HOMEQ files management information circular, recommends shareholders vote for the Birch Hill Arrangement Agreement

TORONTO, May 1, 2012 /CNW/ - HOMEQ Corporation ("HOMEQ" or the "Company") (TSX: HEQ), announced today that it has filed a Management Information Circular that details, among other things, the reasons for the HOMEQ Board of Directors' unanimous recommendation that shareholders should vote FOR the Arrangement Agreement under which Birch Hill Equity Partners ("Birch Hill") will indirectly acquire all of the outstanding common shares (the "Shares") of HOMEQ (the "Arrangement") for cash at a price of $9.50 per Share (the "Transaction").

The $9.50 per share consideration represents a 22% premium over the volume-weighted average price of the Shares over the last 20 trading days on the Toronto Stock Exchange prior to the announcement of the Arrangement on March 30, 2012 and a premium of approximately 54% over the closing price of the common shares on December 21, 2011, the last trading day prior to the commencement of the auction process.

"The Arrangement provides significant and immediate value and liquidity to HOMEQ shareholders," said Gary Samuel, Chairman of the HOMEQ Board of Directors. "Following a thorough review of the full range of strategic alternatives by a special committee of independent directors (the "Special Committee"), the Board determined that the Arrangement is the most attractive alternative for our shareholders."

"As part of this review process, the Board of Directors and its financial advisor determined that with the limited choices of capital available to it, the Company would not be able to achieve its growth targets and deliver increased value to its shareholders."

"In the absence of a sale of its business, the Company would have been forced to pursue alternative near-term financing sources in order to maintain key capital ratios during a period of growth. These sources of finance might not have been economically attractive and may have resulted in downward pressure on shareholder value. This alternative was not attractive to our shareholders, particularly when compared to the 22% cash premium on offer with the Arrangement. Accordingly, the Board unanimously recommends shareholders accept the Arrangement at the May 28 special meeting," said Mr. Samuel.

As previously disclosed, HOMEQ paid its final dividend to shareholders on April 13, 2012. Management will recommend to the Board of Directors that the Company's dividend on the common shares not be reinstated, whether or not the Arrangement is completed, in order to address the need for additional capital required to achieve the Company's future growth plans.

The basis for the Board's recommendation with respect to the Arrangement is contained in the Management Information Circular (the "Circular") filed with Canadian securities regulators. A copy of the Circular is available online at www.homeq.ca or www.sedar.com. The Circular will also be mailed to HOMEQ shareholders.

Reasons to Vote FOR the Arrangement

After careful consideration and based on the recommendation of the Special Committee of the Board, and with the benefit of advice from the Special Committee's financial advisors and its legal advisors and having received and considered a fairness opinion from RBC Capital Markets ("RBC"), the Board determined that the Arrangement is fair to shareholders and in the best interests of HOMEQ.

Accordingly, the Board recommends that shareholders vote FOR the resolution approving the Arrangement.  The reasons for this recommendation include the following:

• Premium to Shareholders - The cash consideration of $9.50 per common share being offered to shareholders under the Arrangement represents a premium of 22% over the volume weighted average price of the common shares on the TSX for the 20 trading days ended March 30, 2012. It also represents a premium of approximately 36% over the volume weighted average price of the common shares on the TSX for the 90 trading days ended March 30, 2012, and a premium of approximately 54% over the closing price of the common shares on December 21, 2011, the last trading day prior to the commencement of the auction process.
  
  
• Liquidity, Certainty of Value and no Financing Condition Associated with the Cash Consideration - The Consideration under the Arrangement is all cash, which provides liquidity and certainty of value to HOMEQ shareholders. Also, the Arrangement is subject to a limited number of conditions and is not subject to any financing condition.
  
  
• Extensive Strategic Review Process - The Special Committee, with the assistance of RBC, conducted a thorough review process to identify potential parties interested in acquiring the common shares. 10 parties were contacted to determine whether they were interested in entering into a transaction leading to the acquisition of HOMEQ. Birch Hill's offer of $9.50 per common share was the only offer received following the formal auction process.  Following this process, the Board concluded that the Arrangement represented the best alternative available to shareholders.
  
  
• Fairness Opinion - The fairness opinion of RBC Capital Markets to the effect that as of March 30, 2012, and based upon and subject to the assumptions, limitations and qualifications set forth in the opinion, the consideration of $9.50 in cash per common share to be received by HOMEQ shareholders pursuant to the Arrangement is fair, from a financial point of view, to HOMEQ shareholders.
  
  
• Credibility of Birch Hill and Likelihood of Completion - Birch Hill is a highly credible and reputable investor with the capacity to complete the transactions contemplated by the Arrangement Agreement and that there is a high probability that such transactions will be completed in accordance with the terms of the Arrangement Agreement.

The directors and certain senior officers, together holding approximately 6% of the outstanding common shares of HOMEQ, have entered into voting and support agreements pursuant to which they have agreed, among other things, to vote in favour of the Arrangement. To align the interests of senior management of the Company with those of Birch Hill following completion of the Arrangement, Birch Hill has requested that certain of those individuals rollover a portion of their HOMEQ shares for a proportionate interest in the Company post Transaction.

