta will acquire all of the outstanding common shares of Mosaic for CAD 5.5 per share in cash, and in addition, Mosaic’s outstanding convertible unsecured subordinated debentures will be acquired for consideration of CAD 1,000 plus accrued and unpaid interest for each CAD 1,000 principal amount. Consolidated enterprise value (inclusive of debt) is approximately CAD 277.3 million. All outstanding Mosaic restricted stock units will have their vesting accelerated and the holders of the Mosaic restricted stock units will receive CAD 5.50 per Mosaic restricted stock unit in cash for each Mosaic restricted stock unit they own as at the effective time. All outstanding Mosaic options will be surrendered for cancellation and the holders of Mosaic options will receive the amount, if any, that CAD 5.50 exceeds the exercise price of each Mosaic option they hold at the effective time, less any applicable withholdings. Mosaic will pay a fee of CAD 1.8 million to 2356340 Alberta in case Mosaic terminates the agreement. 2356340 Alberta will pay a fee of CAD 1.8 million to Mosaic in case 2356340 Alberta terminates the agreement. 2356340 Alberta Inc, use reasonable commercial efforts to take, or cause to be taken, all actions, and do, or cause to be done, all things necessary, proper or advisable to arrange and obtain the proceeds of the Sponsor Financing prior to the Effective Date. The transaction is subject to various conditions, including approval by shareholders at a special meeting, court and regulatory approvals and provision of financing by Mosaic’s lenders. Dissent Rights will not have been exercised with respect to more than 10% of the issued and outstanding Common Shares of Mosaic. The Board of Directors of Mosaic, after receiving the unanimous recommendation of the Special Committee, consisting of William Smith, QC, George Flemming and Evangelos Spiropoulos who are non-Management Directors, unanimously recommended the shareholders to vote in favor of this transaction. Certain shareholders, who collectively beneficially own or exercise control over approximately 41.6% of Mosaic’s outstanding common shares have entered into voting and support agreements pursuant to which they have agreed to vote their common shares in favor of the transaction. The shareholders of Mosaic Capital Corporation approved the transaction on July 29, 2021. The transaction is expected to close in early August 2021. As of July 3, 2021, if all of the conditions to completion of the arrangement are satisfied, Mosaic anticipates that closing will occur prior to the end of the August 2021. As of July 29, 2021, the transaction is expected to close on or about August 5, 2021. Evans & Evans, Inc. acted as fairness opinion provider to the special committee and the Board of Directors of Mosaic. B.R. (Brian) Canfield of Farris LLP acted as legal advisor to the special committee and to Mosaic. Wes Burrow of Fillmore Riley LLP acted as legal advisor to 2356340 Alberta and David Chaikof, Omar Wakil, David Kolesar, Mark Yusishen. Janan Paskaran of Torys LLP acted as legal advisors to Fairfax Financial. Osprey Capital Partners Inc. acted as financial advisor to Mark Yusishen. Olympia Trust Company Inc. acted as depository and transfer agent to Mosaic. Scott Sansgster, Ali Memon of Fasken Martineau DuMoulin LLP advised Mosaic Capital Corporation. 2356340 Alberta Inc. completed the acquisition of Mosaic Capital Corporation (TSXV:M) on August 5, 2021. The Common Shares and the Debentures will each be delisted from the TSX Venture Exchange (the “TSXV”) effective as of the close of trading on August 5, 2021.

Fairfax (TSX:FFH) and MCC Holdings to acquire Mosaic Capital (TSXV:M)

Mosaic Capital Corporation (M) has agreed to be acquired for C$5.50 per share in an all cash transaction.

The company entered into an arrangement with 2356340 Alberta Inc., a private company owned by an entity controlled by Fairfax Financial Holdings Limited and MCC Holdings Ltd., to be acquired for $5.50 per share or a consolidated enterprise value of $277.3 million.

