SYS-CON MEDIA Authors: Carmen Gonzalez, Sean Houghton, Glenn Rossman, Ignacio M. Llorente, Xenia von Wedel

News Feed Item

Tuckamore Responds To ISS Report

TORONTO, ONTARIO -- (Marketwired) -- 07/02/14 -- Tuckamore Capital Management Inc. (TSX:TX)(TSX:TX.DB.B) ("Tuckamore" or the "Company") today responded to a report published by Institutional Shareholder Services ("ISS") in respect of the previously announced proposal (the "Arrangement") pursuant to which Birch Hill Equity Partners ("Birch Hill"), together with certain members of Tuckamore's management, have agreed to acquire all of the common shares of the Company (each a "share") for cash consideration at a price of $0.75 per share. Shareholders have been asked to vote on the Arrangement at the upcoming special meeting of shareholders to be held on July 15, 2014.

"As directors, we have a duty to present an offer such as this to shareholders for their consideration, and we have a duty to give it due consideration and make a recommendation to shareholders. We have done that, and judged this offer to provide immediate and certain value that is in the best interests of all shareholders," said Douglas Brown, Chairman. "The value of the $0.75 per share offer to shareholders includes the cash consideration, an opportunity for liquidity, and the elimination of the financing and operational risks in our business. No superior bid, nor fully-funded alternate plan that protects shareholder value, has been presented to the Board since the announcement of the Birch Hill offer."

"We do feel however, that it is important to correct and respond to the factual and analytical errors in the market, including in ISS' analysis and recommendation to shareholders of Tuckamore. ISS did not meet with Tuckamore, nor did we have an opportunity to comment on this report prior to publication. In our view, the ISS report confuses the concept of equity value with enterprise value, uses inappropriate metrics, and ignores the depth and breadth of the value maximization process undertaken by the Board. We believe these are major flaws that lead directly to ISS' incorrect recommendation," continued Mr. Brown.

Tuckamore believes that ISS' analysis was flawed in a number of material respects including:

Break Fee: ISS makes the error of calculating the break fee based on the equity value of Tuckamore, rather than the enterprise value which would be more appropriate for a highly leveraged company like Tuckamore. The purchaser of Tuckamore will have to assume approximately $280 million of debt (including capital leases) and the restrictive covenants on that debt, in addition to paying the cash consideration shareholders. When properly calculated, the break fee is equal to approximately 2% of Tuckamore's total enterprise value - a percentage that the Board, based on advice from its financial advisor, believes is in line with Canadian transactions over the past 5 years. Furthermore, the Board does not believe that a break fee of less than 2 cents to less than 7 cents per share on a fully diluted basis, is an impediment to a superior offer.

Equity Value vs. Enterprise Value: ISS twice makes the error in its analysis of confusing equity value with enterprise value. In particular, ISS makes the "apples to oranges" comparison of the attempted sale of ClearStream (which represented 78% of Tuckamore's revenues and almost all of its EBITDA) for "$200 M plus" of enterprise value with the approximately $70 million equity value of the Birch Hill offer. An appropriate comparison would be to Tuckamore's enterprise value of approximately $322 million.

In addition, the "auction" of ClearStream which involved engaging with over 20 possible purchasers, did not result in a transaction.

The Rights Offering: ISS asserts that the current cash offer which values Tuckamore's equity at approximately $70 million is too low vs. the $100 million rights offering proposed to the Board. This is a serious error. The rights offering proposal valued Tuckamore's equity at $24 million, and could have resulted in dilution of 80% to existing shareholders.

The "Auction Process": ISS concludes that Tuckamore's Board did not conduct an auction. This is an incorrect statement that ignores the lengthy and comprehensive value-maximization process undertaken by the Board that began in late 2012. As detailed over several pages in Tuckamore's management information circular, the Board proactively sought buyers for ClearStream and considered a variety of proposals from various parties. This process was undertaken with great care to ensure limited employee and customer uncertainty. The Birch Hill offer was announced on May 5, 2014, and to date not a single alternative superior offer has been made.

Valuation: ISS cites the $0.60 to $0.81 per share fair market valuation provided by PricewaterhouseCoopers ("PwC"), as evidence that the $0.75 per share cash offer is inadequate. The offer price is in fact above the midpoint of the range provided by PwC. The range provided by PwC, is just that - a range of possible values where fair market value may be found for Tuckamore's shares.

Financial Advisor: ISS incorrectly identifies PwC as Tuckamore's financial advisor. Canaccord Genuity acted as Tuckamore's financial advisor. PwC, as noted above, was appointed to provide an independent valuation in accordance with MI 61-101.

The Reality

In January 2014, Tuckamore's shares were trading at $0.30, the same as the historical average for the last 5 years. Its debt was trading at an approximate 16% discount to par, which reflected the market's significant concern about the serious financing risks facing the Company. The only serious proposal the Board had received valued Tuckamore's equity at $24 million and required shareholders to accept up to 80% dilution and a discount to the trading price. Today, 6 months later, the Board has delivered an all cash offer to shareholders for their consideration. Not only does it represent a meaningful premium of over approximately 85% to where the stock had traded in the two months prior to the announcement of the deal, but it offers certain liquidity for a stock that has been illiquid for years due to the ever present financial risks associated with the capital structure.

On July 15th, shareholders will have an opportunity to choose between the cash offer of $0.75, that values Tuckamore's equity at approximately $70 million, or to remain a standalone entity. The Board encourages shareholders to consider all of the facts when making their decision.

