Takeover bid for reverse mortgage firm

Canada’s leading provider of reverse mortgages is the target of a takeover. The board of HOMEQ Corp. is recommending shareholders accept an offer of $9.50 per share from Birch Hill Equity Partners.

“We are delighted that Birch Hill has recognized the inherent value in our business,” said Gary Samuel, chairman of the board. “We believe that the all cash offer is highly attractive to existing shareholders. Birch Hill’s long-term track record of successfully investing in Canadian mid-market companies, and its ability to support HOMEQ’s strategic initiatives, will assist HOMEQ in reaching its full potential and achieving its growth plans.”

The deal values HOMEQ—the parent company of HomEquity Bank—at about $138 million. The offer represents a 22% premium over the volume-weighted average price of the Shares over the last 20 trading days on the Toronto Stock Exchange.

“We are excited about the prospect of participating in HOMEQ’s future growth opportunities and the chance to build a leading financial services company focused on the needs of Canada’s expanding population of seniors,” said John MacIntyre, partner at Birch Hill.

The transaction will be subject to approval by at least two-thirds of the votes cast in person or by proxy at HOMEQ’s annual and special meeting of shareholders, expected to be held on or before May 30, 2012. The deal is also subject to regulatory and court approvals.

HomEquity Bank originates and administers the CHIP Home Income Plan. As of December 31, 2011, the mortgage portfolio comprised approximately 9,000 reverse mortgages with an accrued value of $1.2 billion, secured by residential properties across Canada worth roughly $3.3 billion.

Birch Hill is a private equity firm with $2 billion in capital under management, 20 partner companies and 30 fully realized investments since 1994.

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