Crocus Receiver Refuses to Let Go

Growthworks has proposed a process that could involve competitive bidding, ensuring shareholders of the best possible return.

The Crocus saga continues. As was previously reported, the Manitoba Federation of Labour is proceeding to court on September 5. The MFL is requesting that the court order Deloitte and Touche receiver Russ Holmes to call a meeting of the 34,000 Crocus shareholders so they can vote on an offer which has been made by GrowthWorks, to buy the Crocus assets.

In the event that the Court is unwilling to order the receiver to call a shareholders meeting, the MFL has requested that the receiver be ordered by the court to provide the list of shareholders to the MFL, so that we may call such a meeting. To date, the MFL has been unable to call a shareholders meeting because the receiver has refused to provide the MFL with the shareholders’ list, citing confidentiality concerns. At the same time, and in what appears to be a contradiction, the receiver has indicated that the shareholder list is an asset of the Fund, and that it might be sold to a third party.

Also contained in the MFL Notice of Motion is a request that the receiver not be allowed to sell off any assets of Crocus in excess of $1 million without court approval. This request is in response to the receiver’s stated goal of selling off 70 per cent of the Fund by this fall, most likely by allowing the investee companies to buy back Crocus' investment, without any scrutiny before the potential sales.

There is currently no way of knowing whether the receiver will get good value for the shareholders, or not. This is even more uncertain, given that the receiver has stated his opposition to having new valuations performed on the major investee companies in the Fund, due, he says, to cost.

The MFL is concerned, because the only valuations available right now are close to two years old, and a number of the best performing companies have been doing very well recently. Their value may have changed over the last two years.

GrowthWorks Amends its Offer

As a result of the receiver's stated desire to sell off the assets of a number of the investee companies in the Fund, and because there does not appear to be any real competition for these companies' assets, GrowthWorks has formally notified the receiver that it has amended its offer. GrowthWorks is now prepared to have an independent company value the major companies in the Crocus portfolio.

A reputable company would be chosen to do the valuations, paid for by GrowthWorks, but in the interests of confidentiality, the receiver would oversee the process. GrowthWorks is then prepared to match the value of the companies, based on their up-to-date valuation.

The companies could then match, or exceed, the stated value, which might cause GrowthWorks to do the same, thereby setting up a competitive bidding process. This would ensure that the shareholders would get the best possible value for their investment.

The Manitoba Federation of Labour is supportive of the GrowthWorks offer for another reason, as well. Those that have filed the potential class action lawsuit have signed an agreement with GrowthWorks, which will exempt the Crocus Fund from the suit.

This relieves the Fund from a potentially huge settlement against it. In addition, the law suit was identified as a 'contingent liability', which was a major factor identified by the court for refusing to allow a previous request by the MFL to have a shareholders meeting to vote on the GrowthWorks offer.

It appears to the MFL that a shareholders meeting must be called. There is no reason not to allow these investors to determine the fate of Crocus. After all, it is their money. It is time for the Receiver to let go.