GrowthWorks Ltd.

GrowthWorks Ltd.

November 15, 2010 07:53 ET

GrowthWorks Provides Back-Stop Offer on Covington Deal Says Focus Must Be on Maximizing Shareholder Value

TORONTO, ONTARIO--(Marketwire - Nov. 15, 2010) - GrowthWorks Ltd. ("GrowthWorks") today committed to back-stop the Covington proposal so that VenGrowth Funds class A shareholders can have comfort a deal of that kind will not fall off the table if they vote against the Covington proposal at the November 25, 2010 shareholders meeting.

GrowthWorks has filed a dissident proxy circular and is urging VenGrowth shareholders to vote against the Covington proposal at the November 25th meeting to allow GrowthWorks to present an alternative proposal with significant improvements. Our backstop commitment today means that class A shareholders can vote against the Covington proposal and preserve the economic opportunity to, as a minimum, have that kind of deal remain available.

This commitment also reflects GrowthWorks' seriousness and resolve, as the largest independent retail venture capital fund manager in Canada outside of Quebec and the recognized leader in these kinds of transactions, to bring forward a significantly better deal for the benefit of VenGrowth class A shareholders. David Levi, President of GrowthWorks, said "shareholders should be given a choice and have the opportunity to get the best deal. Based on our extensive experience in retail venture capital fund transactions, we see the Covington proposal as being an attractive deal for the Covington Fund II manager, at the expense of VenGrowth Funds' class A shareholders." Mr. Levi commented that "For example, the Covington Fund II manager is not paying any of the approximately $30 million being paid by the VenGrowth Funds to the exiting VenGrowth managers. That is virtually unheard of for a transaction of this size. Rather, the whole cost is effectively being borne by the VenGrowth class A shareholders and will reduce their share net asset value by approximately 8% at closing."

VenGrowth's initial announcement regarding the Covington proposal made no mention of these payments. Instead disclosure on this and other significant issues only became available in the recently filed shareholder meeting information circular. This left a short time between disclosing this key information and the deadline for lodging proxy votes and very little time for GrowthWorks, or anyone, to finalize and present an alternative offer.

As stated in its proxy circular, GrowthWorks' forthcoming proposal is intended to significantly improve on the Covington proposal in at least three key areas. Firstly, GrowthWorks proposes to pay $5 million toward any termination costs due to relieve a significant part of the burden on the VenGrowth class A shareholders. Secondly, instead of the Covington deals' 40% NAV discount for suspended VenGrowth Fund shareholders who redeem on closing, GrowthWorks proposes a significantly lower 30% discount at closing and a yet further reduced 20% discount in a second window 18 months after closing. Thirdly, GrowthWorks proposes to improve upon the percentage these shareholders can redeem annually without any discount.

GrowthWorks believes that all parties should now be focused on maximizing shareholder value. Both the VenGrowth Funds managers and Sponsors will receive substantial financial payments under the Covington proposal. GrowthWorks is calling in particular on the 2 of 10 VenGrowth Funds directors who are not associated with the manager or Sponsor (whether currently or in the past) to work with GrowthWorks to get the best and highest value for class A shareholders.

GrowthWorks encourages all VenGrowth Fund shareholders to read the GrowthWorks Circular and consult with their investment advisors before casting their votes with respect to the Covington Proposal.

* "Covington proposal" means the proposal as described in the VenGrowth Funds' information circular dated October 28, 2010 as it relates to Class A shareholders of the VenGrowth Funds. The GrowthWorks "backstop" of that proposal will automatically arise if Covington cancels or does not extend its proposal and is subject to substantially the same/equivalent conditions as are set out in the Asset Purchase Agreement posted on SEDAR on October 12, 2010 for the Covington proposal. GrowthWorks has issued an amended and restated proxy circular that refers to the backstop commitment and further details about GrowthWorks' position on the Covington proposal.

About GrowthWorks* ( GrowthWorks™ managed funds provide investment capital for Canadian companies and tax-advantaged investment opportunities for Canadian investors. GrowthWorks manages approximately $560 million in assets through the GrowthWorks Canadian Fund Ltd., GrowthWorks Commercialization Fund Ltd., GrowthWorks Atlantic Venture Fund Ltd., and Working Opportunity Fund (EVCC) Ltd. GrowthWorks identifies, analyzes and structures investments in companies with high growth potential. Building on more than 18 years of investment expertise, GrowthWorks is a leader in Canadian venture capital management.

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