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Equity Financial Holdings to be taken private in $93 mln deal

Equity Financial Holdings Inc (TSX: EQI), a Toronto-based provider of residential first mortgage loans through its affiliate, Equity Financial Trust Co, has agreed to be taken private. The deal, which is being led by Canadian activist investor Smoothwater Capital Corp, implies an equity value of about $93 million. Prior to the close of the deal, Smoothwater, an existing shareholder, will be joined by Hennick & Co, Freycinet Ventures and other investors prepared to commit capital and assume a role in the privatized company. Smoothwater will remain the controlling investor. Smoothwater CEO Stephen Griggs is currently Equity’s chairman.


Equity Financial Holdings Inc. Enters into Arrangement Agreement to be Taken Private by Smoothwater Capital Corporation; Hennick & Company and Others to Co-Invest in Private Company Post-Arrangement

TORONTO, Oct. 30, 2017 /CNW/ – Equity Financial Holdings Inc. (TSX: EQI) (“Equity” or the “Corporation”), which offers residential first mortgage loans through its wholly‐owned subsidiary, Equity Financial Trust Company (“Equity Trust”), and Smoothwater Capital Corporation (“Smoothwater”) are pleased to announce that they have entered into a definitive arrangement agreement (the “Arrangement Agreement”) pursuant to which Smoothwater will acquire all of the issued and outstanding shares of Equity (the “Shares”), other than Shares already owned or controlled by Smoothwater, its officers, and by certain other shareholders who have agreed to remain as continuing shareholders (collectively, the “Continuing Shareholders”), by way of a plan of arrangement (the “Arrangement”).

Each Share will be acquired for $9.75 per share in cash (the “Consideration”). The price per Share implies a total equity value of approximately $93 million.

The Consideration offered to Equity shareholders (the “Shareholders”) represents a premium of 29.6% to the volume weighted average price of the Shares on the Toronto Stock Exchange for the 20 trading days ending October 30, 2017.

The Arrangement was unanimously recommended by a special committee of the board of directors of Equity (the “Board”) composed entirely of independent directors (the “Special Committee”): F. David Rounthwaite (chair), Peter Friedmann, Brad Kipp, Michèle McCarthy and Martin Ouellet. No member of the Special Committee will be a Continuing Shareholder and any Shares owned by members of the Special Committee will be exchanged for the Consideration pursuant to the Arrangement.

The Board (with interested, non-independent directors abstaining), following receipt of the unanimous recommendation by a Special Committee, has:

unanimously determined that the Arrangement is in the best interests of Equity and that the Arrangement is fair to the Shareholders, other than the Continuing Shareholders,
unanimously approved the Arrangement Agreement, the Arrangement and the transactions contemplated thereby, and
resolved to recommend that Shareholders vote in favour of the Arrangement.

Subsequent to the completion of the privatization, Smoothwater will be joined by Hennick & Company, Freycinet Ventures and certain other investors who have committed to contribute capital and take an active role to help accelerate the growth of Equity’s business in the years to come. Such investors will acquire a non-controlling interest in Equity from Smoothwater, with Smoothwater maintaining control of the privatized company.

Independent Valuation Process

The Special Committee retained Blair Franklin Capital Partners Inc. (“Blair Franklin”) as independent valuator. In arriving at its unanimous recommendation in favour of the Arrangement, the Special Committee considered several factors which will be outlined in public filings to be made in connection therewith. Blair Franklin provided the Special Committee with a formal valuation, completed under the Special Committee’s supervision, which reflected the determination that, as at October 30, 2017, subject to the assumptions, limitations and qualifications contained therein, the fair market value of the Shares was between $9.50 and $12.00 per Share. Blair Franklin also provided an opinion to the effect that, as at October 30, 2017, subject to the assumptions, limitations and qualifications contained therein, the Consideration to be received by the disinterested Shareholders pursuant to the Arrangement Agreement is fair, from a financial point of view, to such Shareholders. Copies of the Blair Franklin valuation and fairness opinion, which should be read carefully and in its entirety, and other relevant background information will be included in the management proxy circular that will be mailed to Shareholders for the special meeting of Shareholders anticipated to be held in December 2017 to approve the Arrangement (the “Meeting”).

Stephen Griggs, CEO of Smoothwater, and Michael Jones, President & CEO of Equity, who are directors of Equity and also Continuing Shareholders, did not participate in the deliberations or directors’ vote of the Board in relation to the evaluation and approval of the Arrangement. The Continuing Shareholders collectively currently hold approximately 42.2% of the issued and outstanding shares of Equity. Certain independent Shareholders, who collectively own or exercise control or direction over approximately 26.3% of the Shares, and all directors and officers, have entered into support and voting agreements pursuant to which they have agreed, subject to the terms thereof, to vote their Shares in favour of the Arrangement. The support and voting arrangements can be terminated in the event of a “superior proposal” (as defined in the Arrangement Agreement).

Additional Transaction Details

To be implemented, the Arrangement requires approval of at least 66 2/3% of the votes cast by all Shareholders. The proposed transaction will also require approval by a “majority of the minority” of the Shareholders, being a majority of the votes cast by Shareholders whose votes may be included in determining if minority approval is obtained pursuant to Multilateral Instrument 61-101 Protection of Minority Securityholders in Special Transactions. The plan of arrangement is also subject to court approval and the satisfaction of other customary closing conditions, including receipt of regulatory approvals. The Arrangement is not conditional on Smoothwater obtaining financing.

The Arrangement Agreement provides that, at any time prior to the date that is four business days before the Meeting (the “Go-Shop Expiry Date”), Equity may solicit inquiries or proposals regarding, constituting or which may reasonably be expected to constitute a superior proposal. Following the Go-Shop Expiry Date, Equity is still able to respond to unsolicited alternative proposals that could result in a superior proposal, however, Equity is not permitted to solicit any inquiries or proposals regarding, constituting or which may reasonably be expected to constitute an acquisition proposal during such time. Smoothwater has the right to match any competing superior proposal for Equity regardless of whether it arises before or after the Go-Shop Expiry Date. A termination fee equal to the reasonable expenses incurred by Smoothwater in connection with the Arrangement would be payable to Smoothwater in certain circumstances, including if the Arrangement Agreement is terminated in the context of a superior proposal supported by Equity.

Further details regarding the applicable voting requirements and court and regulatory approvals to be obtained will be contained in the management proxy circular to be mailed to Shareholders in connection with the proposed transaction. The management proxy circular as well as the Arrangement Agreement will be made available under the profile of Equity at


Blair Franklin acts as financial advisor and McCarthy Tétrault LLP serves as legal counsel to the Special Committee. Cassels Brock & Blackwell LLP serves as legal counsel to Equity. CIBC Capital Markets acts as financial advisor and Norton Rose Fulbright Canada LLP serves as legal counsel to Smoothwater.

About Equity Financial Holdings Inc.

Equity is a financial services company operating through its wholly‐owned subsidiary, Equity Trust, a federally regulated deposit‐taking trust company. Equity Trust serves the Canadian mortgage market by offering residential first mortgage loans to non‐prime and near‐prime customers who do not meet the conventional underwriting standards of the major Canadian banks. Learn more at

About Smoothwater Capital Corporation

Smoothwater focuses on investing its own capital in small to midcap Canadian public companies where there is an identifiable path to significantly improve the share value. Learn more at

For further information: Equity Financial Holdings Inc., Michael R. Jones, President & CEO, 647.277.0106,; Smoothwater Capital Corporation, Stephen J. Griggs, Chief Executive Officer, 416.986.2207,

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