Terms Negotiated by special
Benefits Accruing to Shareholders
RGMP’s preferred shares
GMP is required to purchase or redeem for $32 million in cash on closing the preferred shares in RGMP held by RFGL
RFGL agreed to no immediate redemption at closing. Instead RFGL has the right to be paid out 3 years after closing
Incremental $32 million in cash immediately available for recruitment and tuck in acquisitions
Share buy-down clause
At closing, GMP is required to buy down RFGL’s shares, for cash at closing, to 33 1/3% ownership
RFGL agreed not be bought down, instead leaving $43 million in cash. RFGL agreed to accept GMP shares at $2.42 which is an 88% premium to the August 13 share price
Incremental $43 million in cash immediately available to fund future growth.
Reference value of GMP share
Mandates that the reference value to be used in determining the share exchange ratio to the 10-day VWAP at the time of announcement, which would have been $1.29
All parties agreed to use intrinsic value for GMP shares rather than mandated 10-day VWAP and RFGL accepted an exchange ratio of 1.875 GMP common shares for its RGMP common shares after taking into account the proposed $0.15 Special Dividend. This ratio reflects a GMP share reference value that is an 88% premium to the 10-day VWAP for GMP shares as at August 13, 2020, to which RFGL was otherwise entitled.
Value difference is $2.42 less $1.29, which equals $1.13 per share for GMP minority shareholders.
11. Is the proposed $0.15 per common share Special Dividend fair to all shareholders, or just Richardson Financial Group Limited?
The size of the Special Dividend reflects the interest of ALL shareholders. It was the outcome of a fair and balanced negotiation. It returns cash to pre-closing GMP common shareholders while also ensuring GMP has the financial capacity and flexibility to pursue its long-term growth plans. Beyond funding growth, it reflects the Board’s prudent desire to preserve cash during the uncertain economic environment caused by the global pandemic outbreak while safeguarding the existing obligations of the business (including retiring or renegotiating the $67 million debt facility that matures at RGMP in September 2021 and servicing of GMP’s $115 million preferred shares). To be clear, the Board believes that any payment in excess of the $0.15 per common share Special Dividend will weaken one of the firm’s three key pillars of success, namely a well-capitalized wealth management business.