The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from CNW Group

Brick offers cashless exercise right to holders of warrants

Wednesday, May 25, 2011

Brick offers cashless exercise right to holders of warrants13:27 EDT Wednesday, May 25, 2011Cashless exercise period to commence immediately, expire on June 29, 2011EDMONTON, May 25, 2011 /CNW/ - The Brick Ltd. (TSX: BRK) (the "Brick Group") today offered to the holders of its Class A common share purchase warrants the right to submit their warrants for the exercise of the subscription right thereof on a cashless basis on the terms and conditions set forth in an offer letter to warrantholders dated May 25, 2011 (the "Offer Letter") and in the cashless exercise election form transmitted therewith (such exercise, a "Cashless Exercise" and such offer, the "Offer"). The warrants subject to the Offer include both the listed warrants (the "Listed Warrants") issued pursuant to the Brick Group's warrant indenture dated as of May 28, 2009 (CUSIP 107879116) and the warrants (the "Fairfax Warrants") issued pursuant to the Brick Group's warrant certificate dated as of August 24, 2009.The Offer will expire at 5:00 p.m. (Eastern Time) on June 29, 2011 (as such time may be extended in accordance with the terms of the Offer Letter, the "Expiration Time"). Warrants may not be submitted for Cashless Exercise pursuant to the Offer after the Expiration Time.If the Participation Requirement (as defined below) and the other conditions to the Offer described in the Offer Letter are satisfied or waived, then each warrant properly submitted pursuant to the Offer and not withdrawn pursuant to an Automatic Withdrawal (as defined below) will be accepted for Cashless Exercise at 11:59 p.m. (Eastern Time) on the date on which the Expiration Time occurs, and the holder thereof will thereupon be entitled to receive the number of Class A common shares described in the Offer Letter.The "Participation Requirement" means that not less than 85% of all warrants outstanding as of 5:00 p.m. (Eastern Time) on June 29, 2011 have been properly submitted for Cashless Exercise pursuant to the Offer not later than such time.  If the Participation Requirement is not satisfied by 5:00 p.m. (Eastern Time) on June 29, 2011, then all warrants submitted for Cashless Exercise pursuant to the Offer on or prior to such time shall automatically be withdrawn from the Offer (an "Automatic Withdrawal"), the Expiration Time shall automatically be extended to 5:00 p.m. (Eastern Time) on July 11, 2011, and the Participation Requirement will be deemed to be waived.  Any warrants submitted for Cashless Exercise pursuant to the Offer will be returned promptly to the holders who submitted such warrants in the event of an Automatic Withdrawal.  A holder whose warrants have been withdrawn from the Offer pursuant to an Automatic Withdrawal or that had not submitted its warrants for Cashless Exercise pursuant to the Offer prior to an Automatic Withdrawal may re-submit or submit, as the case may be, its warrants for Cashless Exercise pursuant to the Offer in the manner described in the Offer Letter.The Brick Group President and Chief Executive Officer Bill Gregson noted that the "purpose of the Offer is to facilitate exercise of the warrants, thereby reducing overhang on the market price of the Class A common shares and dilution resulting from the warrants.  The Brick Group has strengthened its already solid cash position over the last few quarters and has significant borrowing capacity as there are currently no borrowings drawn under its asset-backed credit facility with GE.  We do not anticipate the need for the proceeds from the future exercise of the warrants and our focus has shifted to addressing the dilutive effect of the warrants."The Brick Group has entered into a support agreement with each of Fairfax Financial Holdings Limited (together with its affiliates, "Fairfax"), Mackenzie Financial Corporation, William H. Comrie ("Comrie"), and Chou Associates Management Inc. (collectively, the "Supporting Entities"), which beneficially own in aggregate approximately 86% of the warrants, and which have agreed to submit their warrants not later than 4:00 p.m. (Eastern Time) on June 29, 2011 for Cashless Exercise pursuant to the Offer (subject to Automatic Withdrawal in the event that the Participation Requirement is not satisfied), provided that (i) the volume weighted average trading price of the Class A common shares on the Toronto Stock Exchange for the five trading days immediately preceding June 29, 2011 (the "Market Price") is not less than $2.80 per Class A common share and (ii) the Market Price minus the exercise price of any warrant (being $1.00 in the case of the Listed Warrants and $0.82 in the case of the Fairfax Warrants) is not less than $1.80.To submit warrants for Cashless Exercise pursuant to the Offer, the holder of such warrants must, on or prior to the Expiration Time, comply with the procedures described in the Offer Letter.Any submission of warrants for Cashless Exercise pursuant to the Offer will be irrevocable, except pursuant to an Automatic Withdrawal. Any re-submission or submission of warrants for Cashless Exercise pursuant to the Offer after an Automatic Withdrawal will be irrevocable and may not be withdrawn.In connection with the Offer, amendments ("Amendments") will be made, with the support of the Supporting Entities, to the indenture and certificate governing the warrants and the indenture governing the Brick Group's debentures to permit the Brick Group to effect the Offer and other cashless exercise offers from time to time on terms that are consistent with the rules of the Toronto Stock Exchange. As of May 17, 2011, there were116,403,458 outstanding warrants and $120,000,000 aggregate principal amount outstanding of debentures subject to the Amendments.Insiders of the Brick Group whose warrants and debentures will be amended include Fairfax and Comrie, all of whom are insiders as a result of their securityholdings in the Brick Group.  