Mr. Michael Trimarco of Melrose reports
MELROSE GROUP RESPONDS TO HANK PAYMENTS CORP. MISSTATEMENT ON SHARE OWNERSHIP
Melrose Ventures, along with its joint actors, collectively known as The Melrose Group, wishes to respond to the statement issued by Hank Payments Corp. on Nov. 4, 2024.
The Melrose Group stands by its previous announcement and wishes to clarify the regulatory requirements and the basis of its claims regarding its ownership stake in Hank Payments.
Clarification on ownership stake
Melrose believes there are currently approximately 73.15 million shares outstanding for Hank Payments. According to the rules and laws governing takeover bids and early warning requirements, the total number of shares outstanding for determining a toehold of 10 per cent is based on the number of shares outstanding on the date of the announcement. As of the close of trading on Nov. 4, 2024, the number of shares outstanding for Hank Payments is indeed 73.15 million. This information is sourced from Yahoo Finance as of the close of trading on Nov. 4, 2024.
Melrose believes that the current management of Hank Payments made a material misstatement by stating in the company's Nov. 4 press release that "the number of issued and outstanding shares of the company being 132,720,376 as of Nov. 1, 2024." It is Melrose's understanding that in order for the 59.57 million additional shares to have been issued through the debenture amendment announced on Oct. 2, 2024, it would be subject to TSX Venture Exchange acceptance of regulatory filings. To its knowledge, the TSX Venture Exchange has not accepted such regulatory filings and, as such, the total number of shares outstanding is currently approximately 73.15 million shares, on which the Melrose Group's tender offer is based.
Analysis of misstatement
Hank Payments misinterprets the Melrose Group's statement by omitting the critical word "or." The Melrose Group stated, "We are increasing our tender offer to purchase a minimum of 8.5 million shares or the number of shares necessary to bring our stake above 51 per cent." This phrasing clearly indicates that the tender offer is flexible; it allows for the purchase of either a minimum of 8.5 million shares or a sufficient number of shares to exceed a 51-per-cent stake, depending on the total shares outstanding.
In contrast, Hank's response claims that the intention to purchase a minimum of 8.5 million shares "does not make any sense" based on its inflated figure of 132,720,376 shares. By neglecting the "or," Hank misrepresents the Melrose Group's position, suggesting a misunderstanding of the tender offer's structure and intent.
The Melrose Group's tender offer
The Melrose Group's tender offer is for a cumulative total of 51 per cent of the shares of Hank Payments at nine cents per share and it is submitting all requisite regulatory documents to effect the tender offer, which can be accessed on SEDAR.
Relevant law
The relevant law is found in the Multilateral Instrument 62-104 (Take-Over Bids and Issuer Bids), which states, "The total number of shares outstanding for the purposes of determining a toehold of 10 per cent is based on the number of shares outstanding on the date of the announcement of the takeover bid." According to the rules outlined in Form 62-104F1 and Form 62-103F1, the circular and early warning disclosure can be made after the press release. Specifically, Form 62-104F1 allows for the incorporation of information by reference to another document, which can be filed subsequently. Additionally, Form 62-103F1 requires the early warning report to be filed promptly after the acquisition or disposition of securities that triggers the requirement, not necessarily before a press release. Therefore, Hank Payments' management misstates the requirements in its response.
Filing of circular and press releases
The Melrose Group will ensure that all necessary documents, including the takeover bid circular and related press releases, are filed with SEDAR. This will ensure full transparency and compliance with regulatory requirements.
Commitment to due process
Melrose reiterates its commitment to conducting this takeover bid under the supervision of the Securities and Exchange Commission (SEC) and the Ontario Securities Commission (OSC). It believes in full disclosure to all stakeholders and will continue to pursue this bid in accordance with all applicable rules and regulations.
Melrose is committed to discussing among shareholders and ensuring that all shareholders have equivalent information. It will also engage in a candid discussion regarding the management's lack of performance and the omission of information about the real founders of the company in 2006.
Solicitation of shareholders
The Melrose Group will actively solicit shareholders to join its group of joint actors. Its goal is to seek a change in the board of directors and to move the company toward the creation of value instead of diluting it. It believes that, with the right leadership and strategic direction, Hank Payments can achieve significant growth and enhance shareholder value.
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