Dealnet Capital Corp. and Simply Green Home Services Inc. (“Simply Green”) recently announced the mailing to Dealnet shareholders of the materials related to the board-supported take-over bid of the Company (the “Offer”). Capital Partners Corporation and Municipal Home Service Inc. (collectively, the “Concerned Shareholders”) strongly oppose the Company’s board of directors’ (the “Board”) shameful attempt to support a premature sale of the Company for nearly half the break-up value of $0.29 per share that the Company and a third-party institutional analyst recently promoted in December 2019. The Board has also since touted their first two profitable quarters and frequent “positive news” in public releases further demonstrating that there is no urgency to pursue a sale of the Company.
Do Not Tender – Every Share Matters
Shareholders can fight back by simply doing nothing. The completion of the Offer is conditional on more than 66 2/3% of the outstanding Dealnet shares being tendered. Insiders only own approximately 3.4% of the outstanding Dealnet shares (the “Shares”) – the Offer will fail if shareholders demand better. All that shareholders must do is not tender 33.34% of the Shares. The Concerned Shareholders already control 8.96% of the Shares that will not be tendered to the Offer, therefore only 24.38% of the additional Shares need to be withheld to block the Offer.
Simply Take No Action – Shareholders Deserve Better
Simply Green’s $0.16 bid is merely the first public offer to purchase the Shares and the Concerned Shareholders believe that this sets the floor, not the ceiling, for what shareholders should expect for value. The true value of Dealnet is far greater. Shareholders can expect pressure calls and more of the same misleading tactics from Dealnet. The intimidation has already begun – the Board’s directors’ circular (the “Circular”) cites risks and costs to the Company if the Offer is not completed, however fails to acknowledge that this is already factored into the Offer price. In the event the Offer is unsuccessful, these risks can be mitigated by a responsible board of directors.
Simply Green Can Increase the Bid if it is Rejected
The Circular states that, “Shareholders who do not take any action to deposit their Common Shares to the Offer will not receive the cash consideration for their Common Shares under the Offer”, but conveniently omits the FACT that shareholders who wait and do not tender will retain their Shares and could possibly receive an increased offer for their patience. Only if the Offer is successful will shareholders be potentially compelled to accept payment at the low $0.16 Offer price as part of a compulsory or subsequent acquisition transaction. Shareholders who do not tender may ultimately receive a higher bid. Many shareholders have held patiently while seeing the value of their Shares plummet and the Concerned Shareholders believe there is now nothing to lose by waiting just a bit longer.
Simply Hold Your Shares – Dealnet Has Greater Value Under Strong Leadership
Dealnet has been mismanaged and pillaged by insiders but the largest amount of its value remains secure in long term contracts and relationships worth much more than the low Offer. Simply Green’s strong management and systems plus its successful pursuit of capital has driven its growth to a nearly $1 billion portfolio. On September 3, 2020, Simply Green announced the purchase of Home Capital Group’s Point-of-Sale Retail Lending portfolio for $71 million and has been on an unrivaled acquisition spree purchasing several desirable assets while Dealnet has failed to make a single accretive acquisition under its existing management.
With competent leadership, Dealnet could and should be as successful as Simply Green – matching Simply Green’s access to capital, M&A strategy, systems, sales, stakeholder relationships and execution. Dealnet should rival Simply Green in the marketplace but instead it is being handed to them with self-serving support from the Board. The Concerned Shareholders believe that Dealnet is assuredly worth more than $0.16 per Share and that shareholders who do not tender to the Offer may be well served either with an increased offer or a new board that can realize Dealnet’s true value.
“Board Man Gets Paid” – Dealnet’s Directors Enrich Themselves at Shareholders’ Expense
The Circular identifies revisions to Brent Houlden’s employment agreement, stating, “The employment agreement entered into between the Company and Brent Houlden on December 24, 2019 (the “Employment Agreement”) requires that certain payments be made to Mr. Houlden upon a change of control of the Company”; Mr. Houlden is now expected to receive over $1.3 million in compensation if the Offer is successful. In addition, the over 17 million options insiders have issued to themselves will be exercised for more cash into their pockets from Simply Green.
This “friendly bid” appears to be a desperate “fire sale” of the Company – all engineered by the lackluster leadership seemingly desperate to avoid facing a vote at an annual meeting of shareholders. If the Offer is successful, shareholders will have left substantial amounts of contracted future cash value on the table that could be managed by an enhanced leadership team for the benefit of all shareholders, but insiders have abandoned shareholders for their own benefit. As a further insult to shareholders expecting a better Offer, the Board has bound the Company to an excessive $2.25 million termination payment that may serve to thwart any superior proposal.
Greedy Tactics Avoid Shareholder Vote
The Board’s unanimous “support” for this low Offer appears to be a blatant maneuver for them to stuff their pockets and avoid a vote at the continually delayed shareholder meeting that was validly requisitioned by the Concerned Shareholders over four months ago. The Concerned Shareholders are outraged and believe that the Board accepted the low Offer because they feared losing their position and their enrichment from the Offer.
As announced earlier this month, Dealnet has postponed its annual and special meeting of shareholders, leaving shareholders without a vote or a voice other than to reject the Offer. The Concerned Shareholders are reviewing all possible legal avenues to ensure that the shareholder meeting is no longer unduly delayed. The Board and its high priced information agent will pressure and mislead shareholders in an attempt to force you to tender your Shares – do not let them. “We believe there is nothing to lose by rejecting the current Offer,” concluded Dr. Steven Small, CEO of Capital Partners Corporation.
The information contained in this news release does not and is not meant to constitute a solicitation of a proxy within the meaning of applicable securities laws. Shareholders are not being asked at this time to execute a proxy in favour of the nominees of the Concerned Shareholders. In connection with Dealnet’s annual general and special meeting of shareholders, the Concerned Shareholders may file and mail a dissident information circular in due course in compliance with applicable securities laws.
Dr. Steven Small