/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE
SERVICES OR DISSEMINATION IN THE UNITED
STATES./
CALGARY, Dec. 22, 2016 /CNW/ - Mosaic Capital Corporation
("Mosaic") (TSX-V: M, M.PR.A and M.DB)
is pleased to announce that Fairfax Financial Holdings Limited
through certain of its subsidiaries (collectively "Fairfax")
(TSX: FFH and FFH.U), has agreed to invest
$150 million in Mosaic on a private
placement basis (the "Fairfax Financing").
Fairfax has agreed to subscribe for $100
million principal amount of 6% senior preferred securities
(the "6% Senior Preferred Securities"), $50 million principal amount of 5% seven-year
term secured debentures (the "5% Secured Debentures") and
common share purchase warrants entitling Fairfax to acquire up to
17,026,106 common shares of Mosaic at an exercise price of
$8.81 per share for seven years.
If it fully exercises its warrants, Fairfax, through its
subsidiaries, would own approximately 66% of Mosaic's common
shares, based on the number of shares currently outstanding.
Mosaic and Fairfax each have long term, value oriented investing
styles and have access to significant mid-market investment
opportunities in Canada and, in
the case of Fairfax, internationally. As part of the transaction,
Mosaic and Fairfax have agreed to work together as preferred
partners to share mid-market private equity opportunities. Mosaic
believes this strategic relationship, combining lower cost of
capital, greater access to deal flow and unique transactional
opportunities, will accelerate its ability to make long term
acquisitions and investments in Canada and internationally.
Fairfax will have the right to nominate two directors to the
board of Mosaic. Paul Rivett,
President of Fairfax, will be appointed as a director of Mosaic at
closing of the Fairfax Financing which is expected to occur in late
January 2017.
"We are excited to partner with John
Mackay, Harold Kunik and
Mark Gardhouse and their team
through a direct investment in Mosaic" said Paul Rivett, President of Fairfax. "John and
Harold have a long track record of successfully applying value
investing principles to acquire majority positions in strong cash
flow producing small and medium sized businesses. They have been
successfully applying a decentralized approach that ensures the
management remains invested and operating on a day-to-day
basis. Over time, some of these investments are expected to
grow to a size where they may need additional capital from Fairfax.
Fairfax often receives opportunities that are difficult to act on
because of their smaller size which may be of interest to Mosaic.
We look forward to having a partner whose expertise and experience
in mid-market private equity acquisitions over the last decade can
be combined with our flow of opportunities."
John Mackay, Executive Chairman
of Mosaic, added "It is great to have a partner that shares our
long term, value oriented approach to investing. We also expect to
benefit from the vast experience and investment knowledge of
Prem Watsa, Fairfax's Chairman, and
the entire team at Fairfax."
"We are very pleased to have Fairfax as a key partner in our
business," said Mark Gardhouse CEO of Mosaic. "Fairfax is one of
the best capital allocators in North
America and we look forward to working with them. Fairfax is
providing Mosaic with a significantly reduced cost of capital which
positively impacts our sustainable cash flow. We believe this new
capital structure combined with the relationship with Fairfax will
significantly accelerate Mosaic's corporate growth strategy."
Mosaic will use the proceeds of the Fairfax Financing to:
- redeem all the outstanding Preferred Securities (TSX-V: M.PR.A)
and Series A Shares at the prescribed price of $10 per security (plus all accrued and unpaid
interest);
- retract the Private Yield Securities pursuant to the mandatory
retraction provisions of the private yield securities indenture at
$1,000 per security;
- provide a liquidity option for the holders of Mosaic's
outstanding convertible debentures (the "Convertible
Debentures") (TSX-V:M.DB) (as discussed below); and
- repay all or part of Mosaic's acquisition credit facility and
for general corporate purposes.
The terms of Mosaic's outstanding Preferred Securities, Series A
Shares and Private Yield Securities provide for the
redemption/retraction at the option of Mosaic with no further
action required by the holders. Closing of the redemption of the
Preferred Securities, Series A Shares and the Private Yield
Securities is expected to occur in early February 2017 and applicable
redemption/retraction notices are being provided to the relevant
trustees. The Preferred Securities will be delisted from the TSX
Venture Exchange.
Mosaic's recently issued Convertible Debentures will rank junior
to the 6% Senior Preferred Securities and the 5% Secured Debentures
being issued to Fairfax. As a result, notwithstanding that Mosaic
is entitled to issue securities senior to the Convertible
Debentures under their terms, Mosaic will be providing holders of
the Convertible Debentures with the opportunity, at the holder's
option, to obtain liquidity for their Convertible Debentures at the
issue price plus accrued and unpaid interest. Details of the
mechanism for the liquidity of the Convertible Debentures will be
provided in a future news release.
The lower cost of the Fairfax Financing will reduce Mosaic's
cost of distributions on the equivalent principal amount of
Preferred Securities, Series A Shares and Private Yield Securities
by approximately $5.58 million per
year, or approximately $0.65 per
common share, resulting in Mosaic having additional discretionary
cash flow to further accelerate the execution of its business
strategy.
