Rick Rule to Join Sprott Investment Team and be Nominated to Board of Directors
TORONTO, Jan. 24 /CNW/ - Sprott Inc. (TSX:SII) ("Sprott") today announced the signing of a definitive share exchange agreement (the "Agreement") with Arthur Richards Rule IV and the Rule Family Trust U/A/D 12/17/98 (the "Seller") for the acquisition (the "Transaction") of all of the outstanding stock of Rule Investments, Inc. (the owner of Global Resource Investments, Ltd.), Terra Resource Investment Management, Inc. and Resource Capital Investment Corporation (collectively, the "Global Companies"), as first announced by the Company on September 22, 2010. Closing is expected to occur in early February 2011, subject to the timing of necessary regulatory approvals.
"We are pleased to have the well respected team of investment professionals Rick has built join our organization, and look forward to working with them to continue to deliver superior investment performance to our clients and shareholders," commented Eric Sprott, Chairman of Sprott.
"With our due diligence activities complete, and integration planning underway, our combined team will be moving quickly to offer compelling new investment opportunities to Canadian investors, while continuing to grow our client base both in the United States and globally," said Peter Grosskopf, CEO of Sprott. "We remain convinced that our objectives of expanding our investment management capabilities, increasing our US distribution capabilities, and diversifying our asset and earnings profile will be well served by having the Global Companies join the Sprott organization. Combined, the companies' Assets Under Management would have been approximately $9.0 billion as of December 31, 2010."
"Much like the mutual funds and hedge funds managed by Sprott Asset Management, the Global Companies' pooled investment vehicles have performed exceptionally well in 2010, highlighting the degree of investment expertise that the Global Companies bring to the combined organization," added Mr. Grosskopf.
"The entire team at the Global Companies is delighted to be joining Sprott Inc. We expect that our clients will benefit from the help of the Sprott team, and that this will be a true win-win for all stakeholders; clients, employees, and shareholders of both organizations," commented Rick Rule, founder of the Global Companies.
Sprott will issue 20 million common shares in the capital of Sprott ("Sprott Shares") in consideration for the acquisition of the Global Companies. Approximately 500,000 of the Sprott Shares will be received by employees of the Global Companies after closing. The Seller has agreed to forego any general quarterly or special dividends, if any, associated with Sprott's 2010 financial performance. In addition, the Seller and certain current and future employees of the Global Companies will further be entitled to receive, on the date that is five years following the closing of the Transaction, additional shares (the "Earn-out Shares") based on the aggregate EBITDA of the Global Companies during such five year period, and the performance of the Global Companies relative to the balance of Sprott. For every dollar that the aggregate EBITDA exceeds US$40 million, the Seller and certain current and future employees shall receive 0.145455 Earn-out Shares, up to a maximum of eight million Earn-out Shares in aggregate. Subject to certain conditions, including minimum AUM thresholds at the Global Companies, if aggregate EBITDA of US$95 million is reached prior to the end of such five-year period, the Seller and certain employees as noted above shall receive all the Earn-out Shares at such time; provided that the Seller and these specific employees shall not receive such shares prior to three years after the closing of the Transaction. Each of the Seller and the employees of the Global Companies receiving Sprott Shares or Earn-out Shares will enter into lock-up agreements with Sprott whereby they will agree not to directly or indirectly sell their shares without Sprott's consent, subject to certain conditions, with one-third of such shares being released from lock up every year for three years from the date of issuance.
Upon closing of the Transaction, Mr. Rule will join the investment and management team at Sprott for a minimum three year term and will be included on management's slate of nominees for the election of directors at Sprott's next annual meeting of shareholders. The Transaction is an arm's length transaction and is subject to the approval of all applicable regulatory authorities, including the Toronto Stock Exchange, as well as other third parties, as necessary.
This release contains "forward-looking statements" which reflect the current expectations of Sprott Inc. These statements reflect management's current beliefs with respect to future events and are based on information currently available to management. Forward-looking statements in this press release include, but are not limited to, the closing of the Transaction and the anticipated benefits from the Transaction. Forward-looking statements involve significant known and unknown risks, uncertainties and assumptions, including with respect to the closing of the Transaction, the timing and receipt of all applicable regulatory approvals and third party consents, the anticipated benefits from the Transaction and the satisfaction of other conditions to the completion of the Transaction. Many factors could cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements including, without limitation, those listed under the heading "Risk Factors" in Sprott's annual information form dated March 30, 2010 as well as that the closing of the Transaction could be delayed if the necessary regulatory approvals and third party consents are not obtained within the timelines planned or the Transaction may not be completed at all if these approvals are not obtained or any other conditions to closing are not satisfied. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking statements contained in this release. Although the forward-looking statements contained in this release are based upon what Sprott believes to be reasonable assumptions, management cannot assure investors that actual results, performance or achievements will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this release and Sprott does not assume any obligation to update or revise them to reflect new events or circumstances, except as required by law.
About the Global Companies
The Global Companies are leading experts in the natural resource investing sector providing both investment management and specialized broker services. The Global Companies are led by Rick Rule, a highly respected natural resources investor with over 35 years of experience in the investment industry, and have developed a highly specialized team of resource investing experts, including geologists and mining engineers. They offer their expertise through pooled investment vehicles, managed accounts and brokerage accounts and have delivered strong investment performance to their clients. The Global Companies currently administer or manage more than US$1.8 billion in assets.
About Sprott Inc.
Sprott Inc. is a leading independent asset manager dedicated to achieving superior returns for its clients over the long term. The company currently operates through three distinct business units: Sprott Asset Management LP, Sprott Private Wealth LP and Sprott Consulting LP. Sprott Asset Management is the investment manager of the Sprott family of mutual funds and hedge funds and discretionary managed accounts; Sprott Private Wealth provides wealth management services to high net worth individuals; and Sprott Consulting provides management, administrative and consulting services to other companies, including Sprott Resource Corp. (TSX: SCP) and Sprott Resource Lending Corp. (TSX: SIL; NYSE Amex: SILU). Sprott Inc. is headquartered in Toronto, Canada, and is listed on the Toronto Stock Exchange under the symbol "SII". For more information on Sprott Inc., please visit www.sprottinc.com.