Dacha dissident Goodwood distributes proxy circular
2012-11-06 11:03 ET - News Release
Mr. Peter Puccetti of Goodwood reports
GOODWOOD DISSIDENT CIRCULAR PROVIDES DACHA SHAREHOLDERS WITH COMPELLING REASONS TO REPLACE BOARD
Goodwood Inc. has distributed its dissident proxy circular and accompanying letter to shareholders of Dacha Strategic Metals Inc., urging shareholders to elect a new board of directors at Dacha, which will bring an end to the inappropriate related party dealings, culture of insider self-enrichment and inadequate board oversight that have characterized Dacha for the past three years under the direction of Stan Bharti and Forbes & Manhattan Inc.
Goodwood, which exercises control and direction over approximately 6.4% of Dacha's outstanding shares, is soliciting proxies for the election of seven new directors at Dacha's upcoming shareholders' meeting to be held on November 28, 2012.A The Goodwood Nominees are: Ian W. Delaney, Jorge Bernhard, Timothy E. Thorsteinson, Gregory M. Cameron, Tye W. Burt, Daniel Marks and Peter H. Puccetti.A Goodwood's circular highlights the Goodwood Nominees' proven track records of honest leadership, building businesses and creating shareholder value.
If elected, the Goodwood Nominees expect to be assisted in bringing value to Dacha's shareholders by the services of Peter V. Gundy.A Mr. Gundy is a founder and former Chairman and President of Neo Material Technologies Inc., and widely regarded as one of the foremost world experts in the rare earth element business, with unparalleled sourcing, trading and other relationships.
Goodwood's circular also highlights the failures of Dacha's current board and management under the direction of Stan Bharti and Forbes & Manhattan, contrasting the significant 65% drop in Dacha's share price during fiscal 2012 from its peak against the approximately $3.8 million in compensation, including substantial discretionary cash bonuses, paid to Dacha's directors and management during fiscal 2012.A As well, the circular refers to the wholly-inappropriate "change of control" arrangements recently purportedly implemented by Dacha's board that, if allowed to stand, would see a further $8 million, or approximately 22% of Dacha's current market capitalization, wrongfully transferred from Dacha's shareholders into the pockets of Dacha's insiders including Forbes & Manhattan.A The circular also lays out the disturbing sequence of events whereby Dacha was forced to take a $3.7 million write-off in fiscal 2012 in relation to a non-arm's length related party loan previously advanced by Dacha, for no apparent business purpose, to a private company associated with Stan Bharti and Forbes & Manhattan.
The circular outlines the substantial support that the Goodwood Nominees have already garnered, with shareholders holding approximately 35.2% of Dacha's outstanding shares, including Goodwood, having to date confirmed that they have lost trust and confidence in the current directors of Dacha and intend to vote in favour of the Goodwood Nominees at the Meeting.
All shareholders of Dacha are urged to join Goodwood in freeing Dacha from Stan Bharti and Forbes & Manhattan by voting their YELLOW form of proxy or voting instruction form in accordance with the instructions provided in Goodwood's circular.A Shareholders who require assistance in the completion and delivery of a YELLOW proxy or voting instruction form should contact Goodwood's proxy solicitation agent, Georgeson Shareholder Communications Canada, Inc., at 1-888-605-8415 (toll-free in North America) or [email protected]
Goodwood also announced that it was served yesterday afternoon with a Notice of Application filed by Dacha against Goodwood Inc. and others seeking, among other things, that they be enjoined from voting their common shares.A Goodwood believes that this proceeding is wholly without merit and has been brought by Dacha simply as a tactic to distract Dacha's shareholders from the track record of value destruction and failed leadership by Dacha's current board and management. Goodwood Inc. intends to vigorously defend against this proceeding and resist any attempt by Dacha's current board to seek to delay the November 28, 2012 shareholders' meeting or otherwise frustrate the will of the majority of Dacha's shareholders.
Goodwood's dissident circular and form of YELLOW proxy will be publicly accessible shortly at www.sedar.com. The full text of Goodwood's letter to Dacha's shareholders is appended below.
212 King Street West, Suite 201
Toronto, Ontario CANADA
November 5, 2012
Dear Fellow Shareholder:
We are today providing you with our proxy circular and asking for your support to elect a new board of directors at Dacha Strategic Metals Inc. ("Dacha") that will bring an end to the inappropriate related party dealings, culture of insider self-enrichment and inadequate board oversight and direction that has characterized Dacha for the past three years under the control of Stan Bharti and Forbes & Manhattan, Inc. ("Forbes & Manhattan").