Closing of the Fairfax Financing is subject to customary closing
conditions including, among other things, the settlement of
definitive documentation and the approval of the TSX Venture
Exchange.
ABOUT FAIRFAX FINANCIAL HOLDINGS LIMITED
Fairfax is a holding company which, through its subsidiaries, is
engaged in property and casualty insurance and reinsurance and
investment management.
ABOUT MOSAIC CAPITAL CORPORATION
Mosaic is a Canadian investment company that owns a portfolio of
established businesses which span a diverse range of industries and
geographies. Mosaic's strategy is to create long-term value for its
shareholders through accretive acquisitions, long-term portfolio
ownership, sustained cash flows and organic portfolio growth.
Mosaic achieves its objectives by maintaining financial discipline,
acquiring businesses at attractive valuations, performing extensive
acquisition due diligence, utilizing optimal transaction
structuring and working closely with subsidiary businesses after
acquisition.
This news release shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of
the securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
This news release is not an offer of securities for sale in
the United States, and the
securities may not be offered or sold in the United States absent registration or an
exemption from the registration requirements. The securities have
not been and will not be registered under the United States
Securities Act of 1933, as amended.
Neither the TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
FORWARD-LOOKING INFORMATION
This news release contains forward-looking information and
statements within the meaning of applicable Canadian securities
laws (herein referred to as "forward-looking statements")
that involve known and unknown risks, uncertainties and other
factors that may cause actual results, performance or achievements
to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements. All information and statements in this news
release which are not statements of historical fact may be
forward-looking statements. The words "believe", "expect",
"intend", "estimate", "anticipate", "project", "scheduled", and
similar expressions, as well as future or conditional verbs such as
"will", "should", "would", and "could" often identify
forward-looking statements. In particular, forward-looking
statements in this news release include, but are not limited to:
greater access to unique transactional opportunities; the ability
of Mosaic to make long term acquisitions and investments in
Canada and internationally; the
closing date of the Fairfax Financing; the need for additional
capital from Fairfax; the receipt by Fairfax of investment
opportunities of interest to Mosaic; the reduction in the cost of
capital and positive impact on sustainable cash flow of Mosaic; the
acceleration of Mosaic's growth strategy; the use of the proceeds
of the Fairfax Financing; the closing date of the redemption of the
Preferred Securities, Series A Shares and Private Yield Securities;
the delisting of the Preferred Securities from the TSX Venture
Exchange; the mechanism for the liquidity of the Convertible
Debentures; the reduction in the cost of distributions on the
Preferred Securities, Series A Shares and Private Yield Securities;
an increase in additional discretionary cash flow; and obtaining
approval of the TSX Venture Exchange. Such statements or
information are only predictions and reflect the current beliefs of
management with respect to future events and are based on
information currently available to management. Actual results
and events may differ materially from those contemplated by these
forward-looking statements due to these statements being subject to
a number of risks and uncertainties.
Undue reliance should not be placed on these forward-looking
statements as there can be no assurance that the plans, intentions
or expectations upon which they are based will occur. By their
nature forward-looking statements involve assumptions and known and
unknown risks and uncertainties, both general and specific, that
contribute to the possibility that the predictions and other
forward-looking statements will not occur. Some of the assumptions
made by Mosaic, upon which such forward-looking statements are
based include, but are not limited to: the conditions to closing of
the Fairfax Financing will be satisfied; Mosaic will be able to
obtain all required regulatory approvals; future market conditions
will not be materially different than anticipated by Mosaic; there
will be no material changes to government and environmental
regulations affecting Mosaic or its operations; and the business
operations of the operating businesses of Mosaic will continue on a
basis consistent with prior years.
A number of factors could cause actual results to differ
materially from those expressed or implied by the forward-looking
statements, including, but not limited to: the inability to settle
definitive documentation and closing conditions, including accuracy
of representations and warranties not being satisfied; the
inability to obtain approval from the TSX Venture Exchange;
prevailing economic conditions; unexpected changes in the financial
markets (including in the trading price of the securities of
Mosaic); and changes in the general economic and business
conditions of one or more of Mosaic and its subsidiaries.
Should any of the risks or uncertainties facing Mosaic and its
subsidiaries materialize, or should assumptions underlying the
forward-looking statements prove incorrect, actual results,
performance, activities or achievements could vary materially from
those expressed or implied by any forward-looking statements
contained in this news release. Readers are cautioned that the
foregoing list of risks is not exhaustive. Additional information
on these and other factors that could affect the operations or
financial results of Mosaic and its subsidiaries are included in
Mosaic's annual information form for the year ended December 31, 2015, a copy of which is available
under Mosaic's profile on SEDAR (www.sedar.com).
Although Mosaic believes that the expectations represented by
any forward-looking-statements contained herein are reasonable
based on the information available to it on the date of this news
release, management cannot assure investors that actual results,
performance or achievements will be consistent with these
forward-looking statements. Any forward-looking statements herein
contained are made as of the date of this news release and Mosaic
does not assume any obligation to update or revise them to reflect
new information, events or circumstances, except as required by
law.
SOURCE MOSAIC CAPITAL CORPORATION