Tuckamore says ISS view of buyout plan flawed

TORONTO, July 2 Wed Jul 2, 2014 9:09am EDT

TORONTO, July 2 (Reuters) - Tuckamore Capital Management Inc , which invests in early- and mid-stage private companies, said on Wednesday it believes a leading proxy advisory firm's recommendation against a proposed management-led buyout of Tuckamore is flawed.

The buyout plan, backed by private equity firm Birch Hill Equity Partners, has already faced significant public opposition from shareholders that control close to 30 percent of Tuckamore's shares. Earlier this week proxy advisory firm ISS, or Institutional Shareholder Services, advised its clients not to back the proposal.

ISS said in a report the Tuckamore board's decision to forgo an auction process was a cause for concern, as investors lack "market-based evidence that the deal presented in fact represents the best available alternative."

The firm described the termination fee tied to the deal as unusually high, arguing it may have deterred other potential bidders from offering investors a meaningful premium above the final offer.

Tuckamore argued the ISS argument against its buyout plan was flawed.

"In our view, the ISS report confuses the concept of equity value with enterprise value, uses inappropriate metrics, and ignores the depth and breadth of the value maximization process undertaken by the board," Tuckamore said in a statement.

Tuckamore announced in early May that senior management, with the support of Birch Hill, agreed to acquire the firm in a deal that valued the holding company at about C$60 million ($56 million). Birch Hill does not currently own any significant stake in Tuckamore, according to Thomson Reuters data.

Since then, shareholders that control a significant chunk of Tuckamore's stock, including JC Clark Ltd, Access Holdings and Canso Investment Counsel, have publicly decried the deal.

Access, which plans to launch a proxy battle to unseat the Tuckahoe board if the buyout fails, has filed a complaint with the Ontario Securities Commission, alleging the proposal runs afoul of capital market rules and that the terms are abusive to non-management shareholders.

Tuckamore has alleged Access had tried to seize control of the company without paying a premium to all shareholders.

Ahead of the Canada Day holiday, shares in Tuckamore closed at 79 Canadian cents a share, above the proposed offer price of 75 Canadian cents a share.

Shareholders were set to vote on the proposed offer on July 15. ($1 = 1.0636 Canadian dollars) (Reporting by Euan Rocha; Editing by Jeffrey Benkoe)