Canadian Insider

TORONTO, April 10, 2017 (GLOBE NEWSWIRE) -- Sprott Inc. (“Sprott” or the “Company”) (TSX:SII) announced today that it has entered into an agreement (the “Purchase Agreement”) to sell its Canadian diversified assets to a management group (the “Buyer”) led by John Wilson, CEO of Sprott Asset Management (“SAM”) and James Fox, President of SAM, for approximately $46 million. Sprott is realigning resources to focus on the Company’s core competencies in precious metals, natural resources and real assets in order to capitalize on global market opportunities in those areas.

Transaction Benefits to Sprott:

After giving effect to the transaction, Sprott will feature:

• A focused organization with deep and global expertise in precious metals, natural resources and real assets.
• Financial strength with over $335 million in investable capital.
• $7.5 billion in AUM, including sub-advisory agreements for $865 million in precious metals strategies.
• A predominantly US-based exchange-listed products business with $5 billion of AUM.
• Recently signed commitments for a new $750 million institutional Private Resource Lending LP.
• Industry-leading precious metals and private resource investment teams.
• A growing U.S. business led by industry veterans Whitney George and Rick Rule.
• A recently launched resource-focused merchant bank business.
• Subject to obtaining all required approvals, including that of the Toronto Stock Exchange, Sprott intends to make a normal course issuer bid to purchase up to 5% of the issued and outstanding common shares of the Company.

Transaction Overview:

• Sprott will sell management agreements related to the investment funds listed in the attached Schedule A (the “Included Funds”) and accounts together totaling $3.0 billion in AUM and concurrently enter into new agreements with the Buyer to provide sub-advisory services for $865 million of these assets.
• Sprott’s headcount will be reduced by 50% to approximately 100 employees.
• Sprott will retain all management contracts for its exchange-listed products business and the entire team managing the Sprott Physical Trusts and ETFs will remain intact.
• Sprott will retain the management contracts for its institutional precious metals strategies and the SAM precious metals investment team will remain with Sprott.
• Due to the departure of senior executives, approximately $5 million in the existing Sprott Employee Profit Sharing Plan will be available to be allocated to future compensation programs.

“We have entered into this transaction to refocus on our core competencies as a globally-recognized manager of precious metals and resource industry investments,” said Peter Grosskopf, CEO of Sprott. “After careful consideration of several options, we determined that the sale of our Canadian diversified business was in the best interests of our clients, shareholders and employees.”

“Going forward, we are committed to growing our key franchises, including our exchange-traded products, private resource and public equities businesses, while also seeding and launching complementary new products in capacity-constrained areas of the asset management industry,” added Mr. Grosskopf.

“John Wilson and James Fox have built SAM’s diversified business into one of Canada’s leading independent asset managers and we are confident they will continue to provide Canadian investors with innovative alternative asset management solutions,” concluded Mr. Grosskopf.

“This transaction provides us with the opportunity to take the next step in the evolution of our diversified alternative asset management business,” said John Wilson. “We are committed to continuing to provide excellent client service and investment performance, while also expanding our product shelf without compromising our commitment to innovative alternative strategies.”

“We look forward to working closely with the Sprott team through the transition process and the ongoing sub-advisory relationships for our precious metals investment strategies,” said James Fox.

Transaction Details

As a result of the strategic repositioning, Sprott’s wholly-owned subsidiaries, SAM and SPW (the “Sellers”), have entered into the Purchase Agreement to sell the Company’s Canadian diversified asset management contracts and certain of the client accounts of its Canadian private wealth business to the Buyer. The Sellers and the Buyer have received a commitment letter from a qualified third party who has agreed to provide financing for the purchase price for the assets (subject only to the conditions of the Transactions). 

The transaction will occur in two phases. Under the Purchase Agreement, SAM has agreed to transfer, among other things, all of its interest in the management, advisory and other agreements relating to the Included Funds managed and advised by SAM (the “SAM Transaction”), and Sprott Private Wealth (“SPW”) has agreed to transfer to the Buyer, among other things, all of its interest in the advisory, account and managed account agreements relating to certain accounts managed and advised by SPW (the “SPW Transaction”, and collectively, the “Transactions”) for an aggregate purchase price of approximately $46 million.

Upon the closing of the SAM Transaction, the Buyer will become the investment fund manager and portfolio manager of the Included Funds. SAM will be appointed sub-advisor for certain of the Included Funds pursuant to sub-advisory agreements to be entered into between the Buyer and SAM. For those Included Funds not subject to a sub-advisory agreement, the individuals currently principally responsible for the management of the Included Funds will continue to advise the funds as employees of the Buyer. Accordingly, the SAM Transaction is not expected to have any material impact on the business, operations or affairs of the Included Funds.

