SPROTT INC. ANNOUNCES LETTER OF INTENT FOR THE ACQUISITION OF GLOBAL RESOURCE INVESTMENTS LTD., TERRA RESOURCE INVESTMENT MANAGE
22 Settembre 2010 - 2:00PM
PR Newswire (Canada)
TORONTO, Sept. 22 /CNW/ -- Rick Rule to Join Sprott Executive Team
and be Nominated to Board of Directors TORONTO, Sept. 22 /CNW/ -
Sprott Inc. (TSX:SII) ("Sprott") today announced the signing of a
letter of intent (the "LOI") reflecting an agreement in principle
with Arthur Richards Rule IV and The Rule Family Trust U/A/D
12/17/98 (the "Seller") to acquire (the "Transaction") all of the
outstanding stock of Rule Investments Inc. (the owner of Global
Resource Investments Ltd.), Terra Resource Investment Management
Inc. and Resource Capital Investments Corp. (collectively, the
"Global Companies"). Upon closing of the proposed Transaction, the
LOI calls for Sprott to issue 20 million common shares in the
capital of Sprott ("Sprott Shares") in consideration for the
acquisition of the Global Companies, with the possibility of up to
an additional 8 million common shares of Sprott to be issued as
additional consideration in five years upon the attainment of
certain financial performance hurdles ("Earn-out Shares"). The
Transaction is subject to, among other things, satisfactory results
of due diligence investigations of the Global Companies and the
negotiation of definitive agreements. The Transaction is an arm's
length transaction and is subject to the approval of all applicable
regulatory authorities, including the Toronto Stock Exchange, as
well as other third parties, as necessary. In addition, the
Transaction remains subject to approval by Sprott's board of
directors. The parties will seek to close the Transaction by the
end of the calendar year. About the Global Companies The Global
Companies are leading experts in the natural resource investing
sector providing both investment management and specialized broker
services. The Global Companies are led by Rick Rule, a highly
respected natural resources investor with over 35 years of
experience in the investment industry, and have developed a highly
specialized team of resource investing experts, including
geologists and mining engineers. They offer their expertise through
pooled investment vehicles, managed accounts and brokerage accounts
and have delivered strong investment performance to their clients.
The Global Companies are based in Carlsbad, California but invest
globally. Together, the Global Companies administer or manage more
than US$1.3 billion in client assets across three business lines: -
Resource Capital Investments Corp. (RCIC) was founded in 1998 and
manages US$370 million of assets for pooled investment vehicles
that invest in natural resource companies. The pooled investment
vehicles managed by RCIC generate management and performance fees
and have an average remaining duration of seven years. - Terra
Resource Investment Management (TRIM) was founded in 2006 and is a
Registered Investment Advisor that provides segregated managed
accounts for institutions and high-net worth individuals. TRIM has
US$110 million of assets under management and approximately 600
client accounts. - Global Resource Investments Ltd. (GRIL) was
founded in 1993 and is a full service U.S. brokerage firm that
specializes in natural resource companies in the United States,
Canada and Australia. GRIL has over US$850 million in assets under
administration and almost 5,000 client accounts. Strategic
Rationale The Transaction is expected to provide benefits across
the Sprott organization and throughout the Global Companies through
the sharing of intellectual capital, the development of new
products, and by leveraging Sprott's products and brands in the
United States and internationally. "Rick Rule and his team are
widely respected experts in the field of natural resource
investing, with an excellent track record and a strong, loyal
client base," commented Eric Sprott, Chairman of Sprott. "This
Transaction will unite two leading asset management teams with the
shared goal of continuing to deliver superior investment
performance to our collective clients and shareholders." "In the
Global Companies, we are acquiring a specialized asset manager and
broker dealer with an investment approach that is complementary to
ours at Sprott and a product line that will further diversify our
asset and earnings mix," said Peter Grosskopf, Chief Executive
Officer of Sprott. "We look forward to working with Rick and his
team to capitalize on numerous opportunities to co-manage and
co-distribute our respective investment products and expertise to
clients around the world. The Transaction will increase our assets
under management by almost US$500 million, while growing our
overall assets under administration by over US$850 million. We
expect the Transaction to be immediately accretive to Sprott Inc.
shareholders." "We are delighted to become part of the Sprott
organization. Sprott's culture of performance mirrors our own, and
as a result the combination will serve both our clients well," said
Rick Rule, Founder and Chairman of the Global Companies. "We also
believe that the Global Companies can provide an ideal footprint
for Sprott's U.S. expansion." Based upon the information provided
by the Seller, the Global Companies have generated earnings before
interest, taxes, depreciation and amortization ("EBITDA") of
approximately US$29.6 million, US$24.4 million, US$11.7 million and
US$7.4 million in 2006, 2007, 2008 and 2009, respectively, with
EBITDA margins between 45% and 70%. In the period from January 1 to
August 31 2010, the Global Companies have generated approximately
US$11.4 million of EBITDA(1). Upon closing of the Transaction, Mr.
Rule will join the executive management team at Sprott for a
minimum three year term and will be included on management's slate
of nominees for the election of directors at Sprott's next annual
meeting of shareholders. Along with the recent appointment of Mr.