Your Vote is Very Important

The Arrangement represents an important milestone in our Company's history. To receive the premium for your shares and avoid future financing and operational risks associated with Tuckamore's business, please cast your vote today in favour of the Arrangement Resolution. Your vote is important regardless of how many shares you own.

If you have any questions or need assistance in voting your proxy, please contact our proxy solicitor Kingsdale Shareholder Services at 1-888-518-1561 (toll free within North America) or 416-867-2272 (collect calls accepted), or by email at [email protected].

About the Company

Tuckamore has investments in 7 businesses representing a diverse cross-section of the Canadian economy.

About Birch Hill's Investment

The investment will be part of Birch Hill Fund IV with over $1 billion in committed capital.

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
What do a firewall and a fortress have in common? They are no longer strong enough to protect the valuables housed inside. Like the walls of an old fortress, the cracks in the firewall are allowing the bad guys to slip in - unannounced and unnoticed. By the time these thieves get in, the damage is already done and the network is already compromised. Intellectual property is easily slipped out the back door leaving no trace of forced entry. If we want to reign in on these cybercriminals, it's hig...
We are reaching the end of the beginning with WebRTC, and real systems using this technology have begun to appear. One challenge that faces every WebRTC deployment (in some form or another) is identity management. For example, if you have an existing service – possibly built on a variety of different PaaS/SaaS offerings – and you want to add real-time communications you are faced with a challenge relating to user management, authentication, authorization, and validation. Service providers will w...
"ElasticBox is an enterprise company that makes it very easy for developers and IT ops to collaborate to develop, build and deploy applications on any cloud - private, public or hybrid," stated Monish Sharma, VP of Customer Success at ElasticBox, in this SYS-CON.tv interview at DevOps Summit, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
The term culture has had a polarizing effect among DevOps supporters. Some propose that culture change is critical for success with DevOps, but are remiss to define culture. Some talk about a DevOps culture but then reference activities that could lead to culture change and there are those that talk about culture change as a set of behaviors that need to be adopted by those in IT. There is no question that businesses successful in adopting a DevOps mindset have seen departmental culture change, ...
Explosive growth in connected devices. Enormous amounts of data for collection and analysis. Critical use of data for split-second decision making and actionable information. All three are factors in making the Internet of Things a reality. Yet, any one factor would have an IT organization pondering its infrastructure strategy. How should your organization enhance its IT framework to enable an Internet of Things implementation? In his session at Internet of @ThingsExpo, James Kirkland, Chief Ar...
WebRTC defines no default signaling protocol, causing fragmentation between WebRTC silos. SIP and XMPP provide possibilities, but come with considerable complexity and are not designed for use in a web environment. In his session at @ThingsExpo, Matthew Hodgson, technical co-founder of the Matrix.org, discussed how Matrix is a new non-profit Open Source Project that defines both a new HTTP-based standard for VoIP & IM signaling and provides reference implementations.
The 4th International DevOps Summit, co-located with16th International Cloud Expo – being held June 9-11, 2015, at the Javits Center in New York City, NY – announces that its Call for Papers is now open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's large...
DevOps Summit 2015 New York, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that it is now accepting Keynote Proposals. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long development cycles that produce software that is obsolete...
The definition of IoT is not new, in fact it’s been around for over a decade. What has changed is the public's awareness that the technology we use on a daily basis has caught up on the vision of an always on, always connected world. If you look into the details of what comprises the IoT, you’ll see that it includes everything from cloud computing, Big Data analytics, “Things,” Web communication, applications, network, storage, etc. It is essentially including everything connected online from ha...
The security devil is always in the details of the attack: the ones you've endured, the ones you prepare yourself to fend off, and the ones that, you fear, will catch you completely unaware and defenseless. The Internet of Things (IoT) is nothing if not an endless proliferation of details. It's the vision of a world in which continuous Internet connectivity and addressability is embedded into a growing range of human artifacts, into the natural world, and even into our smartphones, appliances, a...
SAP is delivering break-through innovation combined with fantastic user experience powered by the market-leading in-memory technology, SAP HANA. In his General Session at 15th Cloud Expo, Thorsten Leiduck, VP ISVs & Digital Commerce, SAP, discussed how SAP and partners provide cloud and hybrid cloud solutions as well as real-time Big Data offerings that help companies of all sizes and industries run better. SAP launched an application challenge to award the most innovative SAP HANA and SAP HANA...
Connected devices and the Internet of Things are getting significant momentum in 2014. In his session at Internet of @ThingsExpo, Jim Hunter, Chief Scientist & Technology Evangelist at Greenwave Systems, examined three key elements that together will drive mass adoption of the IoT before the end of 2015. The first element is the recent advent of robust open source protocols (like AllJoyn and WebRTC) that facilitate M2M communication. The second is broad availability of flexible, cost-effective ...
Scott Jenson leads a project called The Physical Web within the Chrome team at Google. Project members are working to take the scalability and openness of the web and use it to talk to the exponentially exploding range of smart devices. Nearly every company today working on the IoT comes up with the same basic solution: use my server and you'll be fine. But if we really believe there will be trillions of these devices, that just can't scale. We need a system that is open a scalable and by using ...
"SAP had made a big transition into the cloud as we believe it has significant value for our customers, drives innovation and is easy to consume. When you look at the SAP portfolio, SAP HANA is the underlying platform and it powers all of our platforms and all of our analytics," explained Thorsten Leiduck, VP ISVs & Digital Commerce at SAP, in this SYS-CON.tv interview at 15th Cloud Expo, held Nov 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is now open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.