Crocus shareholders hear details of Growthworks offer

There appears to be light at the end of the tunnel for investors in the beleaguered Crocus Investment Fund. About 650 shareholders were presented with a proposal Wednesday night from David Levi, CEO of GrowthWorks Capital, at a special meeting in Winnipeg that would see them receive a cash payment of $1.55 per share and $4.43 worth of shares in the GrowthWorks Canadian Fund.

“It’s even better than was originally proposed to us,” says Bernie Bellan, the disgruntled Crocus shareholder who called the meeting. “I think this is about as good as we can get.”

Levi says the proposal will be presented to Russ Holmes, the Deloitte & Touche partner handling the Crocus receivership. “We’re anticipating he’ll simply receive it. We’re not expecting any comments. We’re expecting after he’s read it he’ll give us a call,” he says.

Levi says his plan is to roll the $60 million of Crocus assets left over after the shareholder payout into the GrowthWorks Canadian Fund, making it a $400 million fund. Concurrently, he will also open a Winnipeg office with licensed representatives and ensure local decisions regarding investee companies in Manitoba.

If successful, this will be the fourth struggling fund taken over by GrowthWorks in the last 18 months, Levi says. The others were the Canadian Science and Technology Growth Fund and the Capital Alliance Ventures Fund, both formerly owned by Fullarton Capital in Ontario, and the Workers Investment Fund, an independent fund based in New Brunswick.

Holmes says he’ll have to go through the offer before he’ll know when he’ll make his next move. “We have to look at it and see if it makes any sense, whether there’s any common ground to enter into negotiations or if it’s not worthwhile proceeding,” he says.

Bellan circulated a petition at the meeting calling for a specially convened general meeting of the Crocus shareholders to vote on the GrowthWorks proposal. He needs a total of 1,700 signatures before he’ll be able to present it to the receiver.

If the requisition for the meeting is turned down by Holmes, Bellan says he’ll take it to court. “If five per cent of the shareholders call for a special general meeting, by law, one should be called. I think the judge (Manitoba Court of Queen’s Bench Justice Deborah McCawley) will say ‘yes,'” he says.

Bellan is also leading the charge in a $200 million civil lawsuit against the fund’s former officers, directors, brokers Wellington West Capital and BMO Nesbitt Burns, auditor PricewaterhouseCoopers and the Manitoba Securities Commission.

He says the lawsuit will continue regardless of the outcome of the GrowthWorks proposal. He says it’s been worked out that the Vancouver-based fund will not face any liability, from a former director or officer, for example, resulting from the lawsuit.

Once a major focus of investment activity in the province, Crocus was placed into receivership last June. It has suffered through massive devaluations, a blistering report from Manitoba’s auditor general, allegations of activities contrary to the public interest by the Manitoba Securities Commission and an RCMP investigation into allegations of criminal activity.

Geoff Kirbyson is a financial services writer based in Winnipeg

(03/09/06)