Transaction highlights

  • The purchase price represents a 61.7 per cent premium to the $3.40 closing price of the common shares on the TSXV on June 25, 2021
  • Mosaic’s Board of Directors formed a special committee of non-management directors to provide oversight, guidance and specific instructions with respect to the negotiations
  • Given Mosaic’s considerable outstanding indebtedness, and an ongoing lack of investor interest in diversified small capitalization companies, the special committee does not believe that Mosaic’s limited access to the public equity markets justifies the cost of remaining a public company
  • Mosaic retains the ability to respond to unsolicited superior proposals upon payment of a $1.8 million termination fee
  • Under certain conditions, the purchaser is obligated to pay to Mosaic a reverse termination amount of $1.8 million where there is a failure to consummate the arrangement
  • Completion of the transaction is subject to approval by shareholders at a special meeting
  • The transaction is currently expected to close in early August 2021

William H. Smith, Vice Chairman of Mosaic and chair of the special committee, commented,

“After careful deliberation, we are pleased to unanimously recommend that our shareholders vote in favour of this transaction. We believe the value offered is attractive at this juncture in Mosaic’s history. Furthermore, given the unique challenges related to diversified small-cap public companies in Canada we believe that Mosaic’s underlying portfolio companies are better positioned for future success with Mosaic structured as a private company.”

Fairfax Financial Holdings is engaged in property and casualty insurance and reinsurance and the associated investment management.

MCC Holdings Ltd. is a company controlled by Mark Yusishen. Yusishen owns a number of private businesses throughout Canada and the United States.

Mosaic owns a portfolio of established businesses spanning a diverse range of industries and geographies.

Mosaic Capital Corporation (M) is up by 55.88 per cent and is currently trading at $5.30 per share as of 9:30 am ET.

Mosaic to Be Acquired for $5.50 per Share in All Cash Transaction

Calgary, Alberta–(Newsfile Corp. – June 28, 2021) – Mosaic Capital Corporation (TSXV: M) (TSXV: M.DB) (“Mosaic” or the “Company“) announced today that it has entered into an arrangement agreement (the “Arrangement“) with 2356340 Alberta Inc. (the “Purchaser“), a newly formed private company owned by an entity controlled by Fairfax Financial Holdings Limited and MCC Holdings Ltd. pursuant to which the Purchaser has agreed to acquire all of the outstanding common shares of Mosaic for $5.50 per share in cash (the “Transaction“) for a consolidated enterprise value (inclusive of debt) of approximately $277.3 million. At closing of the Transaction, Mosaic’s outstanding convertible unsecured subordinated debentures will be acquired for consideration of $1,000 plus accrued and unpaid interest for each $1,000 principal amount.

TRANSACTION HIGHLIGHTS

  • Premium to Market Price. The consideration to be paid pursuant to the Arrangement for each common share represents a 61.7% premium to the $3.40 closing price of the common shares on the TSX-V on June 25, 2021, the last trading day prior to the public announcement of the Arrangement, and a 65.9% premium to the 20-day volume-weighted average common share price on the TSX-V for the period ending June 25, 2021.
  • Cash Consideration and Immediate Liquidity. The consideration to be received by shareholders is payable entirely in cash, providing shareholders with certainty of value and immediate liquidity, and removes the risks associated with continued ownership of the common shares.
  • Historical Trading Information. Trading in the common shares has been subject to low volumes and infrequency of trades for the last several years, indicating that the ability of shareholders to realize the current trading price for their common shares is highly unlikely.
  • Special Committee. Mosaic’s board of directors (the “Board of Directors“) formed a special committee (the “Special Committee“) of non-management directors to provide oversight, guidance and specific instructions with respect to the negotiations involving the Arrangement. The members of the Special Committee unanimously concluded that $5.50 per common share is the highest price that the Purchaser was willing to pay to acquire the common shares.
  • Access to Capital and Public Markets. Given the large amount of obligations comprising Mosaic’s outstanding indebtedness, and ongoing lack of investor interest in diversified small capitalization companies, the Special Committee believes that Mosaic has limited ability to utilize the public equity markets, and any financings through such markets would be associated with a high cost of capital and significant dilution to existing shareholders. Therefore, the Special Committee does not believe that Mosaic’s limited access to the public equity markets justifies the cost of remaining a public company.
  • Lack of Alternative Transactions. From 2018 to 2020, Mosaic’s management sought to identify, without success, potential strategic and financial parties who may be interested in undertaking a business combination or significant financing with Mosaic. The Special Committee believes that the inability to attract interest from potential M&A and financing partners over that time period is indicative of the remote likelihood that other potential acquirers may emerge.
  • Ability to Respond to Superior Proposals. Notwithstanding the Special Committee’s determination regarding the remote likelihood of other potential acquirers emerging, Mosaic retains the ability, under the terms of the Arrangement, to consider and respond to unsolicited superior proposals, and to enter into any such superior proposal upon payment of a $1.8 million termination fee.
  • Reverse Termination Amount. The Purchaser is obligated to pay to Mosaic a reverse termination amount of $1.8 million in certain circumstances where there is a failure to consummate the Arrangement when required to do so under the terms of the Arrangement.
  • Support Agreements. Certain shareholders, who collectively beneficially own or exercise control over approximately 41.6% of Mosaic’s outstanding common shares, have entered into “hard” voting and support agreements pursuant to which they have agreed to vote their common shares in favour of the Arrangement.

