Farmers Edge Inc. ("Farmers Edge" or the "Company") (TSX: FDGE) today announced that it has entered into an arrangement agreement (the "Arrangement Agreement") with 15635594 Canada Inc. (the "Purchaser"), a newly-formed subsidiary of the Company's majority shareholder, Fairfax Financial Holdings Limited ("FFHL") and FFHL, as guarantor, in respect of a transaction (the "Transaction") whereby the Purchaser will acquire all of the common shares (the "Common Shares") in the capital of the Company, other than those Common Shares owned by FFHL and its affiliates (collectively, "Fairfax") and the Company's Chief Executive Officer (as described below), at a purchase price of C$0.35 per Common Share (the "Purchase Price"), payable in cash. Today's announcement is the culmination of the negotiations that took place following the receipt by the board of directors of Farmers Edge (the "Board") on November 16, 2023 of an initial proposal from Fairfax at C$0.25 per Common Share (the "Original Proposal") and the January 8, 2024 announcement of the signing of a letter of intent by the Company and Fairfax in respect of the Transaction. The signing of the Arrangement Agreement followed the unanimous recommendation of the special committee (the "Special Committee") of independent directors of the Board.
The Purchase Price represents a 218% premium to the closing price and to the 20-day volume weighted average price per Common Share on the Toronto Stock Exchange, in each case, of approximately C$0.11, as of the close of trading on November 15, 2023, being the trading day immediately before the Company received the Original Proposal.
The Transaction is to be effected by way of a court-approved plan of arrangement under section 192 of the Canada Business Corporations Act and is expected to close in the first quarter of 2024, subject to receipt of shareholder and court approvals and certain other customary closing conditions. Completion of the Transaction is not subject to any financing condition.
Unanimous Board Approval
The Board, having received the unanimous recommendation of the Special Committee, determined (with R. William McFarland and Quinn McLean declaring their roles as directors or officers of Fairfax or an affiliate thereof, and Vibhore Arora declaring his interest in the Transaction given he will be exchanging his equity interests in Farmers Edge for equity of the Purchaser, and each abstaining) that entering into the Arrangement Agreement is in the best interests of the Company and the Board intends to recommend that the Company's shareholders vote in favour of the Transaction at a special meeting of the shareholders to be held to approve the Transaction.
Formal Valuation and Fairness Opinion
In connection with its review of the Transaction, the Special Committee retained BMO Capital Markets ("BMO") as independent valuator and financial advisor to provide financial advice and prepare a formal valuation of the Common Shares (the "Formal Valuation") as required under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). BMO concluded that, as of January 22, 2024, and subject to certain assumptions, limitations and qualifications, the fair market value of the Common Shares was in the range of C$0.05 to C$0.45 per Common Share. BMO has also provided its opinion (the "Fairness Opinion") to the Special Committee that, as of January 22, 2024, and subject to certain assumptions, limitations and qualifications, the consideration to be received by the holders of Common Shares (other than Fairfax and the Company's Chief Executive Officer) pursuant to the Transaction is fair, from a financial point of view, to the holders of Common Shares (other than Fairfax and the Company's Chief Executive Officer).
Click here to see more...