Matrix Asset Management Inc.

Matrix Asset Management Inc.

May 25, 2013 00:37 ET

Matrix and Marquest Agree to Binding Transaction Terms

TORONTO, ONTARIO--(Marketwired - May 25, 2013) - Matrix Asset Management Inc. (TSX:MTA) ("Matrix") announces that the terms of its proposed business combination (the "Transaction") with Marquest Asset Management Inc. ("Marquest") previously announced on February 13, 2013 have been revised. A binding promissory note and binding asset sale term sheet were executed by the parties today. The agreements are held in escrow pending Marquest's advance of $1.8 million to Matrix and an external lender's amendment of its loan, which are expected to take place on Monday, May 27, 2013. Closing of the Transaction is subject to customary closing conditions, including obtaining necessary shareholder, stock exchange and regulatory approvals. It is unknown at this time if these conditions will be satisfied or waived.

The Transaction

  • Under the proposed Transaction, instead of the previously announced share exchange, Marquest will instead purchase certain assets of two Matrix subsidiaries, including all the operational assets (other than its regulatory registrations and working capital) of SEAMARK Asset Management Inc. ("Seamark") and the portfolio management, custodian and related contracts of the Matrix Group of Mutual Funds held in GrowthWorks Capital Ltd. ("GWC"). It is proposed that all employees of Seamark and certain employees of Matrix and GWC will become employees of Marquest at closing. The parties have agreed to consider changes to the structure of the Transaction that may provide tax or other benefits to one party without causing material prejudice to the other party. The assets comprising Matrix's venture capital operating division will continue to be owned and operated by Matrix. The assets subject to the Transaction represent approximately $722 million of Matrix's $1.07 billion in assets under management as at March 31, 2013 and an estimated 34.9% of Matrix's consolidated revenues for the quarter ending March 31, 2013.

  • Marquest has lent $1 million to Matrix on April 15, 2013 ("First Loan") and has agreed to lend another $1.8 million ("Second Loan") effective today, subject to an external lender's approval of the loan. The proceeds of the First Loan and Second Loan will be used by Matrix and its subsidiaries for working capital purposes. The First Loan is repayable on the earliest of (i) October 15, 2013, (ii) the closing of the Transaction and (iii) the closing of any other sale of all or substantially all of the assets of Matrix or a change of control of Matrix. The First Loan accrues interest at a rate of 8.0% per annum before maturity and 14% after maturity and is secured by a charge over shares of Seamark. The Second Loan is repayable on the earliest of (i) on the date which is 366 days after demand for repayment therefor is made by Marquest (ii) the closing of the Transaction and (iii) the closing of any other sale of all or substantially all of the assets of Matrix or a change of control of Matrix. The Second Loan accrues interest at a rate of 10.0% per annum before maturity and 15% after maturity and is secured by a general security agreement over all of the assets of Matrix.

  • Consideration for the Transaction is comprised of Marquest paying $3 million to Matrix as well as assuming subordinated indebtedness owed by a Matrix subsidiary in the principal amount of $6 million. Marquest may choose to surrender to Matrix the First Loan and the Second Loan and related security at closing to partially satisfy its cash payment obligations. At closing, normal asset sale cash adjustments will occur.

  • Under the proposed Transaction, Matrix and Marquest will remain independent of each other after the closing of the Transaction.

Other Provisions

The Transaction documents also provide that a $500,000 break fee will be payable by either party to the other if that party fails to perform its obligations to pursue completion of the Transaction and a $750,000 break fee will be payable if a party completes an alternative transaction that results in non-completion of the Transaction.

While Matrix and Marquest have entered into a binding term sheet providing for a further $1.8 million loan advance and for the Transaction, there can be no assurance that the loan advance or the Transaction will be completed on the terms proposed or at all.

Forward-looking statements: Certain statements in this press release are forward-looking statements including the statements about the pending $1.8 million loan advance by Marquest to Matrix, employment and other arrangements associated with the Transaction and closing of the Transaction. Forward-looking statements are based on beliefs and assumptions at the time the statements are made, including beliefs and assumptions about the satisfaction or waiver of conditions to the loan advance and closing of the Transaction, some of which require regulatory and shareholder approval. While management considers these beliefs and assumptions to be reasonable based on information currently available to it, they are subject to numerous risks and uncertainties and no assurance can be given that such beliefs and assumptions will prove to be correct. Accordingly, actual results may differ significantly from those expressed or implied by forward-looking statements due to many factors including, but not limited to, risks associated with securing necessary regulatory, shareholder and third party approvals for the Transaction, satisfying other conditions to the Transaction, risks associated with completing the Transaction and risks associated with Matrix's ability to continue to operate as a going concern and restore and maintain compliance with minimum working capital and other regulatory requirements. Many of these risks are beyond the control of Matrix. Other than as specifically required by law, Matrix undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made, or to reflect or to reflect new information, future unanticipated events or results or other factors.

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