GMP Responds to Misguided Comments from Dissident

• Overwhelming support from Investment Advisors for RGMP Transaction
• Significant risks and costs to both GMP's and Richardson GMP's businesses if RGMP Transaction is disrupted
• Shareholders should vote FOR the RGMP Transaction Resolution and FOR the Company's slate of board nominees

TORONTO, Sept. 17, 2020 /CNW/ - GMP Capital Inc. ("GMP" or the "Company") (TSX: GMP) today responded to misguided comments from a dissident shareholder and reiterated the benefits of a proposed transaction that would see GMP increase its ownership of wealth management company Richardson GMP to 100% (from 33.2%) through a share exchange (the "RGMP Transaction").

GMP urged common shareholders to end the uncertainty regarding the ownership of Richardson GMP by voting the BLUE proxy FOR the RGMP Transaction and FOR the Company's nominees to the board.

"Don't accept the dissident's claim that he supports the concept of the RGMP Transaction, even as he opposes its terms," said Donald Wright, chair of the GMP board and the independent special committee that negotiated the RGMP Transaction for the benefit of all GMP common shareholders. "The RGMP Transaction is inextricably linked to its fair and balanced terms. It is designed to drive long-term gains in shareholder value. Contrary to the dissident's assertion, the GMP minority common shareholders and the other two parties were all treated fairly."

"The dissident is wrong to demand a share buyback using funds that the board has designated for investment in growth. If the dissident blocks the RGMP Transaction, we as common shareholders will get neither a share buyback nor growth. Instead, we will face value destruction because Richardson GMP's Investment Advisors may react to the ongoing uncertainty by departing for competitors."

"Richardson Financial Group Limited ("RFGL"), a party to the RGMP Transaction negotiations, was entitled to cash for its equity in Richardson GMP but agreed to forego that entitlement if those funds would be used for growth. During very prolonged negotiations, RFGL stipulated that its funds should not be used merely for distribution to common shareholders. Be wary of any assertion by the dissident that he could successfully persuade RFGL otherwise."

Be Skeptical that the Dissident is Acting for the Benefit of Investment Advisors

Be skeptical of the dissident's claims that he can negotiate a deal that is better for Richardson GMP's Investment Advisors. The facts are clear: Richardson GMP Investment Advisors representing approximately 97% of Richardson GMP's assets under administration have indicated their support for the terms of the RGMP Transaction. On September 15, 2020 they provided their views in a news release, available at this link.

GMP does accept the validity of one dissident assertion, which is that the Richardson GMP Investment Advisors "are essential to the future success of the business." Those same Investment Advisors overwhelmingly support the RGMP Transaction. And yet, the dissident would risk delivering those very Investment Advisors into the arms of GMP's competition.

While Richardson GMP Investment Advisors have remained loyal so far, many have informed GMP that this loyalty will be severely tested in the event that uncertainty persists over Richardson GMP's ownership after the October 6, 2020 vote of common shareholders.

But if common shareholders approve the RGMP Transaction, the Richardson GMP Investment Advisors collectively will become significant common shareholders of GMP. To further align themselves with GMP's long-term value creation, the Richardson GMP Investment Advisors have accepted a three-year escrow on their equity. They are confident that the RGMP Transaction will enable Richardson GMP to retain its Investment Advisors and better recruit in an atmosphere of ownership certainty

Richardson GMP has Significant Room to Recruit

Richardson GMP has significant room to recruit without the need for additional selling, general and administrative expense. For example, Richardson GMP already has room for 65 additional staff in its offices across Canada. It has the national size and scale to get a bigger share of the independent market, but capital is needed to recruit.

GMP's strategy is to deploy capital toward the aggressive recruitment of high-quality investment advisory teams. Given our excess capacity, recruiting Investment Advisors is highly accretive to EBITDA with a 3.5 year pay back. Deploying $40 million towards recruitment would fill approximately 22 of the 65 empty spaces, increasing assets under administration by approximately $3.0 billion.

