VenGrowth Asset Management Inc.

VenGrowth Asset Management Inc.

March 18, 2011 18:53 ET

VenGrowth Special Committee Urges Shareholders to Take No Action on Growthworks' Solicitation

The Best Offer is Still to Come

TORONTO, ONTARIO--(Marketwire - March 18, 2011) - VenGrowth Asset Management Inc.

  • GrowthWorks doesn't have the best offer
  • GrowthWorks is stripping away future voting rights from VenGrowth shareholders
  • GrowthWorks is purposely avoiding having its offer compared to other proposals
  • GrowthWorks' financial position requires serious scrutiny
  • GrowthWorks' past actions reveal that its interest is for the GrowthWorks managers -- not shareholders
  • GrowthWorks' proposal has 11 conditions, which means that GrowthWorks has lots of outs and won't necessarily follow through on its promises
  • GrowthWorks has refused to meet or to provide crucial financial information
  • GrowthWorks is trying to scare off other bidders
  • VenGrowth shareholders will be presented with a transaction in a matter of weeks

GrowthWorks doesn't have the best offer

VenGrowth's Special Committee has already received expressions of interest that are superior to the terms of the GrowthWorks proposal on redemptions and financing.

GrowthWorks has no basis to claim that it has the best offer.

Over a dozen parties have signed a mutual confidentiality agreement. We expect this number to increase in the coming days. This high level of interest will provide the Special Committee with a good selection of potential transactions to consider with the objective of providing shareholders with the most attractive fully negotiated transaction.

GrowthWorks is stripping away future voting rights from VenGrowth shareholders

Any shareholder who signs the Support Agreement may irrevocably transfer his/her voting rights to GrowthWorks. GrowthWorks has purposely limited the ability of VenGrowth shareholders to vote on any future proposal. GrowthWorks will control those votes.

GrowthWorks is purposely avoiding having its offer compared to other proposals

The Special Committee of the VenGrowth Funds is disappointed that GrowthWorks has decided not to engage in the formal process that will review and compare competing proposals. Over 12 parties have accepted and are participating in our process.

GrowthWorks' unwillingness to engage in the process leads us to conclude that GrowthWorks does not want its proposal compared against other proposals, because it will not stand up to scrutiny in a competitive environment.

GrowthWorks' financial position requires serious scrutiny

Without access to the financial information that GrowthWorks refuses to provide, we have many concerns about GrowthWorks' financial position.

GrowthWorks Canadian Fund is in a significant negative cash position when the Fund's indebtedness is deducted. Additionally, on August 31, 2010, shares of the GrowthWorks Canadian Fund representing 63% of NAV or $169 million were eligible for redemption.

GrowthWorks Canadian Fund took out a $20 million loan in May 2010. According to its most recent financial statements, it must repay $41.7 million to the lender.

GrowthWorks Canadian Fund had another of GrowthWorks' labour funds provide it with a $15 million standby credit facility in order to meet redemptions.

GrowthWorks' past actions reveal that its interest is for the GrowthWorks managers -- not shareholders

The NAV of the GrowthWorks Canadian Fund declined by 23% over the past five years. During this same period on top of the regular management fees, GrowthWorks paid itself performance fees in excess of $20 million for its "superior" investment management.

According to GrowthWorks' management agreement, if either the Fund or shareholders vote to terminate the manager of the fund, the termination only becomes effective five years later. GrowthWorks managers effectively receive five year's of fees even if its shareholders terminate them, it also appears that the fund is responsible for the manager's wind-down costs.

Without obtaining shareholder approval, GrowthWorks entered into a very unusual and expensive financing arrangement with Roseway Capital in May 2010. This funding limits its flexibility and will reduce the returns to its shareholders. GrowthWorks pledged 15 of its investments with a combined NAV of $100 million for this $20 million loan. Roseway has a 20% participation in 15 investments and, as disclosed in GrowthWorks' audited statements, earns an effective rate of interest of 33%.

In the interests of VenGrowth shareholders, GrowthWorks must disclose crucial information on its financial position, its management expenses, and its management practices so that VenGrowth shareholders can properly assess the quality of the GrowthWorks' proposal. Unfortunately, GrowthWorks CEO to date has refused to meet or to allow access to review the information.

GrowthWorks' proposal has 11 conditions, which means that GrowthWorks has lots of outs and won't necessarily follow through on its promises

GrowthWorks' proposal contains 11 conditions, which means that it doesn't have to follow through on its commitments. The deal is also conditional on borrowing an additional $60 million, which is expected to further strain GrowthWorks financial position. In addition, there is no certainty that such financing has yet been put in place.

GrowthWorks has refused to meet or to provide crucial financial information

GrowthWorks has not provided detailed financial information to the Special Committee or the Financial Advisor. 

GrowthWorks' Chair and CEO both received and rejected repeated offers and invitations to participate in the process and to meet and discuss these matters from representatives of the Special Committee as well as its independent Financial Advisor.

GrowthWorks is trying to scare off other bidders

By taking an aggressive stance, GrowthWorks is trying to create uncertainty and concerns among other bidders about significantly higher transaction costs related to the threat of litigation.

Reducing the number of interested parties doesn't serve the interests of VenGrowth shareholders.

VenGrowth shareholders will be presented with a transaction in a matter of weeks

VenGrowth shareholders will be presented with a transaction that has had the benefit of a competitive process and gone through a thorough independent financial and legal review. The process we are following will generate the best transaction for shareholders.

The Special Committee continues to work towards a timeline that will see a transaction selected for presentation to shareholders in May of this year.

WE URGE VENGROWTH SHAREHOLDERS TO TAKE NO ACTION ON GROWTHWORKS' SOLICITATION.

THE BEST OFFER IS STILL TO COME.

Contact Information

  • Media Inquiries:
    VenGrowth Asset Management Inc.
    Craig Keates
    416.628-9223
    craig@vengrowth.com