CLIFFSIDE CAPITAL LTD. AND CLIFFSIDE LTD. ANNOUNCE GOING PRIVATE TRANSACTION

TORONTO, July 16, 2024 /CNW/ - Cliffside Capital Ltd. ("Cliffside" or the "Company") (TSXV: CEP) and Cliffside Ltd. (the "Purchaser") announce today that they have entered into an arrangement agreement (the "Arrangement Agreement") with CFLP Limited Partnership ("CFLP") and LC Asset Management Corporation ("LC Asset Management"). Pursuant to the Arrangement Agreement, the Purchaser will acquire all of the issued and outstanding common shares (the "Common Shares") in the capital of Cliffside from their holders ("Shareholders") by way of a statutory plan of arrangement (the "Arrangement") for consideration of $0.10 per Common Share (the "Cash Consideration"), other than Common Shares held by certain shareholders of Cliffside ("Share Electing Shareholders") that validly elect to receive common shares in the capital of the Purchaser ("Purchaser Shares") in exchange for their Common Shares ("Share Consideration" and, collectively with the Cash Consideration, the "Consideration").

Upon completion of the Arrangement, Cliffside will be a privately-held company.

Concurrently with its entry into the Arrangement Agreement and to fund the Cash Consideration payable on closing of the Arrangement: (i) the Purchaser has entered into a subscription agreement with CFLP, pursuant to which CFLP will subscribe for the number of Purchaser Shares for an aggregate subscription price of up to $4.1 million; and (ii) CFLP has entered into a subscription agreement in favour of the Company with Michael Stein, a director of Cliffside, pursuant to which Michael Stein has agreed, subject to the terms and conditions set out therein, to subscribe for units of CFLP for an aggregate purchase price of up to $4.1 million.

The Arrangement Agreement was the result of a comprehensive review of strategic alternatives and a negotiation process that was conducted at arm's length with the supervision and involvement of a committee of independent directors of Cliffside (the "Independent Committee"), as advised by external legal and financial advisors. The Independent Committee was appointed by the board of directors of the Company (the "Board") to, among other matters, review the potential transaction and potential alternatives and consider the Company's best interests and the implications to Shareholders and other stakeholders.

Board Approval

The Board, with Steve Malone and Michael Stein (the "Conflicted Directors") declaring their conflicts of interest and abstaining from voting, unanimously approved the Arrangement following receipt of the unanimous recommendation of the Independent Committee. The Board unanimously, with the Conflicted Directors abstaining from voting, recommends that Shareholders vote in favour of the Arrangement.

The Company intends to call and hold an annual and special meeting of Shareholders in September 2024 (the "Meeting"), where the Arrangement will be considered and voted upon by Shareholders of record.

In making their respective determinations, the Board and the Independent Committee considered, among other factors, the fairness opinion of Raymond James Ltd. ("Raymond James") to the effect that, as of July 16, 2024, subject to the assumptions, limitations and qualifications contained therein, the Share Consideration to be received pursuant to the Arrangement is fair, from a financial point of view to the Share Electing Shareholders (other than those persons whose votes on the Arrangement are required to be excluded pursuant to MI 61-101 (as defined below) and the Cash Consideration to be received pursuant to the Arrangement is fair, from a financial point of view, to the Shareholders receiving Cash Consideration.

Transaction Details

As part of the Arrangement, following the payment of the Cash Consideration and prior to the issuance of the Share Consideration, the Common Shares will be consolidated on the basis of one post-consolidation Common Share for each 1,000 pre-consolidation Common Shares (the "Share Consolidation").

The aggregate purchase price payable by the Purchaser under the Arrangement is expected to be approximately $9,726,666.70 million, comprised of: (i) Cash Consideration of up to approximately $4.1 million; and (ii) Share Consideration consisting of approximately 56,283 Purchaser Shares with an aggregate value of approximately $5,628,376.20. The Purchaser Shares will be issued on a post-Share Consolidation basis at a value of $100 per Purchaser Share, being a value equal to $0.10 per Common Share on a pre-Share Consolidation basis. The foregoing anticipated purchase price composition is based on the assumption that Share Electing Shareholders will exchange an aggregate of 56,283,762 pre-Share Consolidation Common Shares for Share Consideration, representing approximately 57.9% of the issued and outstanding pre-Share Consolidation Common Shares, and that all other Shareholders will receive Cash Consideration. 

Completion of the Arrangement is subject to the approval of: (i) at least two-thirds of the votes cast by Shareholders, voting as a single class; and (ii) a simple majority of the votes cast by Shareholders (excluding Common Shares required to be excluded pursuant to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Arrangement is also subject to customary closing conditions, including the receipt of court and regulatory approvals, customary non-solicitation covenants subject to "fiduciary out" provisions and a right to match in favour of the Purchaser, and customary covenants regarding the conduct of the Company's business prior to the closing of the Arrangement.

All of the directors of Cliffside and certain Shareholders (the "Supporting Shareholders"), collectively holding an aggregate of approximately 76% of the outstanding Common Shares, have entered into voting support agreements with the Company, the Purchaser and CFLP pursuant to which they have agreed to vote their Common Shares in favour of the Arrangement and, with respect to certain Shareholders holding approximately 57.9% of the Common Shares, have agreed to elect to receive Share Consideration in exchange for their Common Shares. Excluding all Common Shares required to be excluded pursuant to MI 61-101, the Supporting Shareholders hold approximately 66% of the remaining Common Shares. 

On completion of the Arrangement, the asset management agreement dated July 1, 2016 between Cliffside and LC Asset Management will be terminated and of no further force or effect and LC Asset Management will be dissolved.

Following completion of the Arrangement, the Company will cause the Common Shares to cease to be listed on the TSX Venture Exchange (the "TSXV") and intends to submit an application to cease to be a reporting issuer under applicable Canadian securities laws.

