Discovery Capital Corporation
TSX VENTURE : DVY.Y

Discovery Capital Corporation

June 12, 2007 18:34 ET

Discovery Capital to Proceed With Liquidation Plan-Management Proposal to Purchase Discovery's Venture Management Business to Provide BC Discovery Fund With Continuity of Management

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 12, 2007) -

The directors of Discovery Capital Corporation ("Discovery Capital") (TSX VENTURE:DVY.Y) announce that the Company has entered into a letter of intent with the current Discovery Capital management team lead by John McEwen, Harry Jaako and Charles Cook for the purchase by the management team of Discovery Capital Management Corp. ("DCMC"), the Company's management subsidiary and manager of British Columbia Discovery Fund (VCC) Inc. This management purchase of DCMC ("Management Purchase") is a component of the plan of liquidation announced by Discovery Capital on May 18, 2007 involving the distribution of its net assets pro-rata to Discovery Capital shareholders, the delisting of its common shares from the TSX Venture Exchange and thereafter the voluntary dissolution of Discovery Capital. The purchase price for DCMC is $500,000 cash, payable as to $250,000 on closing and $250,000 on the first anniversary of closing, plus 30% of all performance bonuses that may be earned by DCMC within five years of closing.

The transaction with management was considered and negotiated by a special committee of independent directors of Discovery Capital, consisting of Randy Garg, Jim Fletcher and Scot Martin, who were advised by independent legal counsel, Farris, Vaughan, Wills & Murphy, LLP. In the negotiation of this offer, the Special Committee considered, among other things, the severance obligations payable by DCMC upon a change of control of DCMC, and the risks relating to approvals required to be obtained by a purchaser of DCMC.

The proposed Management Purchase is subject to regulatory and shareholder approvals, including the approval by a majority of disinterested shareholders, and completion of definitive documentation. The letter agreement also includes a non-solicitation covenant on behalf of Discovery Capital, subject to usual "fiduciary out" provisions which entitle Discovery Capital, through its Special Committee, to consider, and Discovery Capital to accept, an unsolicited superior proposal, subject to the management group's right to match such superior proposal. The Special Committee has, following careful and extensive deliberation and negotiation with management, determined to recommend to Discovery Capital's disinterested shareholders that they approve the Management Purchase.

A record date and meeting date for an annual and special meeting of the shareholders of Discovery Capital to consider the plan of liquidation will be announced in due course, and all particulars of the plan of liquidation will be disclosed in an information circular, which is expected to be sent to shareholders of the Company in July, 2007. The meeting of the Discovery Capital shareholders to approve the liquidation and the Management Purchase is expected to take place in early September, 2007.

There is no assurance that the plan of liquidation will proceed as outlined in Discovery Capital's May 18, 2007 announcement.

With respect to British Columbia Discovery Fund (VCC) Inc., the proposed Management Purchase means that the management group currently involved in the day-to-day investment management of the Fund continues in place. The operations and investment portfolio of BC Discovery Fund are distinct and separate from those of Discovery Capital and will not in any way be affected as a result of the proposed liquidation of Discovery Capital.

About Discovery Capital:

With over 20 years of venture capital experience in British Columbia, Discovery Capital is a venture fund manager through its wholly owned subsidiary, Discovery Capital Management Corp., and venture capital investor specializing in: information technology, communications, health and life sciences, and other advanced technologies. Discovery Capital has proven expertise in strategic planning, management development, innovative financing strategies, corporate governance and positioning for liquidity. Discovery Capital Management Corp. is the manager of British Columbia Discovery Fund (VCC) Inc., a British Columbia venture capital fund that has raised over $42.5 million to date and has investment interests in twelve developing technology companies.

For more information about Discovery Capital Corporation, please visit www.discoverycapital.com.

John McEwen, President and Co-Chief Executive Officer

Harry Jaako, Chairman and Co-Chief Executive Officer

This news release may include statements about expected future events and/or financial results that are forward-looking in nature and subject to risks and uncertainties. The Company cautions that actual performance will be affected by a number of factors, many of which are beyond its control. Future events and results may vary substantially from what the Company currently foresees.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Discovery Capital Corporation
    John McEwen
    President and Co-CEO
    (604) 683-3000 ext. 106
    or
    Discovery Capital Corporation
    Harry Jaako
    Chairman and Co-CEO
    (604) 683-3000 ext. 105
    or
    Discovery Capital Corporation
    Charles Cook
    CFO
    (604) 683-3000 ext. 102
    (604) 662-3457 (FAX)
    Email: info@discoverycapital.com
    Website: www.discoverycapital.com