SEC Filing Summary: Terra Nova Royalty Corporation (Form 6-K)
Business Context and Reporting Period
This Form 6-K, filed on September 29, 2010, discloses the execution of a Support and Merger Agreement dated September 24, 2010. The agreement is between Terra Nova Royalty Corporation (Terra Nova), its subsidiary TTT Acquisition Corp. (Terra Nova Subco), and Mass Financial Corp. (Mass). The filing outlines a proposed tender offer by Terra Nova Subco to acquire all outstanding common shares of Mass, followed by a merger (amalgamation) of the two entities.
Key Financial Metrics and Transaction Terms
- Offer Consideration: Mass shareholders will receive one (1) common share of Terra Nova for each common share of Mass held (1-for-1 exchange).
- Top-Up Option: Terra Nova has an option to purchase additional Mass shares to achieve 90% ownership if the tender offer does not result in full acquisition. Consideration for these shares will be Terra Nova shares, cash, or a promissory note.
- Termination Fees:
- Terra Nova Termination Payment: $6,000,000 payable by Mass if the agreement is terminated due to Mass recommending a superior proposal, Mass failing to reaffirm support, or a competing proposal being consummated within 12 months.
- Mass Termination Payment: $6,000,000 payable by Terra Nova if the agreement is terminated due to Terra Nova's material breach of specific covenants regarding shareholder meetings.
- Expense Reimbursement: $750,000 payable by Mass to Terra Nova for certain breaches; $250,000 payable by Terra Nova to Mass for certain breaches.
- Capitalization (as of Sept 23, 2010):
- Terra Nova: 37,897,538 common shares outstanding.
- Mass: 26,204,716 common shares outstanding.
- Financial Statements Referenced: The agreement references audited statements for the year ended December 31, 2009, and unaudited interim statements for the six months ended June 30, 2010, for both companies. Specific revenue, profit, or cash flow figures are not detailed in this filing.
Material Changes and Conditions
The transaction is subject to several material conditions, including:
- Minimum Tender Condition: At least 50.1% of Mass's outstanding common shares (on a fully-diluted basis) must be validly deposited and not withdrawn.
- Shareholder Approval: Approval by Terra Nova shareholders and the New York Stock Exchange (NYSE) listing approval for the new shares.
- Regulatory Approvals: Necessary governmental and regulatory approvals must be obtained.
- No Material Adverse Effect: No material adverse change in Mass's business or financial condition since December 31, 2009.
- Board Recommendation: The Mass Board must maintain its recommendation that shareholders accept the offer.
Outlook, Risks, and Management Commentary
Management Commentary: The Mass Board, after receiving a fairness opinion from its financial advisor, has unanimously determined that the offer is fair from a financial point of view and in the best interests of Mass shareholders. The Mass Board has agreed to recommend acceptance of the offer.
Risks and Contingencies:
- Competing Proposals: Mass is restricted from soliciting competing proposals but may negotiate with a "Superior Proposal" under specific conditions, triggering a "Right to Match" period for Terra Nova.
- Shareholder Rights Plan: Mass has waived or suspended its Shareholder Rights Plan to facilitate the transaction.
- Regulatory Risk: The transaction is contingent on obtaining necessary regulatory approvals and the absence of any legal prohibitions.
- Termination Risk: The agreement may be terminated by either party under various circumstances, including failure to meet conditions, material breaches, or the emergence of a superior proposal.
Key Facts for Investor Verification
- Verify the fairness opinion provided to the Mass Board regarding the 1-for-1 exchange ratio.
- Confirm the status of regulatory approvals required in Canada, the U.S., and Barbados.
- Review the financial statements of both Terra Nova and Mass for the periods ending Dec 31, 2009, and June 30, 2010, to assess the relative value of the exchange.
- Monitor the tender offer results to ensure the 50.1% minimum tender condition is met.
- Check for any competing proposals that might trigger the termination fee provisions or the "Right to Match" clause.
- Verify the NYSE listing approval for the Terra Nova shares to be issued.