TORONTO, ON--(Marketwired - October 02, 2017) -
- Sprott Asset Management ("SAM") to acquire common shares of Central Fund of Canada Limited ("CFCL") and right to administer and manage CFCL's assets for C$120 million in cash and stock
- Upon completion of the transaction, all CFCL Class A shares to be exchanged for units in a new Sprott Physical Gold and Silver Trust
- Over US$300 million in value expected to be realized for CFCL class A shareholders, relative to 9% pre-announcement net asset value ("NAV") discount1
- Adds C$4.3 billion in Assets Under Management ("AUM"), and solidifies Sprott's position as a global leader in precious metals investments
- Highly synergistic with Sprott's current physical bullion product suite
- Expands Sprott's client base by approximately 90,000 investors
Sprott Inc. (TSX: SII) ("Sprott" or the "Company"), a global leader in precious metal and real asset investments, announced today that it has entered into an agreement with Central Fund of Canada Limited (NYSE American: CEF) (NYSE MKT: CEF) (TSX: CEF.A) ("CFCL"), CFCL's administrator (the "Administrator"), and the controlling shareholders of CFCL and the Administrator, to acquire the common shares of CFCL and the right to administer and manage CFCL's assets, and move CFCL's class A shareholders to a new Sprott-managed trust. The transaction is expected to drive long-term revenue and earnings growth for Sprott and unlock significant value for the class A shareholders of CFCL.
"This transaction reinforces Sprott's global leadership in precious metals, doubling our physical bullion holdings to more than C$8.5 billion and building our total AUM to approximately C$11.5 billion," said Peter Grosskopf, CEO of Sprott. "Importantly, it demonstrates how we're executing on our strategy of increasing our precious metals and real assets exposure to meet growing investor interest in the sector."
Under the agreement, (i) CFCL's class A shares will, effectively, be exchanged for units of a newly-established trust (the "New Sprott Trust"), on a net asset value to net asset value basis, which will acquire substantially all of the existing assets and liabilities of CFCL and be managed by SAM and (ii) Sprott will acquire the common shares of CFCL and the right to administer and manage CFCL's assets for an aggregate amount of C$105 million in cash and C$15 million of Sprott common shares.2 The controlling shareholders of the Administrator will also receive a one-time, performance-based cash payment of at least C$5 million on the first anniversary of the closing of the transaction.
"With this transaction, we will add another best-in-class precious metals vehicle to our product lineup, also featuring our industry-leading physical redemption feature, while materially increasing our revenue from this business line," said John Ciampaglia, Senior Managing Director of Sprott and CEO of SAM. "Based on the historical trading of SAM-managed physical bullion trusts at or near the value of the metal that underlies them, we expect to unlock approximately US$300 million in value for CFCL's class A shareholders."
The New Sprott Trust will be substantially similar to the existing SAM-managed physical bullion trusts, Sprott Physical Gold Trust (NYSE ARCA: PHYS) (TSX: PHYS) and Sprott Physical Silver Trust (NYSE ARCA: PSLV) (TSX: PSLV), including SAM's best-in-class physical bullion redemption feature. The New Sprott Trust's management fee will be 40 bps of NAV, which is comparable with Sprott Physical Gold Trust and Sprott Physical Silver Trust.
The transaction will be implemented pursuant to a plan of arrangement under the Business Corporations Act (Alberta) and is expected to close in the first quarter of 2018, subject to the satisfaction of customary conditions, including receipt of regulatory, securities commission and stock exchange approvals, Alberta court approval and approval by the class A and common shareholders of CFCL. Holders of approximately 85% of CFCL's common shares have entered into agreements with Sprott agreeing to vote all of their common shares in favour of the transaction. Sprott's cash on hand will be used to finance the cash portion of the purchase price and the approval of Sprott shareholders is not required.
Conference Call and Webcast
A conference call and webcast to discuss the transaction will be held today, Monday, October 2, 2017 at 11:00am ET. To participate in the call, please dial 1 (855) 458-4215 ten minutes prior to the scheduled start of the call and provide conference ID 93419848. A taped replay of the conference call will be available until Monday, October 9, 2017 by calling 1 (855) 859-2056, reference number 93419848. The conference call will be webcast live at www.sprott.com and http://edge.media-server.com/m/p/zbrburfi
Sprott is an alternative asset manager and a global leader in precious metal and real asset investments. Through its subsidiaries in Canada, the US and Asia, the Corporation is dedicated to providing investors with best-in-class investment strategies that include Exchange Listed Products, Alternative Asset Management and Private Resource Investments. The Corporation also operates Merchant Banking and Brokerage businesses in both Canada and the US. Sprott is based in Toronto with offices in New York, Carlsbad and Vancouver and its common shares are listed on the Toronto Stock Exchange under the symbol (TSX: SII). For more information, please visit www.sprott.com.
This press release contains "forward-looking information" within the meaning of applicable securities laws. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements contained herein are made as of the date of this press release and the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances, management's estimates or opinions should change, except as required by securities legislation. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements. Such risks and uncertainties include receiving requisite regulatory, securities commission, stock exchange, court and shareholder approvals, closing of the transaction, timing for closing of the transaction and the trading value relative to NAV of the units of the New Sprott Trust.
1 Based on the published NAV (US$13.40) and closing price on the NYSE American (US$12.20) for CFCL's class A shares on March 7, 2017, the last trading day prior to the date of Sprott's initial press release proposing a plan of arrangement involving CFCL, and an indicative discount to NAV based on the published NAV (US$9.99) and closing price on the NYSE Arca (US$9.96) for the units of Sprott Physical Gold Trust on March 7, 2017.
2 Sprott common share consideration is a fixed amount of is 6,997,387 Sprott common shares. C$15.0 million figure based on the 20 day volume weighted average trading price of the Sprott common shares on September 29, 2017.