ISG Capital Corporation Announces Proposed Conversion to Real Estate Investment Trust

    




 - Firm Capital to manage new diversified REIT - 

 TORONTO, Aug. 30, 2012 /CNW/ - ISG Capital Corporation  ("ISG") announced today that it has entered into an arrangement  agreement with Firm Capital Property Trust ("FCPT") to effectively  convert ISG into a new Real Estate Investment Trust (REIT) with members  of the Firm Capital group of companies providing asset, property and  executive management services. 

 "This transaction provides immediate liquidity for ISG shareholders who  wish to crystallize the value of their investment in ISG.  It also  provides an opportunity to participate in future growth of a new  publicly traded REIT under the direction of Firm Capital's proven  management team", noted David Ogden, ISG's President and CEO. 

 This proposed conversion will be implemented by way of a Plan of  Arrangement under the Canada Business Corporations Act and is subject to the approval of the TSX Venture Exchange (the  "TSXV"), the Ontario Superior Court of Justice and ISG's shareholders  as well as completion of the previously announced sale of ISG's sole  real estate asset - the distribution facility located in Ingersoll,  Ontario (the "Ingersoll Facility") and other customary closing  conditions. 

 Details of the Transaction 

 Redemption of ISG Common Shares 

 Pursuant to the Plan of Arrangement, holders of ISG common shares  ("Shares") other than Firm Capital Mortgage Corporation ("FCMC"), an  affiliate of FCPT, will have the option of redeeming their Shares for  cash, exchanging them for units in FCPT or a combination of the two,  provided that each Shareholder who owns a sufficient number of Shares  to receive 100 FCPT units under the Plan of Arrangement will be  required to exchange Shares for at least 100 FCPT units. 

 The cash redemption amount per Share will be determined based on ISG's  cash on hand following completion of its sale of the Ingersoll Facility  less deductions for (i) required payments under ISG's management  incentive plan, (ii) the cost of purchasing a "run-off" directors' and  officers' insurance policy and (iii) ISG's transaction costs, and less  a further deduction of $0.005 per Share.  ISG currently anticipates  that this will result in a cash redemption amount of approximately  $0.175 per Share.  The ratio at which Shares would be exchanged for  FCPT units will be determined based on the cash redemption amount per  Share but without the $0.005 per Share deduction, resulting in an  exchange value of approximately $0.18.  The FCPT units will have an  initial value of $5.00 per unit, which, assuming an exchange value of  $0.18 per Share, would result in an exchange ratio of 0.036 FCPT units  for each Share. 

 Following redemption of all the Shares pursuant to the Plan of  Arrangement, ISG will be a wholly-owned subsidiary of FCPT, its sole  remaining Shareholder. 

 Listing  

 In connection with the transaction, FCPT will apply to list its units on  the TSXV in substitution for the Shares, and receipt of TSXV  conditional approval for such listing is a condition of closing. 

 Shareholder Approvals 

 The Plan of Arrangement and the sale of the Ingersoll Facility  (collectively, the "Transactions") will each require approval by at  least two-thirds of the votes cast by Shareholders at a special  meeting.  In addition, for the reasons described under "Business  Combination" below, the Plan of Arrangement must also be approved by a  simple majority of the votes cast by Shareholders at the special  meeting other than FCMC and its affiliates and David Ogden and his  affiliates. 

 Voting Agreements 

 David Ogden and Joseph Sorbara, each an officer and director of ISG,  along with FCMC have each entered into support and voting agreements  pursuant to which: 




        --  David Ogden (and entities affiliated with him) has agreed to
            vote the 3,013,000 Shares he controls in favour of the Plan of
            Arrangement and the sale of the Ingersoll Facility and to
            exchange a minimum of 750,000 Shares for new REIT units;
        --  Joseph Sorbara (and entities affiliated with him) has agreed to
            vote the 3,141,000 Shares he controls in favour of the
            Transactions and to exchange a minimum of 750,000 Shares for
            new REIT units; and
        --  FCMC has agreed to vote the 2,071,000 Shares it controls in
            favour of the Transactions and to exchange all 2,071,000 Shares
            for new REIT units.




