Home Capital chose Buffett bid over 2 suitors: proxy circular

Alternative mortgage lender Home Capital Group Inc. fielded acquisition offers from two different private equity firms in June — one of which raised its bid even after the Toronto company decided to take Warren Buffett’s white-knight deal, according to a proxy circular released on Friday.

The two firms were not named in the document released ahead of a special meeting of shareholders next month, but sources familiar with the process say Home Capital’s two suitors were Onex Corp. and Brookfield Business Partners.

As the embattled company faced a crisis of confidence earlier this year, Home Capital and its financial and legal advisers liaised with 88 different parties as it explored its options to shore up liquidity, it said in the document.

On June 2, it received an unsolicited proposal for 100 per cent of the common shares from an unnamed private equity firm, Home Capital’s board said in the circular. Canada’s biggest alternative lender received another proposal to acquire 100 per cent of the common shares from an unnamed private equity firm on June 12, it added.

Even after Home Capital announced its deal with Buffett’s Berkshire Hathaway Inc. on June 21 — in which the company would acquire up to 38.39 per cent of Home Capital in two tranches for an average of $10 per share — one private equity firm upped its June 2 offer for the second time on June 23, the circular said, but did not disclose the bid price.

Home Capital’s board rejected the sweetened bid: “The Board determined that the revised acquisition proposal was inferior to the (Berkshire) Transaction ...” .

Sources familiar with the process say Brookfield Business Partners, established under the Brookfield umbrella last year, was one of the firms vying for 100 per cent of troubled Home Capital. According to one source, Brookfield was the firm mentioned in the circular that sweetened its bid in June, but ultimately lost out to the investment and loan transaction negotiated with Buffett. Onex Corp. is also understood to have put in a bid for 100 per cent of Home Capital.

These new details about the options Home Capital considered as it was pushed to the brink amid allegations of misleading disclosure and a partial run on its deposits have emerged in a proxy circular as shareholders prepare to vote on whether Buffett should be allowed to buy a bigger piece of the company in a meeting on Sept. 12.