Fairfax, MCC Holdings to acquire private equity firm Mosaic

Calgary-based private equity firm Mosaic Capital Corp has agreed to be acquired by a newly formed vehicle controlled by Fairfax Financial Holdings and Mark Yusishen’s MCC Holdings. Mosaic’s common shares will be bought for C$5.5 per share in cash, representing an enterprise value of about C$277.3 million. The firm’s board is recommending the deal, which is expected to close in August.

PRESS RELEASE

Calgary, Alberta–(Newsfile Corp. – June 28, 2021) – Mosaic Capital Corporation (TSXV: M) (TSXV: M.DB) (“Mosaic” or the “Company”) announced today that it has entered into an arrangement agreement (the “Arrangement”) with 2356340 Alberta Inc. (the “Purchaser”), a newly formed private company owned by an entity controlled by Fairfax Financial Holdings Limited and MCC Holdings Ltd. pursuant to which the Purchaser has agreed to acquire all of the outstanding common shares of Mosaic for $5.50 per share in cash (the “Transaction”) for a consolidated enterprise value (inclusive of debt) of approximately $277.3 million. At closing of the Transaction, Mosaic’s outstanding convertible unsecured subordinated debentures will be acquired for consideration of $1,000 plus accrued and unpaid interest for each $1,000 principal amount.

TRANSACTION HIGHLIGHTS

Premium to Market Price. The consideration to be paid pursuant to the Arrangement for each common share represents a 61.7% premium to the $3.40 closing price of the common shares on the TSX-V on June 25, 2021, the last trading day prior to the public announcement of the Arrangement, and a 65.9% premium to the 20-day volume-weighted average common share price on the TSX-V for the period ending June 25, 2021.

Cash Consideration and Immediate Liquidity. The consideration to be received by shareholders is payable entirely in cash, providing shareholders with certainty of value and immediate liquidity, and removes the risks associated with continued ownership of the common shares.

Historical Trading Information. Trading in the common shares has been subject to low volumes and infrequency of trades for the last several years, indicating that the ability of shareholders to realize the current trading price for their common shares is highly unlikely.

Special Committee. Mosaic’s board of directors (the “Board of Directors”) formed a special committee (the “Special Committee”) of non-management directors to provide oversight, guidance and specific instructions with respect to the negotiations involving the Arrangement. The members of the Special Committee unanimously concluded that $5.50 per common share is the highest price that the Purchaser was willing to pay to acquire the common shares.

Access to Capital and Public Markets. Given the large amount of obligations comprising Mosaic’s outstanding indebtedness, and ongoing lack of investor interest in diversified small capitalization companies, the Special Committee believes that Mosaic has limited ability to utilize the public equity markets, and any financings through such markets would be associated with a high cost of capital and significant dilution to existing shareholders. Therefore, the Special Committee does not believe that Mosaic’s limited access to the public equity markets justifies the cost of remaining a public company.

Lack of Alternative Transactions. From 2018 to 2020, Mosaic’s management sought to identify, without success, potential strategic and financial parties who may be interested in undertaking a business combination or significant financing with Mosaic. The Special Committee believes that the inability to attract interest from potential M&A and financing partners over that time period is indicative of the remote likelihood that other potential acquirers may emerge.

Ability to Respond to Superior Proposals. Notwithstanding the Special Committee’s determination regarding the remote likelihood of other potential acquirers emerging, Mosaic retains the ability, under the terms of the Arrangement, to consider and respond to unsolicited superior proposals, and to enter into any such superior proposal upon payment of a $1.8 million termination fee.

Reverse Termination Amount. The Purchaser is obligated to pay to Mosaic a reverse termination amount of $1.8 million in certain circumstances where there is a failure to consummate the Arrangement when required to do so under the terms of the Arrangement.

