Berkshire Hathaway Inc. (NYSE: BRK.A; BRK.B) (“Berkshire”) announced today that its wholly-owned subsidiary, Columbia Insurance Company (“Columbia”), has entered into an investment agreement (the “Investment Agreement”) pursuant to which it has agreed to make an initial investment (the “Initial Investment”) of C$153,225,739 to acquire 16,044,580 common shares (“Common Shares”) of Home Capital Group Inc. (“Home Capital”) on a private placement basis, representing an approximate 19.99% equity stake in Home Capital on a post-issuance basis (25% on a pre-issuance basis). Subject to approval from the Toronto Stock Exchange for reliance on the “financial hardship” provisions of the TSX Company Manual, the Initial Investment will not require approval of Home Capital’s shareholders and is expected to close on June 29, 2017. The Initial Investment is subject to customary closing conditions and is not subject to any financing or diligence condition. Columbia also agreed to make an additional investment (the “Additional Investment”) of C$246,774,261 to acquire 23,955,420 Common Shares on a private placement basis, which, together with its Initial Investment, would represent an approximate 38.39% equity stake in Home Capital. The Additional Investment will be subject to approval by not less than a majority of the votes cast by Home Capital’s shareholders (excluding the Common Shares beneficially held by Berkshire, or over which it exercises control or direction) at a special meeting of shareholders that is expected to take place in September 2017. The Additional Investment is also subject to Canadian Competition Act clearance and other customary closing conditions. If approved by Home Capital’s shareholders, it is anticipated that the Additional Investment would close shortly after the required special shareholders meeting.
Berkshire will not be granted any rights to nominate directors of Home Capital or any governance rights as an equity holder pursuant to the Investment Agreement. Berkshire will be granted customary registration rights for transactions with a significant shareholder in connection with the Additional Investment. In addition, Berkshire has agreed that for as long as it owns more than 25% of the outstanding Common Shares it will only be entitled to vote that number of shares that represents 25% of the outstanding Common Shares, unless and until it obtains the required regulatory approvals to enable it to vote greater than a 25% interest.
The Investment Agreement contains non-solicitation covenants of Home Capital, subject to fiduciary obligations of the board of directors of Home Capital (the “Board”). The Board has agreed to recommend to the shareholders that they vote in favour of the Additional Investment. If the Board makes a change in its recommendation for any reason and shareholder approval of the Additional Investment by the Investor is not obtained, then the terms of the New Credit Agreement (defined below) shall automatically increase the interest rate on outstanding balances by 0.5% per annum and a standby fee on undrawn funds will increase by 0.75% per annum. If there is a change in the Board’s recommendation and shareholder approval of the Additional Investment is not obtained, these amended terms to the New Credit Agreement would be effective regardless of whether the Company enters into any agreement to complete an alternative transaction.
Concurrently with the execution of the Investment Agreement, Home Capital caused Home Trust Company, as borrower, to agree to enter into a new C$2 billion loan facility (the “New Credit Agreement”) with a wholly-owned subsidiary of Berkshire, as the agent and initial lender, to be secured against a portfolio of mortgages originated by Home Trust Company. The New Credit Agreement will replace the C$2 billion loan facility made as of May 1, 2017 between Home Trust Company, as borrower, and a major institutional investor, and is expected to be effective on June 29, 2017.
The Common Shares will be acquired for investment purposes. Berkshire will evaluate its investment in Home Capital from time to time and may, based on such evaluation, market conditions and other circumstances, increase or decrease its shareholdings as circumstances require pursuant to the registration rights agreement contemplated in the Investment Agreement, market transactions, private agreements, or otherwise, in each case in accordance with applicable securities laws.
This press release is issued pursuant to National Instrument 62-103 – The Early Warning System and Related Take-Over Bid and Insider Reporting Issues, which requires a report to be filed under Home Capital’s profile on SEDAR (www.sedar.com) containing additional information with respect to the foregoing matters. A copy of such report may be obtained by contacting Marc D. Hamburg, Senior Vice President and Chief Financial Officer at (402) 346-1400. Columbia has an office c/o Berkshire Hathaway Inc., 3555 Farnam Street, Suite 1440, Omaha, NE 68131.
About Berkshire Hathaway (www.berkshirehathaway.com):
Berkshire Hathaway and its subsidiaries engage in diverse business activities including insurance and reinsurance, utilities and energy, freight rail transportation, finance, manufacturing, retailing and services. Common stock of Berkshire is listed on the New York Stock Exchange, trading symbols BRK.A and BRK.B.
Certain statements contained in this press release are “forward looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Canadian securities legislation. These statements are not guaranties of future performance and actual results may differ materially from those forecasted.
Berkshire Hathaway Inc.
Marc D. Hamburg, 402-346-1400