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.