WINNIPEG, Manitoba – January 22, 2024 – Farmers Edge Inc. (“Farmers Edge” or the “Company”) (TSX: FDGE) today announced that it has entered into an arrangement agreement (the “Arrangement Agreement”) with 15635594 Canada Inc. (the “Purchaser”), a newly-formed subsidiary of the Company’s majority shareholder, Fairfax Financial Holdings Limited (“FFHL”) and FFHL, as guarantor, in respect of a transaction (the “Transaction”) whereby the Purchaser will acquire all of the common shares (the “Common Shares”) in the capital of the Company, other than those Common Shares owned by FFHL and its affiliates (collectively, “Fairfax”) and the Company’s Chief Executive Officer (as described below), at a purchase price of C$0.35 per Common Share (the “Purchase Price”), payable in cash. Today’s announcement is the culmination of the negotiations that took place following the receipt by the board of directors of Farmers Edge (the “Board”) on November 16, 2023 of an initial proposal from Fairfax at C$0.25 per Common Share (the “Original Proposal”) and the January 8, 2024 announcement of the signing of a letter of intent by the Company and Fairfax in respect of the Transaction. The signing of the Arrangement Agreement followed the unanimous recommendation of the special committee (the “Special Committee”) of independent directors of the Board.
The Purchase Price represents a 218% premium to the closing price and to the 20-day volume weighted average price per Common Share on the Toronto Stock Exchange, in each case, of approximately C$0.11, as of the close of trading on November 15, 2023, being the trading day immediately before the Company received the Original Proposal.
The Transaction is to be effected by way of a court-approved plan of arrangement under section 192 of the Canada Business Corporations Act and is expected to close in the first quarter of 2024, subject to receipt of shareholder and court approvals and certain other customary closing conditions. Completion of the Transaction is not subject to any financing condition.
Unanimous Board Approval
The Board, having received the unanimous recommendation of the Special Committee, determined (with R. William McFarland and Quinn McLean declaring their roles as directors or officers of Fairfax or an affiliate thereof, and Vibhore Arora declaring his interest in the Transaction given he will be exchanging his equity interests in Farmers Edge for equity of the Purchaser, and each abstaining) that entering into the Arrangement Agreement is in the best interests of the Company and the Board intends to recommend that the Company’s shareholders vote in favour of the Transaction at a special meeting of the shareholders to be held to approve the Transaction.
Formal Valuation and Fairness Opinion
In connection with its review of the Transaction, the Special Committee retained BMO Capital Markets (“BMO“) as independent valuator and financial advisor to provide financial advice and prepare a formal valuation of the Common Shares (the “Formal Valuation“) as required under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101“). BMO concluded that, as of January 22, 2024, and subject to certain assumptions, limitations and qualifications, the fair market value of the Common Shares was in the range of C$0.05 to C$0.45 per Common Share. BMO has also provided its opinion (the “Fairness Opinion”) to the Special Committee that, as of January 22, 2024, and subject to certain assumptions, limitations and qualifications, the consideration to be received by the holders of Common Shares (other than Fairfax and the Company’s Chief Executive Officer) pursuant to the Transaction is fair, from a financial point of view, to the holders of Common Shares (other than Fairfax and the Company’s Chief Executive Officer).
Transaction Details
Pursuant to the terms of the Arrangement Agreement, the Purchaser will acquire all of the Common Shares, other than those Common Shares owned by Fairfax and the Company’s Chief Executive Officer (as described below), for a purchase price of C$0.35 per Common Share, payable in cash. The Transaction will be financed by cash on hand of Fairfax and is not subject to any financing condition. FFHL has provided a guarantee in favour of the Company with respect to the obligations of the Purchaser under the Arrangement Agreement.
The consummation of the Transaction will be subject to various conditions customary for transactions of this nature, including, among others, (i) receipt by the Company and the Purchaser of any required regulatory, court and/or stock exchange approvals, and (ii) the approval of the Transaction at a special meeting of the shareholders of the Company entitled to vote on the Transaction (including a “majority of the minority” vote of the shareholders excluding for this purpose the votes of Common Shares held or controlled by Fairfax, the Company’s Chief Executive Officer and any other persons described in items (a) through (d) of Section 8.1(2) of MI 61-101).
As part of the Transaction, Vibhore Arora, the Company’s Chief Executive Officer and a director on the Board, will be exchanging his equity interests in the Company for equity of the Purchaser.