Capital is also essential to compete. Richardson GMP's competitors are investing in recruitment, and there will be a negative impact on Richardson GMP if it does not keep up or surpass them. For example, on August 1, 2018 one such competitor announced that it had raised $115 million in support of wealth management growth, including recruitment.

Compare the benefits of investing now with the dissident's misguided allocation of $40 million to reduce GMP's public float (excluding RFGL) by 16.5 million common shares, or 29% of the shares owned by GMP minority shareholders immediately prior to closing of the RGMP Transaction. In addition to limiting growth prospects, the dissident's plan would concentrate GMP's remaining equity in few hands, reducing trading volume and making it difficult to create demand for the stock. Limited growth prospects, combined with limited liquidity, would weaken the share price and make it even more difficult to retain Investment Advisors.

Beyond funding future growth, GMP intends to use its capital to service current indebtedness and preferred share obligations and provide resilience in the current unprecedented and uncertain economic environment. This is prudent and responsible.

RFGL made Significant Concessions

In its circular, the dissident fails to recognize that RFGL made significant concessions in its negotiations with an independent special committee, including:

• RFGL agreed to forego the immediate redemption of its $32 million of preferred shares;
• RFGL accepted GMP common shares in lieu of the $43 million cash portion of the purchase price to which RFGL was otherwise entitled, and
• RFGL accepted an exchange ratio of 1.875 GMP common shares for its RGMP common shares after taking into account the proposed $0.15 special dividend. This ratio reflects a GMP share reference value that is an 88% premium to the 10-day VWAP for GMP shares as at August 13, 2020, to which RFGL was otherwise entitled.

The purpose of these concessions is to leave the business with more capital for growth. As an expression of confidence in the growth plan, RFGL accepted a three-year escrow on its GMP shares. The independent special committee believes it could not have secured these concessions if the funds it secured would have been used for a larger special dividend or a share buyback.

Ultimately, the RGMP Transaction consists of a carefully balanced package of terms. GMP reiterates that common shareholders should be wary of any attempt by the dissident to single out certain terms that he dislikes while ignoring the overall balance that GMP negotiated. The special committee believes that the terms achieved are the best available, are fair, and will benefit all parties.

The Special Dividend is Appropriately Sized

As previously disclosed, after extensive negotiations, the board proposes a special dividend of $0.15 per common share on completion of the RGMP Transaction, in what will be the second special dividend paid to common shareholders in less than a year.

The first, paid on December 31, 2019, amounted to $0.275 per share. Combined, these special dividends total $0.425 per share and represent a payout of 76% of the proceeds received from the 2019 divestiture of GMP's capital markets business.

The board believes the amount of the special dividend strikes the right balance for an executable transaction. There is no basis to believe that the dissident can negotiate a better balance, never mind do so quickly enough to avoid an extended period of uncertainty and the possible departure of Richardson GMP Investment Advisors.

Vote Using the BLUE Proxy Today

The Board recommends that Common Shareholders read GMP's Management Information Circular dated September 8, 2020 (the "Management Information Circular") and accompanying letter to shareholders carefully and vote using the BLUE form of proxy or voting instruction form:

• FOR the RGMP Transaction; and
• FOR the Company's nominees for election to the Board.

Shareholders with questions may contact the Company's strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors, at 1-866-879-7644 toll free in North America, or call collect outside North America at 1-416-867-2272 or by email at [email protected].

FORWARD-LOOKING INFORMATION

This press release contains "forward-looking information" as defined under applicable Canadian securities laws. This information includes, but is not limited to, statements concerning our objectives, our strategies to achieve those objectives, as well as statements made with respect to management's beliefs, plans, estimates, projections and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking information generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "should", "plans" or "continue", or similar expressions suggesting future outcomes or events. Such forward-looking information reflects management's current beliefs and is based on information currently available to management.  The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement.

