The improved financial fortunes of Genesis Land Development Corp. – GDC-T – means that the Calgary-based company can go it alone if no buyer emerges for the company after a friendly takeover agreement stalled, according to chief executive Gobi Singh.
Genesis announced in April that it had entered an agreement with Jupiter Acquisition Ltd. to sell all issued and outstanding common shares for $5.80 per common share. The deal was subject to a number of conditions including the buyer obtaining financing for the transaction and conducting a satisfactory due diligence review.
Two months later, Genesis announced that the agreement with Jupiter had lapsed because “due to certain conditions to complete the transaction not being satisfied…” Genesis has since appointed investment firm Desjardin Securities to assist a committee of directors “to determine which alternative(s) might result in superior value for shareholders,” the company said.
Genesis holds more than 7,000 acres of land in its portfolio, the majority of which is located in the Calgary area, with smaller parcels in Edmonton and British Columbia. Most of the Calgary land is fully approved for development, said Singh. “In the north half of Calgary we are the largest developer to date. There is good stuff here. There is solid, strategically held land positions that would be attractive to a buyer.”
Singh, who founded the company and is the largest shareholder of Genesis with a 20% voting bloc, said his company continues to engage in discussions with Jupiter but is open to entertaining offers from other potential buyers. “We’re still in talks with them. What we did not want to do was extend the exclusivity agreement so that we would open the doors to other people who might be interested,” he said.
“[Jupiter] could not fulfill their obligations to remove the financing condition” and needed more time to put a financial package together to support the takeover, said the Genesis CEO.
Singh said that there have been “several enquiries” recently from other potential buyers for the company.
“The shareholders at the end of the day are the ones that are going to make a decision what price they would accept,” he said. “A special committee has been formed to address that independent of management and they will make a recommendation to the board.”
Genesis Does Not Need to Sell
If no suitable offer surfaces for Genesis, the developer is in strong enough financial condition to carry on, said the CEO. “The fundamentals of the corporation are very strong. We have come out of a tough time like everyone else did. Last year, 2009, if you look at our financial statements, they were best ever.”
Those improved finances have lessened any urgency to do a deal, he said. “If there is nothing feasible that emerges out of this exercise, Genesis is now stronger than pre-2007 times. Having emerged out of a tough time we are just better and more efficient and stronger.”
Singh said he, like the rest of the shareholders, would sell given the right offer. “For the right price I would go along with a deal because it provides liquidity to all shareholders including myself because there are shareholders that have [owned] the stock for quite some time,” he said. “If we don’t have a reasonable offer that is forwarded to us, we will operate the company the best we know how.”
Prospective purchaser Jupiter Acquisition was set up by Calgary businessman David Crombie, described by Genesis as president and chief financial officer of Conserve Oil Corp., general partner of Proven Oil Canada and president of Little Dipper Holdings. Previously, he was vice-president of corporate development with Three Sisters Resorts Canmore where he raised $67 million and an additional $100 million plus for other real estate projects and has held a number of senior positions within the real estate and financial consulting industries.