The foregoing summary is qualified in its entirety by the provisions of the Arrangement Agreement, a copy of which, together with the voting support agreements, will be filed on SEDAR+ at www.sedarplus.ca.

Early Warning Disclosure

Prior to the closing of the Arrangement, the Purchaser holds no Common Shares. On closing of the Arrangement, the Purchaser will acquire 97,266,670 Common Shares, being 100% the issued and outstanding Common Shares of Cliffside. Further information may be obtained by contacting Praveen Gupta, Chief Financial Officer of Cliffside, at [phone] or [email protected].

Advisors

Raymond James is acting as financial advisor to the Independent Committee. Gardiner Roberts LLP is acting as legal advisor to the Independent Committee. Bennett Jones LLP is acting as legal advisor to Cliffside.

About Cliffside

Cliffside is focused on investing in strategic partnerships with parties who have specialized expertise and a proven track record in originating and serving loans and similar types of financial assets. Cliffside's strategy is to generate revenue as an investor, affording its shareholders an opportunity to invest in the growing alternative lending sector with the potential for attractive. For more information, see Cliffside's filings on SEDAR+ at www.sedarplus.ca.

About Cliffside Ltd.

The Purchaser was incorporated on May 27, 2024 pursuant to the laws of the Province of Ontario. The Purchaser was incorporated for the sole purpose of completing the Arrangement and is controlled by Steve Malone, a director and Chief Executive Officer of Cliffside. Its head office is located at 11 Church Street, Suite 200, Toronto, Ontario, M5E 1W1.

About CFLP 

CFLP is a limited partnership formed on June 25, 2024 under the laws of the Province of Ontario for the sole purpose of funding the Cash Consideration payable on completion of the Arrangement. Upon completion of the Arrangement, CFLP will be the majority shareholder of the Purchaser and is controlled by Michael Stein, a director of Cliffside. Its head office is located at 11 Church Street, Suite 200, Toronto, Ontario, M5E 1W1.

About LC Asset Management

LC Asset Management was incorporated on March 17, 2016 pursuant to the laws of the Province of Ontario. LC Asset Management is controlled by Steve Malone and Michael Stein and provides certain management services to Cliffside. Its head office is located at 11 Church Street, Suite 200, Toronto, Ontario, M5E 1W1.

Additional Information about the Arrangement

Further information regarding the Arrangement, the Arrangement Agreement and the Meeting, including a copy of Raymond James' fairness opinion, will be included in the management information circular expected to be mailed to Shareholders of record in connection with the Meeting in August 2024. Copies of the proxy materials in respect of the Meeting will be available on the Company's SEDAR+ profile at www.sedarplus.ca.

Cautionary Notes

This press release contains certain forward-looking statements and forward-looking information, as defined under applicable Canadian securities laws (collectively, "forward-looking statements"). In some cases, but not necessarily in all cases, forward-looking statements can be identified by the use of forward-looking terminology such as "will", "intend", "anticipate", "could", "should", "may", "might", "expect", "estimate", "forecast", "plan", "potential", "project", "assume", "contemplate", "believe", "shall", "scheduled", and similar terms and, within this press release, include, without limitation, any statements (express or implied) respecting: the rationale of the Board for entering into the Arrangement Agreement; the composition of the Consideration payable on completion of the Arrangement; the expected benefits of the Arrangement; the holding of the Meeting; the anticipated timing, steps and completion of the Arrangement, including the Share Consolidation; approval of the Arrangement by the Shareholders at the Meeting; approval of the TSXV; the satisfaction of the conditions precedent to the Arrangement; timing, receipt and anticipated effects of Shareholder and other approvals of the Arrangement; the anticipated delisting of the Common Shares from the TSXV; and the Company ceasing to be a reporting issuer under applicable Canadian securities laws. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements.

Forward-looking statements are not historical facts, nor guarantees or assurances of future performance but instead represent management's current beliefs, expectations, estimates and projections regarding future events and operating performance. Forward-looking statements are necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by the Company as of the date of this release, are subject to inherent uncertainties, risks and changes in circumstances that may differ materially from those contemplated by the forward-looking statements, including, without limitation that: Share Electing Shareholders will elect to receive Share Consideration in the amounts anticipated; the Arrangement will be completed on the terms currently contemplated or at all; the Arrangement will be completed in accordance with the timing currently expected; all conditions to the completion of the Arrangement will be satisfied or waived; and the Arrangement Agreement will not be terminated prior to the completion of the Arrangement.

Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, but are not limited to: actual elections by Share Electing Shareholders to receive Cash Consideration or Share Consideration; the possibility that the proposed Arrangement will not be completed on the terms and conditions currently contemplated or at all; the possibility of the Arrangement Agreement being terminated in certain circumstances; the ability of the Board to consider and approve a superior proposal for the Company; and other risk factors identified under "Risk Factors" in the Company's latest annual information form and management's discussion and analysis for the year ended December 31, 2023, in the Company's management's discussion and analysis for the period ended March 31, 2024, and in other periodic filings that the Company has made and may make in the future with the securities commissions or similar regulatory authorities in Canada, all of which are available under the Company's SEDAR+ profile at www.sedarplus.ca. These factors are not intended to represent a complete list of the factors that could affect the Company. However, such risk factors should be considered carefully.

Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this press release and, except as expressly required by applicable law, Cliffside disclaims any intention and undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable Canadian securities laws. All of the forward-looking statements contained in this release are expressly qualified by the foregoing cautionary statements.

The TSXV has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this news release. Neither the TSXV nor its Regulation Service Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Cliffside Capital Ltd.

Contact Information: Praveen Gupta, Chief Financial Officer, [phone], [email protected]