TIMIA Capital Corp has agreed to acquire the business of Pivot Financial, a Canadian private lender focused on small and mid-sized companies. The purchase price is about C$6 million plus working capital. Vancouver-based TIMIA provides growth capital loans to growing business-to-business technology companies.
TIMIA Capital to Acquire Pivot Financial
VANCOUVER, BC, Sept. 10, 2021 /CNW/ – TIMIA Capital Corporation (“TIMIA” or the “Company”) (TSXV:TCA) (OTCQB: TIMCF) is pleased to announce that it has entered into a series of agreements to acquire the business of Pivot Financial (“Pivot”), a Canadian-based private lender focused on creative financing solutions for the small and medium business market, for a purchase price of approximately $6.0 million plus working capital comprised of a combination of common shares (“Common Shares”) with a deemed value of $0.30 per share, series A preferred shares (“Preferred Shares”) with a deemed value of $1.00 per share and cash (the “Transaction”).
Pivot Financial has successfully grown to profitability over the past 6 years and is now looking to accelerate its growth via this combination with TIMIA. The Pivot management team is excited to continue growing Pivot and the TIMIA team is excited to welcome them into the broader group. Ken Thomson, CEO of Pivot, will take on a senior leadership role with TIMIA Capital as Chief Strategy Officer as well as joining the Board of Directors of TIMIA, while Dan Flaro, President of Pivot, will continue in his role with respect to the Pivot business.
“TIMIA’s fintech-based loan origination and underwriting platform is complementary to the lending profile of Pivot Financial,” said Mike Walkinshaw, CEO of TIMIA. “TIMIA and Pivot service two distinct markets seeking growth capital with little or no overlap. As a result, this combination provides synergies from which we can each continue to build our portfolios while mutually leveraging our technology platform to drive efficiency and profit.”
“Over the past 6 years, we have been successful at building our business by focusing on the borrowing needs of small to mid sized Canadian enterprises with up to 100 employees and $50 million in revenue,” said Ken Thomson, CEO of Pivot. “Joining TIMIA Capital provides access to a more diverse capital pool, a combined larger portfolio of assets under management, and a proven technology-based loan origination and management platform. Moving forward we will leverage the strengths of each company with a goal of becoming a leading specialty lending company in North America.”
Details of the Transaction
Pursuant to the Transaction, TIMIA will:
Acquire the loan book and other assets, and assume specific related debt of Pivot Financial Inc. (“PFI”)
Acquire all of the outstanding common shares of Pivot Financial Services Inc. (“PFSI”)
Establish a new wholly-owned limited partnership to manage the loan book, other assets, and specific related debt of PFI
Aggregate consideration payable by TIMIA under the Transaction is comprised of:
5,000,000 Common Shares (at a deemed price of $0.30 per Common Share), 2,000,000 Preferred Shares (at a deemed price of $1.00 per Preferred Share) and the payment of $1.0 million in cash (subject to post-closing working capital adjustments) to Ken Thomson (“Thomson”), the sole shareholder of PFSI
1,500,000 Preferred Shares (at a deemed price of $1.00 per Preferred Share) issuable to PFI
Highlights of the combined company and key financial metrics1 include:
52.5 million common shares total outstanding post transaction
68.2 million common shares fully diluted post transaction
10.5 million Preferred A Shares total outstanding post transaction
Insider ownership of approximately 37%.
Pro forma combined assets would have been approximately $100 million with a further $42 million of assets under administration had the acquisition been completed by August 31, 2021.
Pro Forma revenue for the combined entity for the first half of Fiscal 2021 would have been $4.3 million, assuming the transaction closed on August 31, 2021. This pro forma revenue for the combined entity is an increase of 39% over TIMIA’s consolidated revenue for the first half of Fiscal 2021.
Pivot generated $431,000 in normalized net income for the first half of fiscal 2021.