The Amendments have been approved by the Brick Group's board of directors based on the recommendation of a special committee of independent directors that excludes any representative of Fairfax, Comrie or other insiders of the Brick Group.  GMP Securities is acting as advisor to the special committee of the Brick Group's board of directors in connection with the Offer.The Offer and the Amendments will be completed pursuant to an exemption by securities regulators from the minority approval requirements of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions.As of May 17, 2011, Fairfax held 11,046,600 (20%) Class A common shares, 48,000,000 (43%) Listed Warrants, 5,317,000 (100%) Fairfax Warrants, and $45,000,000 (38%) aggregate principal amount of debentures.  Following the Offer, and assuming the Cashless Exercise of all issued and outstanding warrants and a Market Price of $2.80, Fairfax will hold 45,663,621 (35%) Class A common shares, no Listed Warrants, no Fairfax Warrants, and the same amount and proportion of debentures.As of May 17, 2011, Comrie held 21,561,983 (40%) Class A common shares, 18,000,000 (16%) Listed Warrants, and $18,000,000 (15%) aggregate principal amount of debentures.  Following the Offer, and assuming the Cashless Exercise of all issued and outstanding warrants and a Market Price of $2.80, Comrie will hold 33,133,412 (26%) Class A common shares, no Listed Warrants, and the same amount and proportion of debentures.All references herein to the number and percentage of outstanding warrants exclude any Listed Warrants that have been acquired by the Brick Group and will be cancelled prior to the Expiration Time.Registered holders of warrants that wish to submit their warrants for Cashless Exercise pursuant to the Offer must ensure that all requirements for such submission have been satisfied on or prior to 5:00 p.m. (Eastern Time) on June 29, 2011. Beneficial owners of warrants, whose warrants are registered in the name of a brokerage firm, bank or trust company or other intermediary, should promptly contact their intermediaries and obtain and follow their intermediaries' instructions with respect to the applicable submission procedures and deadlines, which may be earlier than the deadlines that are described above and set out in the Offer Letter.If you have any questions or require assistance with the Cashless Exercise of your warrants, or if you wish to obtain a copy of the Offer Letter and the cashless exercise election form transmitted therewith, please contact:Georgeson100 University Avenue11th Floor, South TowerToronto, Ontario M5J 2Y1Toll Free: 1-866-656-4118Email: askus@georgeson.comThe preceding statements are only a summary of certain provisions of the Offer Letter, cashless exercise election form transmitted therewith, warrant indenture, warrant certificate, debenture indenture and related amendments, and are qualified in their entirety by the full text of each, copies of which are available electronically under the System for Electronic Document Analysis and Retrieval (SEDAR) System (www.sedar.com).The Offer is not being made to, and cashless exercise election forms will not be accepted from or on behalf of, warrantholders in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction.About the Brick GroupThe Brick Group, together with its subsidiaries, is one of Canada's largest volume retailers of household furniture, mattresses, appliances and home electronics, operating under five banners: The Brick, United Furniture Warehouse, The Brick Superstore, The Brick Mattress Store, and Urban Brick. In addition, through its corporate sales division, the Brick Group services the subdivision, condominium, hospitality, and high-rise builder market. The Brick Group's retail operations are located in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Prince Edward Island, Nova Scotia, New Brunswick and Yukon.Forward-Looking StatementsThis news release contains "forward-looking statements" within the meaning of applicable Canadian securities laws, including (but not limited to) statements about the Brick Group's consolidated sales and operating revenue, consolidated EBITDA, consolidated net loss, sales and operating revenue in the financial services and retail segments, same store sales growth and goodwill and indefinite life intangible asset impairment charges, the financial flexibility and capital resources necessary to manage the business in the current economic environment, and similar statements concerning anticipated future events, results, circumstances, performance or expectations, that reflect management's current expectations and are based on information currently available to management of the Brick Group and its subsidiaries. The words "may", "will", "should", "believe", "expect", "plan", "anticipate", "intend", "estimate", "predict", "potential", "continue" or the negative of these terms, or other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters, identify forward-looking matters. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Brick Group to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. The Brick Group undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by applicable law. www.thebrick.comFor further information: Contact Information Bill Gregson                      Greg Nakonechny President and CEO                     Vice President, Legal and Corporate Secretary The Brick Group                     The Brick Group (780) 930-6300                     (780) 930-6300 investor@thebrick.com                    investor@thebrick.com