Support Agreements. Certain shareholders, who collectively beneficially own or exercise control over approximately 41.6% of Mosaic’s outstanding common shares, have entered into “hard” voting and support agreements pursuant to which they have agreed to vote their common shares in favour of the Arrangement.

William H. Smith, QC, Vice Chairman of Mosaic and Chair of the Special Committee, commented “After careful deliberation, we are pleased to unanimously recommend that our shareholders vote in favour of this transaction. We believe the value offered is attractive at this juncture in Mosaic’s history. Furthermore, given the unique challenges related to diversified small-cap public companies in Canada we believe that Mosaic’s underlying portfolio companies are better positioned for future success with Mosaic structured as a private company.”

TRANSACTION DETAILS

The Transaction will involve the Purchaser acquiring all of the common shares of Mosaic for $5.50 per share in cash. It will be implemented through a statutory plan of arrangement under the Business Corporations Act (Alberta).

Completion of the Transaction is subject to various conditions, including approval by shareholders at a special meeting, court and regulatory approvals and provision of financing by Mosaic’s lenders. It is currently expected to close in early August 2021.

It is a term of the plan of arrangement that all of Mosaic’s outstanding convertible unsecured subordinated debentures will be acquired for consideration of $1,000 plus accrued and unpaid interest for each $1,000 principal amount.

The foregoing summary is qualified in its entirety by the provisions of the Arrangement Agreement, a copy of which will be filed on SEDAR at www.sedar.com. Mosaic will mail a management information circular and certain related documents to shareholders in connection with the special meeting to consider and vote on the Transaction, copies of which will also be filed on SEDAR at www.sedar.com.

MOSAIC BOARD OF DIRECTORS RECOMMENDATION AND FAIRNESS OPINION

The Board of Directors, after receiving the unanimous recommendation of the Special Committee and in consultation with its legal advisors, has unanimously determined that the Transaction is in the best interests of Mosaic and fair to shareholders and is recommending that shareholders vote in favour of the Transaction.

Evans & Evans, Inc. has provided a fairness opinion to the Special Committee and Board of Directors that based upon and subject to the assumptions and limitation described in its opinion, the consideration to be received by shareholders pursuant to the Transaction is fair, from a financial point of view, to the shareholders.

ADVISORS

Farris LLP is acting as legal counsel to the Special Committee and to the Company. Evans & Evans, Inc. has provided the Special Committee and the Board of Directors with a fairness opinion in respect of the Transaction. Fillmore Riley LLP is acting as legal counsel to the Purchaser and MCC Holdings Ltd. Torys LLP is acting as legal counsel to Fairfax Financial Holdings Limited. Osprey Capital Partners Inc. is acting as sole financial advisor to MCC Holdings Ltd.

ABOUT MOSAIC CAPITAL CORPORATION

Mosaic is a Canadian investment company that owns a portfolio of established businesses which span a diverse range of industries and geographies. Mosaic’s strategy is to create long-term value for its shareholders through accretive acquisitions, long-term portfolio ownership, sustained cash flows and organic portfolio growth. Mosaic achieves its objectives by maintaining financial discipline, acquiring businesses at attractive valuations, performing extensive acquisition due diligence, utilizing optimal transaction structuring and working closely with subsidiary businesses after acquisition.

ABOUT FAIRFAX FINANCIAL HOLDINGS LIMITED

Fairfax Financial Holdings Limited is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and the associated investment management.

ABOUT MCC HOLDINGS LTD.

MCC Holdings Ltd. is a company controlled by Mark Yusishen. Mr. Yusishen is a Canadian businessman who owns, directly or indirectly, a number of private businesses throughout Canada and the United States.

Fairfax and mcc holdings to take mosaic capital private for $277m

CPE News (6/28/2021) – Mosaic Capital Corporation (TSX–V: M) has entered into an arrangement agreement with 2356340 Alberta Inc. pursuant to which the 2356340 Alberta has agreed to acquire all of the outstanding common shares of Mosaic for $5.50 per share in cash for a consolidated enterprise value (inclusive of debt) of approximately $277.3 million

2356340 Alberta is a newly formed private company owned by an entity controlled by Fairfax Financial Holdings Limited (TSX: FFH and FFH.U) and MCC Holdings Ltd., a company controlled by Mark Yusishen.

At closing of the transaction, Mosaic’s outstanding convertible unsecured subordinated debentures will be acquired for consideration of $1,000 plus accrued and unpaid interest for each $1,000 principal amount.