Grosskopf as Chief Executive Officer, Mr. Rule will further
strengthen the senior management team at Sprott. Terms of the
Proposed Transaction Upon the closing of the proposed Transaction,
Sprott will issue 20 million Sprott Shares in consideration for the
acquisition of the Global Companies. The Seller and certain
employees of the Global Companies will further be entitled to
receive, on the date that is five years following the closing of
the Transaction, Earn-out Shares based on the aggregate EBITDA of
the Global Companies during such five year period. For every dollar
that the aggregate EBITDA exceeds US$40 million, the Seller shall
receive 0.145455 Earn-out Shares, up to a maximum of 8.0 million
Earn-out Shares. If aggregate EBITDA of US$95 million is reached
prior to the end of such five-year period, the Seller shall receive
the 8.0 million Earn-out Shares at such time; provided that the
Seller shall not receive such shares prior to three years after the
closing of the Transaction. Each of the Seller and the employees of
the Global Companies receiving Sprott Shares or Earn-out Shares
will enter into lock-up agreements with Sprott whereby they will
agree not to directly or indirectly sell their shares without
Sprott's consent, subject to certain conditions, with one-third of
such shares being released from lock up every year for three years
from the date of issuance. Conference Call and Webcast A conference
call and webcast will be held on Wednesday, September 22, 2010, at
10:00am ET to discuss this announcement. The call will be hosted by
Eric Sprott, Chairman of Sprott Inc., and Peter Grosskopf, CEO of
Sprott Inc. To access the call, please dial (647) 427-7450 or
1-888-231-8191 ten minutes prior to the scheduled start of the
call. A taped replay of the conference call will be available until
October 22, 2010 at 11:59 pm by calling (416) 849-0833 or
1-800-642-1687, reference number 12962790. A live audio webcast of
the conference call will be available through www.sprottinc.com or
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3232240.
Participants will require Windows Media Player(TM) to listen to the
webcast. Forward-Looking Statements This release contains
"forward-looking statements" which reflect the current expectations
of Sprott Inc. These statements reflect management's current
beliefs with respect to future events and are based on information
currently available to management. Forward-looking statements in
this press release include, but are not limited to, statements with
respect to the negotiation of the definitive agreements for the
Transaction, the terms of such definitive agreements, the closing
of the Transaction and the anticipated benefits from the
Transaction including the beneficial impact of the Transaction on
Sprott's assets under management, assets under administration and
results of operation. Forward-looking statements involve
significant known and unknown risks, uncertainties and assumptions,
including with respect to the anticipated completion of the
negotiation of the definitive agreements, the closing of the
Transaction, the timing and receipt of all applicable regulatory
approvals and third party consents, the anticipated benefits from
the Transaction, the information provided by the Seller and the
satisfaction of other conditions to the completion of the
Transaction. Many factors could cause actual results, performance
or achievements to be materially different from any future results,
performance or achievements that may be expressed or implied by
such forward-looking statements including, without limitation,
those listed under the heading "Risk Factors" in Sprott's annual
information form dated March 30, 2010 as well as that the closing
of the Transaction could be delayed if the necessary regulatory
approvals and third party consents are not obtained on the
timelines planned or the Transaction may not be completed at all if
these approvals are not obtained or any other conditions to closing
are not satisfied. Should one or more of these risks or
uncertainties materialize, or should assumptions underlying the
forward-looking statements prove incorrect, actual results,
performance or achievements could vary materially from those
expressed or implied by the forward-looking statements contained in
this release. Although the forward-looking statements contained in
this release are based upon what Sprott believes to be reasonable
assumptions, management cannot assure investors that actual
results, performance or achievements will be consistent with these
forward-looking statements. These forward-looking statements are
made as of the date of this release and Sprott does not assume any
obligation to update or revise them to reflect new events or
circumstances, except as required by law. About Sprott Inc. Sprott
Inc. is a leading independent asset manager dedicated to achieving
superior returns for its clients over the long term. The company
currently operates through three distinct business units: Sprott
Asset Management LP, Sprott Private Wealth LP and Sprott Consulting
Limited Partnership. Sprott Asset Management is the investment
manager of the Sprott family of mutual funds and hedge funds and
discretionary managed accounts; Sprott Private Wealth provides
wealth management services to high net worth individuals; and
Sprott Consulting provides management, administrative and
consulting services to other companies, including Sprott Resource
Corp. (TSX: SCP) and Sprott Resource Lending Corp. (TSX: SIL; NYSE
Amex: SILU). Sprott Inc. is headquartered in Toronto, Canada, and
is listed on the Toronto Stock Exchange under the symbol "SII". For
more information on Sprott Inc., please visit www.sprottinc.com.
------------------------- (1) EBITDA does not represent and should
not be considered as an alternative to net income or cash flow from
operations, as determined by United States generally accepted
accounting principles, and the Seller's calculation of EBITDA may
not be comparable to that reported by other companies. EBITDA is
included herein because it is a basis upon which the Seller
assesses its financial performance and because it believes that it
presents useful information to investors. The Seller's definition
of EBITDA may not be the same as that used by other companies in
the financial services industry or other industries. Investor
contact information: (416) 203-2310 or 1 (877) 403-2310 or
ir@sprott.com
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