Dacha – which started life as a company that bought and owned rare earth metals — will distribute its Merus shares to its own shareholders on a pro-rata basis
Dacha Strategic Minerals Inc., an investment company “whose objective is to enhance shareholder value over the long run,” is doing what some shareholders wish other companies would do: wind up operations and distribute the proceeds to the owners.
The latest piece of the drama at Dacha – which was the subject of a proxy battle at the end of 2012 – played out this week when it agreed to invest at least $11-million in shares of Merus Labs International. That investment was made as part of a $27.2-million Merus bought deal financing when the “specialty pharmaceutical company” placed 16 million shares at $1.70 each.
Once that financing is complete, Dacha – which started life as a company that bought and owned rare earth metals — will distribute its Merus shares to its own shareholders on a pro-rata basis. Those shares represent substantially all of Dacha’s assets. After that the company will be wound up and delisted from the TSX-Venture Exchange.
So what caused Dacha to go into wind-up mode? What happened to the plan of the activist shareholders — announced in late 2012 at the time of the proxy contest — to elect a new board “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…”?
Certainly, it tried hard to find value-creating situations. Peter Puccetti, who became the chief executive at Dacha Strategic Metals following the proxy contest, said the company looked at more than 60 possibilities to develop Dacha.
Of the 60, Mr. Puccetti said that about two thirds represented overtures from private companies, which were looking at a way to go public. “But something always came up in the due diligence,” said Mr. Puccetti, whose main job is as chief executive at the Goodwood Funds, which focus on special situations value investing. The group’s main fund, the Goodwood Fund has been around since 1996.
So why not wait a little longer and seek a more conventional way to develop a company? Mr. Puccetti said Merus emerged after having looked at the company for three years. For whatever reason, the two companies – initially through Goodwood and now through Dacha – couldn’t structure a transaction until now.
“We like Merus,” Mr. Puccetti said Friday when referring to its potential, a potential that can only get better when Merus grows and is able to attract a higher valuation.
In the past, Mr. Puccetti has participated in more positive outcomes. For instance, while he was at Westaim Corp. (which was spun out of Sherritt International) that company bought Jevco Insurance Co. in February 2010 from Kingsway Financial. In the fall of 2012, Jevco was sold to Intact Financial – which represented a 55% gain to Westaim’s shareholders.
In the summer of 2012, following another proxy battle, Mr. Puccetti was named interim chief executive at Longford Energy. At the time, the new board said it intended “to actively review Longford’s prospects and opportunities to best utilize its capital so as to maximize long-term value for shareholders, whether through acquisitions, mergers, other transactions or in some other way.”
About a year later, Longford’s shareholders had their answer when it merged with Earth Video Camera Inc. Known as UrtheCast, the company “develops and publishes a high definition video web platform.” That merger initially worked out fairly well but of late the share price has fallen to levels of nine months back.