The Transactions are subject to receipt by the Sellers of the respective requisite regulatory and/or securityholder approvals for the Included Funds and/or accounts, receipt by the Buyer of the requisite regulatory approvals and registrations relating to the Included Funds and/or accounts, and customary closing conditions. Subject to these conditions, the parties anticipate closing the SAM Transaction in the third quarter of 2017 and the SPW Transaction in the fourth quarter of 2017.

Pursuant to Multilateral Instrument 61-101 (“MI 61-101”), the Transactions constitute a “related party transaction.” The Company is exempt from the formal valuation requirement of MI 61-101 in reliance on section 5.5(a) of MI 61-101, and is exempt from obtaining minority shareholder approval in reliance on section 5.7(1)(a) of MI 61-101, as the aggregate value of the Transactions does not exceed 25% of the market capitalization of the Company.

TD Securities Inc. acted as exclusive financial advisor to Sprott and Baker McKenzie and Borden Ladner Gervais LLP acted as legal counsel to Sprott. Norton Rose Fulbright Canada LLP acted as legal counsel to the Buyer.

Conference Call and Webcast
A conference call and webcast will be held today, Monday, April 10, 2017 at 5:30pm ET to discuss the transaction. To participate in the call, please dial (855) 458-4215 ten minutes prior to the scheduled start of the call and provide conference ID 6144237.  A taped replay of the conference call will be available until Tuesday, April 18 by calling (855) 859-2056, reference number 6144237.

The conference call will be webcast live at www.sprottinc.com and
http://edge.media-server.com/m/p/8ydzbnmn

About Sprott

Sprott is a global alternative asset manager with three primary lines of business: Private Resources Investments; Exchange Listed Products; and Alternative Investment Management. The Private Resource business platform houses the Company's private resource-focused asset management activities; the Exchange Listed Products business platform houses the Company's closed-end physical trusts and exchange traded funds; and the Alternative Asset Management business platform houses the Company's full suite of public mutual funds, alternative investment strategies and managed accounts. Sprott Asset Management LP is the principal subsidiary of Sprott Inc. and the manager of both the Exchange Listed Products business line and the Alternative Investment Management business line. For more information, please visit www.sprottinc.com.

Forward-Looking Statements

This press release contains “forward-looking information” within the meaning of applicable securities laws. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or variations (including negative variations) of such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements contained herein are made as of the date of this press release and the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances, management’s estimates or opinions should change, except as required by securities legislation. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements. Such risks and uncertainties include receiving requisite regulatory and/or unitholder approvals for the sale of the assets, closing of the Transactions, the ability of the Company to grow the remaining businesses and the completion of a normal course issuer bid.

Contact information:

Investors
Glen Williams
Head of Investor Relations
(416) 943-4394
[email protected]

Media
Gagnier Communications
Dan Gagnier
(646) 569-5897
[email protected]

 
Schedule A - Included Funds

Sprott Energy Fund
Sprott Energy Opportunities Trust
Sprott Global Infrastructure Fund
Sprott Global Real Estate Fund
Sprott Real Asset Class
Sprott Enhanced Equity Class
Sprott Enhanced U.S. Equity Class
Sprott Enhanced Balanced Fund
Sprott Enhanced Balanced Class
Sprott Enhanced Long Short Equity Fund L.P.
Sprott Enhanced Long Short Equity RSP Fund
Sprott Canadian Equity Fund
Sprott Focused Global Balanced Class
Sprott Focused Global Dividend Class
Sprott Focused U.S. Dividend Class
Sprott Focused U.S. Balanced Class
Sprott Diversified Bond Fund
Sprott Diversified Bond Class
Sprott Credit Income Opportunities Fund
Sprott Alternative Income Fund
Sprott Small Cap Equity Fund
Sprott Private Credit Trust
Sprott Private Credit Trust II
Sprott Bridging Income Fund LP
Sprott Bridging Income RSP Fund
Sprott Canadian Senior Debt Fund
Sprott Short‐Term Bond Fund
Sprott Short‐Term Bond Class

Sprott Gold Bullion Fund*
Sprott Silver Bullion Fund*
Sprott Hedge Fund LP*
Sprott Hedge Fund LP II*
Sprott Bull/Bear RSP Fund*
Sprott Gold and Precious Minerals Fund*
Sprott Silver Equities Class*
Sprott 2017 Flow‑Through Limited Partnership*
Sprott 2016‐II Flow Through Limited Partnership*
Sprott Resource Class*

*Funds subject to Sub-advisor Agreement