Business of the Annual and Special Meeting

The Management Information Circular contains further information for shareholders regarding the annual and special meeting (the ''Meeting'') of the holders of Shares of HOMEQ to be held at the Royal York Hotel, 100 Front Street West, Toronto, Ontario, M5J 1E3 on May 28, 2012 commencing at 11:30 a.m. (Toronto time).

At the Meeting, shareholders will be asked to approve the Arrangement Agreement, elect the directors of HOMEQ, appoint the auditors of HOMEQ until the end of the next annual meeting of shareholders, and approve the shareholder rights plan of HOMEQ adopted by the Board of Directors to replace the existing rights plan which will terminate on the day of the Meeting.

How to Vote Shares in Favour of the Arrangement Agreement

To ensure that your vote is recorded, please complete the voter information form sent to you by Broadridge Communications Solutions, Canada or Computershare Trust Company of Canada and return it in accordance with the specified instructions on or before the date and time noted therein, whether or not you plan to attend the Meeting.

If you have any questions or require more information with regard to voting your HOMEQ shares, please contact the Company's proxy solicitation agent, Georgeson Shareholder Communications Canada Inc., at its toll-free number: 1-866-656-4104 or by email at [email protected]

About HOMEQ

HOMEQ's wholly owned subsidiary HomEquity Bank is the only national provider of reverse mortgages to homeowners aged 55 and over, Canada's fastest growing demographic segment. HomEquity Bank originates and administers Canada's largest portfolio of reverse mortgages under the CHIP Home Income Plan brand. As of December 31, 2011, the mortgage portfolio comprised approximately 9,000 reverse mortgages with an accrued value of $1.2 billion, secured by residential properties across Canada worth approximately $3.3 billion. HomEquity Bank has been the main underwriter of reverse mortgages in Canada since its predecessor, Canadian Home Income Plan, pioneered the concept in 1986.

HOMEQ's shares trade on the Toronto Stock Exchange under the symbol HEQ.  Additional information on HOMEQ, including annual and quarterly reports can be viewed at www.homeq.ca.

About Birch Hill

With $2 billion in capital under management, 20 partner companies and more than 50 investments since 1994; Birch Hill is the leader in long-term value creation in the Canadian mid market. For more information about Birch Hill Equity Partners, please visitwww.birchhillequity.com.

Forward-Looking Information

Certain statements included herein constitute "forward-looking statements". All statements, other than statements of historical fact, included in this release that address future activities, events, developments or financial performance are forward-looking statements. These forward-looking statements can be identified by the use of forward-looking words such as "may", "should", "will", "could", "expect", "intend", "plan", "estimate", "anticipate", "believe", "future" or "continue" or the negative thereof or similar variations. In particular, statements about the proposed Arrangement between Birch Hill and HOMEQ, including the expected timetable for completing the Transaction, the receipt of shareholder and regulatory approvals and any other statements regarding HOMEQ's future expectations, beliefs, goals or prospects are or involve forward-looking information. These forward-looking statements are based on certain assumptions and analyses made by HOMEQ and its management, in light of their experiences and their perception of historical trends, current conditions and expected future developments, as well as other factors they believe are appropriate in the circumstances. Shareholders are cautioned not to put undue reliance on such forward looking statements, which are not a guarantee of performance and are subject to a number of uncertainties, assumptions and other factors, many of which are outside the control of Birch Hill and HOMEQ, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, among other things, the parties' ability to consummate the Arrangement; the parties' ability to satisfy the conditions to the completion of the Arrangement, including that the receipt of Shareholder approval, court approval, or regulatory approval for the Arrangement may not be obtained, or may not be obtained on the terms expected or on the anticipated schedule; general economic and market factors (including changes in global, national or regional financial, credit, currency or securities markets), changes or developments in global, national or regional political conditions (including any act of terrorism or war), changes in government laws or regulations (including tax laws) and changes in GAAP or regulatory accounting requirements. Readers are cautioned that the foregoing lists are not exhaustive.

Such forward-looking statements should, therefore, be construed in light of such factors. If any of these risks or uncertainties were to materialize, or if the factors and assumptions underlying the forward-looking information were to prove incorrect, actual results could vary materially from those that are expressed or implied by the forward-looking information contained herein. All forward-looking statements attributable to HOMEQ, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements set forth above. Readers are cautioned not to place undue reliance on forward-looking statements contained herein, which reflect the analysis of the management of Birch Hill or HOMEQ, as appropriate, only as of the date of this release.

For more information regarding these and other risks, readers should consult HOMEQ's reports on file with applicable securities regulatory authorities accessible online by going to SEDAR at www.sedar.com or by going to the HOMEQ website at www.homeq.ca. HOMEQ is under no obligation, and HOMEQ expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Shareholders 

Georgeson Shareholder Communications Canada Inc.
1-866-656-4104
[email protected] 

Media 

Longview Communications

Joel Shaffer
416-649-8006

David Ryan
416-649-8007