The forward-looking statements included in this press release, including statements regarding the RGMP Transaction, the nature of GMP's growth strategy going forward and execution of any of its potential plans, are not guarantees of future results and involve numerous risks and uncertainties that may cause actual results to differ materially from the potential results discussed in the forward-looking statements.  In respect of the forward-looking statements and information concerning the consolidation of 100% of ownership in Richardson GMP, and the Company's strategy going forward, management has provided same based on reliance on certain assumptions it considers reasonable at this time including the timing of the completion of any transaction involving Richardson GMP and that any conditions precedent can be satisfied.  Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release.

Risks and uncertainties related to the RGMP Transaction include, but are not limited to: failure of GMP and RFGL to obtain the required shareholders and regulatory approvals for, or satisfy other conditions to effect, the RGMP Transaction; the risk that the RGMP Transaction may involve unexpected costs, liabilities or delays; the risk that, prior to or as a result of the completion of the RGMP Transaction, the business of GMP and/or Richardson GMP may experience significant disruptions, including loss of clients or employees due to transaction related uncertainty, industry conditions or other factors; risks relating to employee retention; the risk that legal proceedings may be instituted against GMP or Richardson GMP; risks related to the diversion of management's attention from GMP's ongoing business operations; and risks related to the COVID-19 global pandemic.  For a description of additional risks that could cause our actual results to materially differ from our current expectations, see the "Risk Management" and "Risk Factors" sections of GMP's most recent Annual and Interim MD&A and the "Risk Factors" section in the Company's AIF. For additional information on the risk factors related to the RGMP Transaction, see "The RGMP Transaction – Reasons for the RGMP Transaction" and "Risk Factors" in the Management Information Circular . Material assumptions and factors underlying the forward-looking information in this press release include, but are not limited to, those set out in "Business Environment – Outlook" in GMP's most recent Annual and Interim MD&A. GMP's most recent Annual and Interim MD&A and the Management Information Circular are filed under the Corporation's profile on SEDAR at www.sedar.com.

Although forward-looking information contained in this press release is provided based on management's reliance on certain assumptions it considers reasonable, there can be no assurance that such expectations will prove to be correct. Certain statements included in this press release may be considered a "financial outlook" for purposes of applicable Canadian securities laws, and as such, the financial outlook may not be appropriate for purposes other than this press release. Readers should not place undue reliance on the forward-looking statements and information contained in this press release. When relying on forward-looking statements to make decisions, readers should carefully consider the foregoing factors, the list of which is not exhaustive. 

The forward-looking information contained in this press release is made as of the date of this press release, and should not be relied upon as representing GMP's views as of any date subsequent to the date of this press release. Except as required by applicable law, Management and the Board undertake no obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

ABOUT GMP CAPITAL INC.

GMP currently operates through two business segments: Operations Clearing and Wealth Management; and a corporate segment.  Operations Clearing provides carrying broker services to Richardson GMP and other third parties, including trade execution, clearing, settlement, custody, and certain other middle- and back-office services, and other expenses associated with providing such services. Wealth Management consists of GMP's non-controlling ownership interest in Richardson GMP. Richardson GMP, one of Canada's largest independent wealth management firms, is focused on providing exclusive and comprehensive wealth management and investment services delivered by an experienced team of investment professionals. GMP is listed on the Toronto Stock Exchange under the symbol "GMP". For further information, please visit our corporate website at gmpcapital.com.

Shareholders with questions may contact the Company's strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors, at 1-866-879-7644 toll free in North America, or call collect outside North America at 1-416-867-2272 or by email at [email protected].

SOURCE GMP Capital Inc.

GMP Capital Inc., Rocco Colella, Director, Investor Relations, 145 King Street West, Suite 200, Toronto, Ontario M5H 1J8, Tel: [phone]; Fax: [phone], [email protected] or [email protected]; Media contact: Longview Communications and Public AffairsBoyd Erman [phone]; [email protected], Alan Bayless [phone]; [email protected]

Related Links

http://gmpcapital.com/