Current Price – C$7.99
Offer Price – C$8.0 – C$8.3
Upside – 4% (C$30 for odd lot holders)
Expiration Date – 14th of Feb 2017
No proration for Odd Lot Holders (99 shares and less)
This is a tiny opportunity in Canada. Currently the shares trade one cent below the lower limit and thus odd-lot holders are guaranteed that their shares will be purchased at least at the same price in one month. This is a free option on any potential share price appreciation in the meantime or tender being priced at the upper limit (I consider the later to be unlikely).
Trez Capital Mortgage Investment Corporation offers to purchase class A shares having an aggregate purchase price not exceeding $35,000,000. The purchase price per Share will not be less than C$8.00 and not more than C$8.30. This purchase offer represents c. 25%-26% of all outstanding Company’s stock.
In Sep 2016, company launched a similar tender to buy 2m shares at C$8.5 per share. The offer was heavily oversubscribed with proration factor of 27%. Although the tender price is lower this time, I would assume the offer will be oversubscribed again and tender is likely to be priced at C$8.0.
No proration for odd lot holders
If a Shareholder owns in the aggregate fewer than 100 Shares (an “odd lot”) as of the close of business on the Expiration Date and that Shareholder validly deposits all such Shares pursuant to an Auction Tender at a price equal to or less than the Purchase Price or pursuant to a Purchase Price Tender, the Company will purchase all of those Shares without proration
Source and Amount of Funds
The Company will fund any purchases of Shares pursuant to the Offer from available cash on hand.
Often distributions received from Canadian tenders are treated as dividends and in turn cause withholding tax burden on foreign shareholders. As per below, distributions received from tendering Trez Capital Mortgage shares will be treated as sale of shares and thus there should be no additional taxes (as compared to US tenders).
A Non-Resident Shareholder who sells Shares to the Company under the Offer will be deemed to receive a dividend equal to the excess, if any, of the amount paid by the Company for the Shares over their paid-up capital for Canadian income tax purposes except to the extent the Company elects in prescribed form to treat such amount as a capital gains dividend. The paid-up capital per Share as at December 31, 2016 was approximately $9.65, taking into account the distribution as a return of capital payable on January 16, 2017. As a result, the Company expects that Non-Resident Shareholders who sell Shares under the Offer should not be deemed to receive a taxable dividend or a capital gains dividend for purposes of the Tax Act.