PenderFund Capital Management, representing the Pender Small Cap Opportunities Fund, has publicly urged shareholders of Altius Renewable Royalties Corp. (TSX: ARR) to reject a proposed take-private offer from Northampton Capital Partners, LLC. This call to action comes as Pender, the largest non-insider shareholder of Altius, prepares to vote against the offer of $12 per share, which they argue significantly undervalues the company.
Pender asserts that the intrinsic value of Altius should be between $15 and $18 per share, especially given the company’s imminent growth in royalty revenues as several development projects are set to become operational in the coming quarters. The timing of Northampton’s offer is characterized as “opportunistic,” capitalizing on a moment when Altius is on the verge of a financial turnaround. Pender highlights that this undervaluation does not reflect the potential for future revenue growth from new royalties and interconnection deposits, which could provide substantial value to shareholders.
Pender has raised serious questions regarding the negotiation process undertaken by Altius’s board and special committee. They argue that the board’s actions indicate a lack of diligence in exploring strategic alternatives or conducting a meaningful market check prior to agreeing to the deal with Northampton. For over two months following Northampton’s initial offer, it appears that negotiations were primarily conducted with Northampton and Altius Minerals Corporation, which holds a controlling 58% stake in Altius. Pender criticizes this exclusive negotiation approach as potentially neglecting the interests of minority shareholders.
The Management Information Circular released by Altius on October 18, 2024, reportedly lacks transparency regarding any alternative offers or negotiations that may have taken place. Notably, an unsolicited non-binding offer from a third party was rejected by the special committee without detailed disclosure on its terms or any efforts made to negotiate further.
Pender also expressed concerns over the absence of any post-announcement market check mechanisms in the arrangement agreement. Typical provisions such as non-solicitation covenants and break fees are included, however, these do not adequately protect minority shareholders in this context. The arrangement agreement does not provide for a “go-shop” period, which would allow for other potential offers to be considered after the announcement.
Furthermore, Pender points out that while Altius claims that the transaction is fair and beneficial for minority shareholders, the lack of robust negotiation processes and transparency raises doubts about this assertion.
In light of these concerns, Pender is actively encouraging all minority shareholders to reject Northampton’s take-private offer by voting against it at the upcoming special meeting. They emphasize that exercising dissent rights is crucial; if more than 5% of shares dissent and do not withdraw their objections, it could signal significant shareholder dissatisfaction with the transaction.
As part of their advocacy, Pender has engaged Norton Rose Fulbright Canada LLP as their legal advisor to navigate this complex situation.
The unfolding situation at Altius Renewable Royalties highlights critical issues surrounding corporate governance, shareholder rights, and valuation practices in take-private transactions. As minority shareholders prepare to make their voices heard, the outcome of this dispute could have lasting implications for how such transactions are approached in the future.
