TORONTO, ONTARIO -- (Marketwired) -- 07/09/13 -- VN Capital Management, LLC ("VN Capital"), a minority shareholder of Ceres Global Ag Corp. ("Ceres"), publicly announced today that it urges shareholders of Ceres to vote to terminate the management contract between Ceres and Front Street Capital 2004 ("Front Street") at Ceres' July 24th Special Shareholder Meeting because the contract improperly favors Front Street at the expense of the other Ceres shareholders. Proxies in favor of the resolutions proposed by VN Capital are being solicited by way of this press release by VN Capital. VN Capital beneficially owns or exercises control or direction over 1,174,700 common shares or approximately 8.2% of the outstanding common shares of Ceres.
VN Capital believes that the Front Street's management contract with Ceres needs to be terminated because:
1. Ceres has performed terribly under Front Street's management during the course of the agreement. Front Street's initial strategy of investing in publicly traded agricultural securities soured, costing Ceres millions of dollars when liquidated three years ago. These losses were compounded over the past three years when Front Street mismanaged the Riverland grain storage facilities, turning what was once a profitable business into a chronically losing operation.2. The management fees paid to Front Street are excessive. Front Street gets paid over $3 million per year plus other expenses under a hedge fund fee structure, even though Ceres is now an operating company. A study of all publicly traded Canadian companies of similar size and revenue (+ or - $10 million of Ceres' market capitalization) shows that the combined median cost for a CEO/President, CFO, and non-executive chairman is slightly over $1 million. In addition, some of that cost in replacing Front Street with a new, dedicated internal management team can be recouped by eliminating duplicative operating management and systems at Riverland.3. Ceres gets poor value for the money spent on Front Street. For instance Ceres' top leadership team of Gary Selke, Michael Detlefsen and Tom Muir spend large amounts of their time operating their own respective businesses, Front Street Capital and Muir Detlefsen & Associates, respectively. In addition, Front Street's team does very little day-to- day management of Ceres' businesses, leaving those details to Riverland management and Stewart Southern Railway's majority partners. Thus, shareholders are paying over $3 million a year for what are essentially part-time capital allocators, and given Front Street's past record, shareholder's aren't exactly getting returns on their capital on a par with those provided by Charlie Munger and Warren Buffet.4. The management agreement structurally misaligns Front Street's financial interests from those of Ceres' shareholders. To illustrate, since the company's inception, Front Street has collected $15.4 million of fees plus $2.3 million of additional expenses which has more than offset any losses on Front Street's equity stake in Ceres while the non-Front Street shareholders have lost a collective $53 million based on the July 8 closing price. This depresses Ceres stock price as the market views the company as being run for Front Street's benefit as the expense of its other shareholders.5. The market views ending the Front Street management contract positively. Since the public release of the Management Information Circular in respect of the Special Shareholders Meeting on June 28, 2013, and related news articles and press releases, Ceres' stock price has shot up over 15% as investors see the possibility of the biased management contract being terminated.