Farmers Edge expects to hold a special meeting (the “Special Meeting”) of its shareholders to approve the Transaction on or around March 12, 2024. The terms and conditions of the Transaction will be disclosed in greater detail in a management information circular for the Special Meeting that will be mailed to the Company’s shareholders. Copies of the definitive agreement, the Support Agreements (as defined below) and the management information circular for the Special Meeting will be filed with Canadian securities regulators and will be available on the SEDAR+ profile of Farmers Edge at www.sedarplus.ca. Farmers Edge’s shareholders are urged to read those and other relevant materials when they become available.
Following completion of the Transaction, the Company expects to be de-listed from the Toronto Stock Exchange and to cease to be a reporting issuer in all provinces and territories of Canada.
Voting Support Agreements
Two institutional shareholders and the directors and certain officers of the Company (collectively, the “Supporting Shareholders”) have each entered into voting support agreements (the “Support Agreements”) to vote their Common Shares in favour of the Transaction subject to certain customary exceptions. The Supporting Shareholders hold, collectively, approximately 8.3% of the Common Shares (and 24.1% of the Common Shares after excluding the Common Shares held or controlled by Fairfax and the Company’s Chief Executive Officer).
Early Warning Information
Fairfax currently owns and controls, directly and in the investment portfolios of its insurance companies, 25,718,393 Common Shares, representing approximately 61.2% of the Common Shares immediately prior to the execution of the Arrangement Agreement. Following completion of the Transaction, Fairfax will beneficially own approximately 99.4% of the issued and outstanding Common Shares. An early warning report will be filed by Fairfax in accordance with applicable securities laws and will be available on SEDAR+ at www.sedarplus.ca or may be obtained directly from Fairfax upon request at 416-367-4941 (Attention: John Varnell) or at Fairfax’s head and registered office address at 95 Wellington Street West, Suite 800, Toronto, Ontario M5J 2N7.
Forward Looking Information
This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking information”) within the meaning of applicable 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. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as “expects”, “estimates”, “outlook”, “forecasts”, “projection”, “prospects”, “intends”, “anticipates”, “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might”, “will”, “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections regarding future events or circumstances. Forward-looking information in this news release, which includes, among other things, statements relating to the Transaction, is necessarily based on a number of opinions, estimates and assumptions that the Company considered appropriate and reasonable as of the date such statements are made in light of its experience, current conditions and expected future developments, including the assumption that any conditions precedent to the closing of the Transaction can be satisfied.
Risks and uncertainties related to the Transaction include, but are not limited to: failure of Farmers Edge and Fairfax to obtain the required shareholder and court approvals for, or satisfy other closing conditions to effect, the Transaction; the risk that the Transaction may involve unexpected costs, liabilities or delays; the risk that, prior to or as a result of the completion of the Transaction, the business of Farmers Edge 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 Farmers Edge or pending legal proceedings may be determined adversely to the interests of Farmers Edge; and risks related to the diversion of management’s attention from Farmers Edge’s ongoing business operations.
Although we have attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. No forward-looking statement is a guarantee of future results. Accordingly, you should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this news release represents the Company’s expectations as of the date of this news release (or as the date they are otherwise stated to be made) and are subject to change after such date. However, the Company disclaims any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws in Canada. All of the forward-looking information contained in this news release is expressly qualified by the foregoing cautionary statements.
About Farmers Edge
Farmers Edge is a global leader in digital agriculture, revolutionizing the industry with a broad portfolio of proprietary technological innovations, spanning hardware, software, and services. Powered by a unique combination of connected field sensors, artificial intelligence, big data analytics, and agronomic expertise, the Company’s digital platform turns data into actions and intelligent insights, delivering value to all stakeholders of the agricultural ecosystem. Farmers Edge disruptive technologies accelerate digital adoption on the farm and beyond, protecting our global resources and ensuring sustainable food production for a rapidly growing population. For more information on Farmers Edge, please visit www.farmersedge.ca. Additional information relating to the Company, including all public filings, is available on SEDAR+ (www.sedarplus.ca).
About Fairfax Financial Holdings Limited
Fairfax Financial Holdings Limited is a holding company which, through its subsidiaries, is primarily engaged in property and casualty insurance and reinsurance and the associated investment management. For further information contact: John Varnell, Vice President, Corporate Development at (416) 367-4941.
Advisors
BMO Capital Markets is acting as financial advisor and independent valuator to the Special Committee, Goodmans LLP is acting as independent legal advisor to the Special Committee and McCarthy Tétrault LLP is acting as legal advisor to the Company.
Torys LLP is acting as legal advisor to Fairfax on the Transaction.
Farmers Edge Investor Relations:
InvestorRelations@FarmersEdge.ca
Farmers Edge Media Relations:
Media@FarmersEdge.ca
