Jaguar Announces Ownership of Shares in Galway Metalsadmin
Jaguar Announces Ownership of Shares in Galway Metals
Jaguar Opposes Proposed Private Placement
Toronto, Ontario CANADA, April 03, 2014 /FSC/ – Jaguar Financial Corporation (JFC – TSX), (“Jaguar” or the “Company”) today announced its ownership of 3,627,500 shares of Galway Metals Inc. (‘Galway”) (TSXV:GWM) or approximately 7.2% of Galway’s outstanding shares.
According to its public disclosure, Galway had cash resources of US$11.28 million as at September 30, 2013 and owns a moly and tungsten property in New Mexico. Jaguar believes there are opportunities to create value in Galway given its market cap of C$6.1 million.
Jaguar is concerned about the proposed private placement of up to C$660,000 of units of Galway disclosed in its press release dated March 31, 2014. Galway has indicated in that press release that up to C$440,000 of the proceeds from the private placement will be “made available for insiders as an inducement for continued service.” This stated justification provides no details as to what is meant by an inducement for continued service by insiders.
Are directors or management leaving? We doubt that is the case. Or are the directors and management concerned about the accumulation of shares by a then unidentified purchaser and are concerned about losing their management and Board positions? We believe this is the case and that this private placement is meant to serve as a defensive mechanism to dilute potentially vocal value creating shareholders like Jaguar who may seek to enhance shareholder value which might result in a change to management and the directors.
Jaguar believes the financing is an inappropriate defensive mechanism and is therefore opposed to the proposed financing given that (i) Galway already has more than ample cash resources; (ii) Galway management receive very substantial compensation; (iii) the Galway directors receive fees and other consideration; and (iv) the stated purpose of the related parties participating in the financing as an inducement for their continued service is designed to mask the true purpose which is to implement a defensive mechanism.
Galway’s CEO has an annual salary of approximately US$200,000 and, according to Galway’s public disclosure, he only spends approximately 50% of his time on Galway’s business. The Galway CEO is also entitled to change of control compensation of three times his salary, or US$600,000. This compensation is excessive.
With the compensation paid to the Galway CEO and the directors, there is no basis that the insiders of Galway require any “inducement for continued service”. Given this level of compensation, Jaguar is of the view that the current Galway board and management have a strong incentive to ensure that no shareholder is able to acquire a position that is large enough to threaten the status quo.
Galway’s CEO is also CEO of a sister company, Galway Gold Inc. (“Goldco”) and is paid an annual salary of US$290,000. Presumably the CEO spends 50% of his time on Goldco. His change of control compensation is three times his Goldco salary or US$870,000. Four of the five Galway directors are also directors of Goldco including the Galway CEO.
Therefore the Galway CEO for 100% of his working time is paid an annual salary of US$490,000 for his positions at Galway and Goldco and is entitled to total change of control compensation of US$1,470,000 from both companies.
The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this news release.
About Jaguar Financial Corporation
Jaguar is a Canadian merchant bank that generally invests in undervalued, overlooked and underappreciated public companies where Jaguar determines that one or more changes could be made to create shareholder value.
For additional information on this press release, please contact:
Vic Alboini, Chairman & Chief Executive Officer
Jaguar Financial Corporation
Commerce Court North
25 King St.W., Suite 1450
P.O. Box 223
Toronto, Ontario M5L 1E8
Tel: (647) 352-8180
Fax: (647) 352-8150
To view this press release as a PDF file, click onto the following link:
Source: Jaguar Financial Corporation (TSX: JFC)
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Posted: April 3rd, 2014 under FSCWIRE.