In light of this information, it is clear that at least four shareholders of Ithaca who are also significant shareholders of Valiant (representing nearly 22% of Valiant's outstanding share capital) will have the opportunity to vote on the Opposed Transaction (by virtue of their ownership of Valiant shares) at the Valiant shareholder meeting. This constitutes an unfair opportunity to shareholders, like you and JEC, for which the Ithaca board has provided no explanation.
The above shareholders (and any other undisclosed joint Ithaca and Valiant shareholders) are conflicted because, as at the date of the announcement of the Opposed Transaction, such conflicted shareholders gained 31.46% to the value of their Valiant shares trading on AIM, representing a per share gain on Valiant shares at the close of markets on March 1, 2013 of GBP 1.09 (C$1.68, based on the Bank of Canada closing exchange rate on the same date). Conversely, such conflicted shareholders sustained an approximate 6.6% loss to the value of their Ithaca shares, representing a per share loss on Ithaca shares of $0.13. The result is that, for every shareholder holding one Valiant share and one Ithaca share, the net gain realized by conflicted shareholders, as at the close of markets on March 1, 2013 was approximately C$1.55 (the "Conflict Spread"). The Conflict Spread may be even greater on closing of the Opposed Transaction, considering that the consideration per Valiant share represents a premium of approximately 37% to Valiant's closing price on the last trading day prior to the announcement of the Opposed Transaction, or where a conflicted shareholder owns a greater number of Valiant shares than Ithaca shares.
As a further result of the unfair treatment of disinterested Ithaca shareholders created by the Conflict Spread, conflicted shareholders of Ithaca and Valiant will stand to become even more concentrated within the Ithaca capital structure following the Opposed Transaction, as their Valiant shareholdings will be acquired in consideration for additional Ithaca shares (as well as funds borrowed by Ithaca, of which they are shareholders, the full economic risk of which is borne by the disinterested Ithaca shareholders who receive nothing and are diluted). The issuance of additional Ithaca shares to joint shareholders of both Ithaca and Valiant will increase the proportionate shareholdings of such shareholders in Ithaca, with the result that the Opposed Transaction will materially affect control of Ithaca.
It is for these reasons that we are demanding the Ithaca Board to obtain a disinterested shareholder vote. We understand why shareholders of Ithaca, who are also shareholders of Valiant and friends of management, are supportive of the Opposed Transaction: they get a vote on the Valiant side of the Opposed Transaction, enjoy a premium from their Valiant holdings and will achieve a greater percentage ownership of Ithaca with the result that the Ithaca Board and management will become entrenched. Disinterested shareholder approval is clearly required in these circumstances.
Avoiding Ithaca Shareholders
On February 14, 2013, JEC and certain other shareholders holding more than 5% of the Company's issued and outstanding shares, requisitioned a meeting of Ithaca's shareholders for the purposes of voting on the addition of two new directors to the board, both of whom had been nominated by JEC (the "Requisition"). The Requisition was filed in response to serious concerns respecting the strategic direction of Ithaca under the leadership of the Ithaca Board and requested a meeting date of no later than April 8, 2013. A copy of the press release is available on SEDAR.
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