 In addition to the commitments of David Ogden and Joseph Sorbara  described above, each of the other directors of ISG have indicated that  they intend to vote all of their Shares in favour of the Transactions.   Collectively, the directors and officers of ISG and Firm Capital  Mortgage Corporation own 10,590,000 Shares, which represent 58% of  ISG's 18,242,000 issued and outstanding Shares. 

 Non-Solicitation  

 The arrangement agreement provides for customary board support and  non-solicitation covenants from ISG, which are subject to customary  "fiduciary out" provisions that entitle ISG to consider and accept an  unsolicited superior proposal in certain circumstances.  The  arrangement agreement also provides for the payment of a termination  fee by ISG of $200,000 to FCPT on the occurrence of certain termination  events. 

 Business Combination 

 Pursuant to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"), the Plan of Arrangement constitutes a "business  combination" for ISG. Because it is listed on the TSXV, ISG is exempt  from the formal valuation requirement of MI 61-101 in connection with  the Plan of Arrangement.  Under MI 61-101 and TSXV rules, ISG is  required to obtain approval for the Plan of Arrangement by a majority  of the votes cast by "disinterested" Shareholders. 

 Recommendation of Board of Directors 

 ISG's Board of Directors has unanimously determined that the  Transactions are in the best interests of ISG and all Shareholders and  unanimously recommends that all Shareholders approve the Transactions. 

 Timing 

 ISG expects that an information circular describing the Transactions and  FCPT in greater detail will be mailed to Shareholders and available on www.sedar.com in September 2012. A special meeting of Shareholders to consider the  Transactions is currently expected to be held in Toronto, Ontario in  October 2012. 

 About ISG 

 ISG is a publicly-traded commercial real-estate company (www.isgcapital.ca).  The company is committed to creating shareholder value by incorporating  environmentally and socially responsible approaches in its growth  strategy.  

 About FIRM CAPITAL PROPERTY TRUST  

 Firm Capital Property Trust (FCPT) is focused on creating long-term  value, capital preservation and disciplined investing to achieve stable  distributable income for Unitholders. In partnership with management  and industry leaders, FCPT focuses on co-owning a diversified property  portfolio of multi residential, flex industrial, net lease convenience  retail, net lease stand alone retail, core service provider  professional and healthcare professional office space. In addition to  stand alone accretive acquisitions, FCPT's primary focus is on  acquisitions, on a co-ownership basis with strong financial co-owned  partners and will specifically focus on joint acquisitions and the  acquisition of partial interests from existing co-ownership groups, in  a manner that provides liquidity to those selling co-owners and  professional management for those remaining as co-partners. Firm  Capital Realty Partners Inc. (FCRP), through a structure solely focused  on an alignment of financial interests with FCPT, is the asset and  property manager. In addition to asset and property management, FCRP  will source, syndicate and participate in investments alongside FCPT. 

 Reader Advisory 

 This news release contains "forward-looking statements" within the  meaning of applicable securities laws, including those relating to the  Plan of Arrangement, the anticipated cash redemption amount thereunder,  the expected sale of the Ingersoll Property and the proposed listing of  FCPT units on the TSXV. These forward-looking statements are subject to  a number of risks and uncertainties that could cause actual results or  events to differ materially from current expectations.  In particular,  there can be no assurance that the parties will proceed with the  proposed plan of arrangement and associated transactions, that the  ultimate terms of the proposed plan of arrangement and associated  transactions will be consistent with those that currently are  contemplated, that the required court, shareholder or TSXV approvals  will be obtained, that the proposed plan of arrangement and associated  transactions will be successfully completed or that the cash redemption  amount that Shareholders are ultimately entitled to receive will be  consistent with the amount currently expected by ISG.  The statements  in this news release are made as of the date of this release. Although  ISG believes that the assumptions inherent in the forward-looking  statements are reasonable, forward-looking statements are not  guarantees of future performance and, accordingly, readers are  cautioned not to place undue reliance on such statements due to the  inherent uncertainty therein.  

 Neither the TSX Venture Exchange Inc. nor its Regulation Services  Provider (as that term is defined in policies of the TSX Venture  Exchange) has approved or disapproved the contents of this press  release. 



ISG Capital Corporation


CONTACT:  David OgdenPresident and Chief Executive Officer(416) 203-7538 or [phone]www.isgcapital.ca 


    

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