1 Note Pivot’s past financial results have not been subject to an external financial audit.
Additionally, the Company wishes to announce that, concurrent with closing of the Transaction, it proposes to complete a private placement of 1,666,667 Common Shares at a price of $0.30 per Common Share and 500,000 Preferred Shares at a price of $1.00 per Preferred Share with Dan Flaro (“Flaro”), a key employee of PFSI, for gross proceeds of $1,000,000 (the “Investment Transaction”). The Company anticipates using proceeds of the Investment Transaction for general corporate purposes.
On closing of the Transaction expected to be on or about September 21, 2021, the Company will enter into voting agreements with Thomson, PFI and Flaro, whereby, among other things, these parties will agree to vote Common Shares held by them in favour of matters proposed by management of the Company for a period of 24 months, subject to certain standard exceptions (the “Voting Agreements”).
On closing of the Transaction, the Company will appoint Thomson as a member of the board of directors of TIMIA and will grant Thomson 100,000 stock options exercisable at a price of $0.30 per share for a period of 5 years. Flaro will receive 150,000 stock options exercisable at a price of $0.30 per share for a period of 5 years. Thomson and Flaro will each enter into employment agreements with the Company.
Completion of the Transaction is subject to the following conditions:
Receipt of approval of the TSX Venture Exchange (the “TSXV”) for the Transaction and the Investment Transaction
Receipt of all necessary third party consents, including the consent of lenders to Pivot.
Completion of the Investment Transaction
Entry into the Voting Agreements
Other customary closing conditions
Following completion of the Transaction and the Investment Transaction, Thomson (including shares issuable to PFI) will hold an aggregate of 5,000,000 Common Shares (representing 9.52% of the outstanding Common Shares on an undiluted basis) and 3,500,000 Preferred Shares. On a partially diluted basis (assuming conversion of stock options and Preferred Shares controlled by him), Thomson will hold an aggregate of 8,500,000 Common Shares (representing 15.32% of the outstanding Common Shares on a partially diluted basis).
The Company is at arm’s length with PFI, PFSI, Thomson and Flaro. No finder’s fee will be payable in connection with the Transaction and the Investment Transaction.
Ken Thomson, CEO and founder of Pivot Financial, will serve as CEO of the wholly-owned subsidiary, Pivot Financial Services Inc and will serve as Chief Strategy Officer and Board Member of TIMIA. Mr. Thomson has over 20 years of experience in the investment industry and in managing and growing businesses. He serves on the board of several private companies including two other private lenders, Chairs the board of a North American manufacturing business, and was a member of the Board of Directors, Audit Committee and Independent Review Committee of a family of TSX-listed investment funds. Mr. Thomson is a member of the Independent Review Committees of Hazelview Securities Inc., Algonquin Capital and Goodwood Inc. and is Chair of the Independent Review Committee of Educators Financial Group. He holds an Honours Business Administration degree from the Richard Ivey School of Business and has completed the Partners’, Directors’ and Officers’ Course offered by the Investment Funds Institute of Canada.
In other matters, the Company wishes to confirm that it previously closed the second tranche of its private placement of its over-subscribed private placement as announced in April, 2021. The second tranche consisted of an additional 500,000 series A preferred shares, for a total of $1,250,000 in aggregate proceeds.
About Pivot Financial
Pivot is an asset manager that deploys funds on behalf of institutions, retail investors, high net worth individuals, its management team and shareholders. We seek out favourable risk return lending opportunities through prudent credit assessment and diversification targeting lower mid market borrowers in Canada. We manage all aspects of borrower relationships including origination, underwriting and ongoing portfolio management. For more information please visit: www.pivotfinancial.com
About TIMIA Capital Corporation
TIMIA Capital Corporation has developed a proprietary loan origination platform that services private market, high-yield loan opportunities, thereby earning recurring fees and a share of the profit. While focusing on the fast growing, global, business-to-business Software-as-a-Service (or SaaS) segment, TIMIA’s automated loan origination system is applicable to multiple technology sectors, it creates scalable and profitable growth for TIMIA’s stakeholders. For more information about TIMIA Capital Corporation, please visit www.timiacapital.com