Certain shareholders, who collectively beneficially own or exercise control over approximately 41.6% of Mosaic’s outstanding common shares, have entered into “hard” voting and support agreements pursuant to which they have agreed to vote their common shares in favour of the arrangement.

As of March 17, 2021, Mosaic had: (i) 10,705,665 common shares issued and outstanding; (ii) 10,000,000 preferred securities issued and outstanding ; (iii) $13,124,000 aggregate principal amount of convertible debentures issued and outstanding; (iv) $50,000,000 aggregate principal amount of secured debentures issued and outstanding; and (v) 17,026,106 Warrants issued and outstanding entitling Fairfax to acquire, subject to adjustment, up to 17,026,106 Common Shares at an exercise price of $8.81 per common share on or before January 26, 2024.

In January 2017, Mosaic Capital closed $150 million financing with Fairfax, consisting $100 million aggregate principal amount of 6% senior preferred securities, $50 million aggregate principal amount of 5% senior secured debentures, and common share purchase warrants entitling Fairfax to acquire up to 17,026,106 common shares of Mosaic at a price of $8.81 per common share until January 26, 2024.

Calgary based Mosaic is a Canadian investment company that owns a portfolio of established businesses which span a diverse range of industries and geographies.

photo credit: Mosaic Capital

News Release

MOSAIC TO BE ACQUIRED FOR $5.50 PER SHARE IN ALL CASH TRANSACTION

Calgary, Alberta – June 28, 2021. Mosaic Capital Corporation (“Mosaic” or the “Company”) (TSX–V Symbols: M and M.DB) announced today that it has entered into an arrangement agreement (the “Arrangement”) with 2356340 Alberta Inc. (the “Purchaser”), a newly formed private company owned by an entity controlled by Fairfax Financial Holdings Limited and MCC Holdings Ltd. pursuant to which the Purchaser has agreed to acquire all of the outstanding common shares of Mosaic for $5.50 per share in cash (the “Transaction”) for a consolidated enterprise value (inclusive of debt) of approximately $277.3 million. At closing of the Transaction, Mosaic’s outstanding convertible unsecured subordinated debentures will be acquired for consideration of $1,000 plus accrued and unpaid interest for each $1,000 principal amount.

TRANSACTION HIGHLIGHTS

• Premium to Market Price. The consideration to be paid pursuant to the Arrangement for each common share represents a 61.7% premium to the $3.40 closing price of the common shares on the TSX-V on June 25, 2021, the last trading day prior to the public announcement of the Arrangement, and a 65.9% premium to the 20-day volume-weighted average common share price on the TSX-V for the period ending June 25, 2021.
• Cash Consideration and Immediate Liquidity. The consideration to be received by shareholders is payable entirely in cash, providing shareholders with certainty of value and immediate liquidity, and removes the risks associated with continued ownership of the common shares.
• Historical Trading Information. Trading in the common shares has been subject to low volumes and infrequency of trades for the last several years, indicating that the ability of shareholders to realize the current trading price for their common shares is highly unlikely.
• Special Committee. Mosaic’s board of directors (the “Board of Directors”) formed a special committee (the “Special Committee”) of non-management directors to provide oversight, guidance and specific instructions with respect to the negotiations involving the Arrangement. The members of the Special Committee unanimously concluded that $5.50 per common share is the highest price that the Purchaser was willing to pay to acquire the common shares.
• Access to Capital and Public Markets. Given the large amount of obligations comprising Mosaic’s outstanding indebtedness, and ongoing lack of investor interest in diversified small capitalization companies, the Special Committee believes that Mosaic has limited ability to utilize the public equity markets, and any financings through such markets would be associated with a high cost of capital and significant dilution to existing shareholders. Therefore, the Special Committee does not believe that Mosaic’s limited access to the public equity markets justifies the cost of remaining a public company.
• Lack of Alternative Transactions. From 2018 to 2020, Mosaic’s management sought to identify, without success, potential strategic and financial parties who may be interested in undertaking a business combination or significant financing with Mosaic. The Special Committee believes that the inability to attract interest from potential M&A and financing partners over that time period is indicative of the remote likelihood that other potential acquirers may emerge.
• Ability to Respond to Superior Proposals. Notwithstanding the Special Committee’s determination regarding the remote likelihood of other potential acquirers emerging, Mosaic retains the ability, under the terms of the Arrangement, to consider and respond to unsolicited superior proposals, and to enter into any such superior proposal upon payment of a $1.8 million termination fee.
• Reverse Termination Amount. The Purchaser is obligated to pay to Mosaic a reverse termination amount of $1.8 million in certain circumstances where there is a failure to consummate the Arrangement when required to do so under the terms of the Arrangement.
• Support Agreements. Certain shareholders, who collectively beneficially own or exercise control over approximately 41.6% of Mosaic’s outstanding common shares, have entered into “hard” voting and support agreements pursuant to which they have agreed to vote their common shares in favour of the Arrangement.