Dacha's Board is Not Acting in Your Interests
Dacha urgently requires a new board of directors that will act in the best interests of Dacha and all its shareholders, rather than serving the interests of Stan Bharti and Forbes & Manhattan:
during fiscal 2012, Dacha's stock price declined 65% from its high leaving the company with a market capitalization of only $37 million;
under the control of directors assembled by Stan Bharti and Forbes & Manhattan, Dacha has consistently demonstrated that it will place the interests of Stan Bharti and Forbes & Manhattan ahead of the interests of Dacha's shareholders.A The actions referred to below, while suiting the purposes of Stan Bharti and other Dacha insiders who benefited from them, were demonstrably not in the interests of Dacha or its shareholders:
Dacha's board recently purportedly adopted inappropriate "change of control" arrangements that, if permitted to stand, will transfer at least $8 million, equal to approximately 22% of Dacha's current market capitalization, from Dacha's shareholders into the pockets of Dacha's insiders, including $3.3 million to Forbes & Manhattan;
these change of control arrangements are on top of the more than $3.8 million in compensation paid to Dacha's directors and management during fiscal 2012, which included substantial discretionary cash bonuses paid to certain directors notwithstanding Dacha's declining share price;
in fiscal 2012, Dacha was forced to take a $3.7 million write-off, equal to approximately 10% of its current market capitalization, on account of the non-payment of a non-arm's length related party loan previously advanced by Dacha to a company associated with Stan Bharti and Forbes & Manhattan - contrary to applicable regulatory requirements, this related party loan was advanced without the required public disclosure or notification to the TSX Venture Exchange; and
Dacha's board recently spent months wasting Dacha shareholder value pursuing an ill advised related party merger transaction with another Forbes & Manhattan company, Aberdeen International Inc., that was not in the best interests of Dacha's shareholders or ultimately even capable of completion, apparently because the combined company did not meet the net income tests under the Toronto Stock Exchange's listing requirements;Dacha has shown itself to be devoid of any coherent strategy to protect the interests of shareholders during the current down-cycle in rare earth element pricing.A Over the past 12 months, the net asset value of Dacha's metals inventory and cash has consistently declined every month, falling by an aggregate of approximately 60.8%;
Dacha's current board and management have demonstrated that they neither understand the intricacies of the rare earth element business nor have the expertise or experience to properly manage Dacha's business or create value for Dacha's shareholders.A Their track-record is one of destroying shareholder value, while enriching themselves at the expense of Dacha's shareholders; and
Dacha's business and affairs are being conducted without sufficient regard to its timely disclosure and other regulatory obligations.A Certain share trading undertaken by a director of Dacha in the context of the failed Aberdeen transaction also raises concerns that Dacha's compliance policies are inadequate.
Dacha's Board Must be Independent of Stan Bharti and Forbes & Manhattan
Currently, Dacha's board and management consists exclusively of individuals with bonds to Stan Bharti and Forbes & Manhattan.A In response to shareholder demands for change, that same Stan Bharti-dominated board is now purporting to shuffle the deck by introducing four new director nominees, hand-chosen by the same failed board, in a hollow effort to show greater distance between Dacha's board and Forbes & Manhattan.A The reality, however, is quite different.A Each of the proposed new directors, like each of the current directors who are not standing for re-election, is tied to Stan Bharti and Forbes & Manhattan.A While it may suit the purposes of Stan Bharti and Forbes & Manhattan to have Dacha's board and management stacked with individuals beholden to Stan Bharti and Forbes & Manhattan, it has not well served the interests of Dacha or its shareholders in the past and will not well serve their interests in the future.
In the Management Circular, Stan Bharti and Forbes & Manhattan try to create the impression that their involvement with Forbes & Manhattan portfolio companies adds value for shareholders.A The reality is that their involvement often enriches only Stan Bharti, Forbes & Manhattan and the stable of related individuals that they install as directors and officers, and not shareholders.A We found a clear and disturbing trend when we reviewed the aggregate compensation paid to Stan Bharti and Forbes & Manhattan, and to other Forbes & Manhattan associates, by various Forbes & Manhattan portfolio companies in their last fiscal year, and compared that to the last 12 months' shareholder returns at those companies.A During the relevant period, Stan Bharti and Forbes & Manhattan collectively were paid compensation of approximately $20.8 million by these companies.A Other Forbes & Manhattan associates took out compensation of approximately $31 million.A At the same time, the median shareholder return at these companies was negative 48.2%.
The Goodwood Nominees will Protect Your Interests and Enhance Value
At the meeting of Dacha's shareholders on November 28, 2012, shareholders finally have the opportunity to elevate Dacha out of the world of penny-stock behaviour and related party dealings that have been harming the interests of its shareholders over the past several years.
The seven new director nominees being proposed by Goodwood (the "Goodwood Nominees") have the skills, knowledge and experience to finally provide Dacha with the leadership, governance and strong board oversight that Dacha's complex business requires and its shareholders deserve.A As importantly, they have earned the trust and respect of shareholders and capital markets participants through proven track records of honest leadership, building businesses and creating shareholder value.A The Goodwood Nominees are as follows: