C.A. Bancorp Inc.

C.A. Bancorp Inc.

September 14, 2009 16:51 ET

C.A. Bancorp Inc. (TSX:BKP) Announces Internalization of Management

TORONTO, ONTARIO--(Marketwire - Sept. 14, 2009) - C.A. Bancorp Inc. ("C.A. Bancorp" or the "Company") (TSX:BKP) announced today that it has reached an agreement to internalize its management and administrative functions (the "Internalization") currently provided by Sentry Select Capital Corp. ("Sentry Select") through the termination of its Management and Administration Agreements with Sentry Select (together, the "Management Agreements"). The closing date of the Internalization is expected to occur on September 24, 2009, with a retroactive effective date of September 15, 2009, subject to the satisfaction of certain closing conditions. In connection with the Internalization, the Company has agreed to pay to Sentry Select a one-time cash fee of $1,435,000, inclusive of GST (the "Termination Fee") in consideration for the termination of the Management Agreements as well as the termination of an administration agreement between the Company's wholly-owned subsidiary C.A. Bancorp Ltd. (in its capacity as manager of C.A. Bancorp Canadian Realty Finance Corporation) and Sentry Select.

Pursuant to the terms of the agreement with Sentry Select, the Company has agreed to:

- enter into a sublease with Sentry Select under which the Company will sublet the space which it currently occupies on terms and conditions that reflect the terms and conditions under which Sentry Select currently leases such space;

- purchase certain computer and furniture equipment from Sentry Select;

- enter into a transition services agreement with Sentry Select pursuant to which certain administrative services will be provided to the Company for up to six months; and

- extend offers of employment to those members of management and staff who provide full time services to the Company.

On the closing of the Internalization, Mr. John Driscoll will resign his position as Chief Executive Officer ("CEO"). Mr. Driscoll, a 12% shareholder of the Company, will continue to serve as Chairman of the Company's Board of Directors.

The terms of the Internalization were arrived at following negotiations between Sentry Select and the Company's independent directors. The Independent Directors retained independent legal counsel and, in order to ensure that the Internalization was financially fair, engaged Grant Thornton LLP as their independent financial advisor. Grant Thornton provided a fairness opinion with respect to the terms of the Internalization and has, after careful analysis, concluded that the terms of the Internalization are fair from a financial point of view to the shareholders of the Company.

The Internalization is a "related party transaction" for purposes of Multilateral Instrument 61-101, however, because the fair market value of the subject matter of and the consideration for the Internalization is less than 25% of the market capitalization of the Company, the Internalization is exempt from the valuation and minority approval requirements of the Instrument.

The Company will be filing a material change report in respect of the Internalization less than 21 days before the expected closing of the Internalization on the basis that this shorter period is reasonable in the circumstances as the Company disclosed the proposed Internalization on substantially similar terms in its second quarter results publicly disseminated on August 7, 2009.

"The Company has reached a stage in its development where it believes it can more effectively meet its management and administration needs internally. Sentry Select played an important and vital role in the initial stages of the Company's growth, but now the Company is well positioned to move forward independently. This Internalization is a crucial first step in that direction," said Mark Gardhouse, President of C.A. Bancorp.


The Internalization will have the following immediate benefits to the Company and its shareholders:

- simplification of the Company's operating and corporate structure;

- the ability to better align management's interests with those of the Company's shareholders as a result of the direct employment of these individuals;

- the ability of the Company to make strategic and operational decisions without the uncertainty of variable management fees and performance fees to Sentry Select which will be eliminated; and

- an improvement to the Company's corporate governance structure as all directors of the Company will be unrelated to management.

If the Company had chosen to terminate the Management Agreements in 2011 in accordance with their terms, a payment approximating five times 1.5% of the closing net book value of the Company would have been payable to Sentry Select, an amount which may have been in excess of the Termination Fee negotiated by the Company. Based on the Company's closing net book value as of June 30, 2009 of $69,815,000, the amount would have been approximately $5,200,000. As such, the Internalization provides a less costly and more straightforward solution to achieving the objectives of independence and longer-term financial and operating flexibility.

Aside from the Termination Fee and other one-time costs associated with the Internalization (including legal, advisory and independent director fees), the Company estimates that, in the short-term, the post-Internalization operating costs of the Company will increase by approximately $0.6 million per annum. However, in the long-term the Internalization is expected to result in costs savings to the Company as a result, in part, of the elimination of management and performance fees. While the Management Agreements provided for a performance fee being payable to Sentry Select under certain circumstances which to date have not been realized, if the Management Agreements had been renewed for successive five year terms, the conditions for the payment of performance fee including the "high-water" mark would have reset in accordance with the Management Agreements and it is possible that the Company could have paid material performance fees to Sentry Select in the future. The termination of the Management Agreements eliminates this possibility.

Management Agreements

Copies of the full text of Management Agreements and any amendments thereto are available under C.A. Bancorp's profile on SEDAR at www.sedar.com.

C.A. Bancorp Inc.

C.A. Bancorp is a publicly traded Canadian merchant bank and alternative asset manager that provides investors with access to a range of private equity and other alternative asset class investment opportunities. C.A. Bancorp is focused on investments in small- and middle-capitalization public and private companies, with emphasis on the industrials, real estate, infrastructure and financial services sectors.

This news release contains forward-looking statements. These statements relate to anticipated future events, results, circumstances, performance or expectations that are not historical facts but instead represent C.A. Bancorp's beliefs regarding future events. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "will," "expect," "intend," "plan," "estimate," "anticipate," "believe" or "continue," similar words or the negative thereof, or variations of such words and phrases that certain actions, events or anticipated outcomes "may," "would" or "might" be taken, occur or be achieved. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur. The future business, operations and performance of C.A. Bancorp discussed herein could differ materially from those expressed or implied by such statements. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Forward-looking statements are based on a number of assumptions which may prove to be incorrect including, without limitation, that the conditions to closing of the Internalization will be satisfied or waived by the closing date and that the future operating costs will be as predicted. Additional important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, competition, interest rates, tax related matters, loss of personnel, reliance on key personnel, and managing operating costs. The Company cautions that risk factors discussed in applicable continuous disclosure filings required by law that the Company has made and filed on SEDAR including its MD&A and annual information form, should also be considered carefully and that undue reliance not be placed on forward-looking statements as events and results could differ materially from those expressed or implied by forward-looking statements made by the Company. The cautionary statements qualify all forward-looking statements attributable to C.A. Bancorp and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release.

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