William H. Smith, QC, Vice Chairman of Mosaic and Chair of the Special Committee, commented “after careful deliberation, we are pleased to unanimously recommend that our shareholders vote in favour of this transaction. We believe the value offered is attractive at this juncture in Mosaic’s history. Furthermore, given the unique challenges related to diversified small-cap public companies in Canada we believe that Mosaic’s underlying portfolio companies are better positioned for future success with Mosaic structured as a private company.”

TRANSACTION DETAILS

The Transaction will involve the Purchaser acquiring all of the common shares of Mosaic for $5.50 per share in cash. It will be implemented through a statutory plan of arrangement under the Business Corporations Act (Alberta).

Completion of the Transaction is subject to various conditions, including approval by shareholders at a special meeting, court and regulatory approvals and provision of financing by Mosaic’s lenders. It is currently expected to close in early August 2021.

It is a term of the plan of arrangement that all of Mosaic’s outstanding convertible unsecured subordinated debentures will be acquired for consideration of $1,000 plus accrued and unpaid interest for each $1,000 principal amount.

The foregoing summary is qualified in its entirety by the provisions of the Arrangement Agreement, a copy of which will be filed on SEDAR at www.sedar.com. Mosaic will mail a management information circular and certain related documents to shareholders in connection with the special meeting to consider and vote on the Transaction, copies of which will also be filed on SEDAR at www.sedar.com.

MOSAIC BOARD OF DIRECTORS RECOMMENDATION AND FAIRNESS OPINION

The Board of Directors, after receiving the unanimous recommendation of the Special Committee and in consultation with its legal advisors, has unanimously determined that the Transaction is in the best interests of Mosaic and fair to shareholders and is recommending that shareholders vote in favour of the Transaction.

Evans & Evans, Inc. has provided a fairness opinion to the Special Committee and Board of Directors that based upon and subject to the assumptions and limitation described in its opinion, the consideration to be received by shareholders pursuant to the Transaction is fair, from a financial point of view, to the shareholders.

ADVISORS

Farris LLP is acting as legal counsel to the Special Committee and to the Company. Evans & Evans, Inc. has provided the Special Committee and the Board of Directors with a fairness opinion in respect of the Transaction. Fillmore Riley LLP is acting as legal counsel to the Purchaser and MCC Holdings Ltd. Torys LLP is acting as legal counsel to Fairfax Financial Holdings Limited. Osprey Capital Partners Inc. is acting as sole financial advisor to MCC Holdings Ltd.

ABOUT MOSAIC CAPITAL CORPORATION

Mosaic is a Canadian investment company that owns a portfolio of established businesses which span a diverse range of industries and geographies. Mosaic’s strategy is to create long-term value for its shareholders through accretive acquisitions, long-term portfolio ownership, sustained cash flows and organic portfolio growth. Mosaic achieves its objectives by maintaining financial discipline, acquiring businesses at attractive valuations, performing extensive acquisition due diligence, utilizing optimal transaction structuring and working closely with subsidiary businesses after acquisition.

ABOUT FAIRFAX FINANCIAL HOLDINGS LIMITED

Fairfax Financial Holdings Limited is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and the associated investment management.

ABOUT MCC HOLDINGS LTD.

MCC Holdings Ltd. is a company controlled by Mark Yusishen. Mr. Yusishen is a Canadian businessman who owns, directly or indirectly, a number of private businesses throughout Canada and the United States.

FOR FURTHER INFORMATION PLEASE CONTACT:
Cam Deller
Vice President, Corporate Development
Mosaic Capital Corporation
400, 2424 – 4th Street SW
Calgary, AB T2S 2T4
T: (403) 930-6576
E: [email protected]

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.