Mass Financial Corp. Agrees to be Acquired by Terra Nova Royalty Corporation and Reports Results for the First Half 2010

HONG KONG, Sept. 27 /PRNewswire-FirstCall/ -- Mass Financial Corp. ("Mass" or "MFC") (Vienna Stock Exchange symbol: MASS) (Pink Sheets: MFCAF) today reported its financial results for the six months ended June 30, 2010.  All figures are in U.S. dollars and earnings per share amounts are on a diluted basis.

For the six months ended June 30, 2010, MFC reported total revenues of $173.7 million with net income attributable to our shareholders of $12.5 million or $0.48 per share, compared to total revenues of $163.4 million with net income attributable to our shareholders of $11.2 million or $0.42 per share for the six months of 2009 (excluding a one-time gain on the repurchase of preferred shares).  

At June 30, 2010, the Company had $252.5 million in cash and securities, our current ratio was 2.49, and the long-term debt-to-shareholders' equity ratio was 0.24. Our book value was $215.4 million.

As of June 30, 2010 our inventory increased as we are now holding commodities where the risks have been mitigated.  We also paid down liabilities during the period in the amount of  approximately $69.9 million.  We will pursue this strategy while we review our borrowing costs and continue with our monitoring of the fluctuation in the exchange rate between the Euro and the U.S. Dollar.

President Michael Smith, commented, "We are proceeding into the energy industry in India, despite some setbacks for this emerging market.  We, however, remain generally optimistic as to the overall economic conditions, as well as with our other Indian operations.

While we cannot predict with certainty how we will do for the full year 2010,  we believe we can increase our net asset value per share.  Net asset value is the way management values Mass."  

In addition, Mass has entered into an agreement with Terra Nova Royalty Corporation ("Terra Nova") for Terra Nova to acquire all of the issued and outstanding shares of Mass by way of a takeover bid (the "Offer").  The Offer is one Terra Nova share for each Mass share.  

Terra Nova is in the mineral royalty and natural resources business.  One of Terra Nova's assets is a royalty on the Wabush iron ore mine located in Labrador, Newfoundland, Canada. Terra Nova's shares are listed for trading on the NYSE.

In connection with the Offer, the Board of Directors of Mass formed a special committee of qualified directors to review and consider the Offer.  The Board of Directors of Mass, after receiving the recommendation of its special committee and in consultation with its financial and legal advisors, has unanimously approved entering into the agreement and the Offer.  The Mass Board received an opinion from its financial advisor that the Offer is fair, from a financial point of view, to Mass shareholders.  As a result, our Board of Directors unanimously recommends that all shareholders accept the Offer from Terra Nova and views it to be positive for all our stakeholders.

A transaction with Terra Nova is also excellent for our over 550 employees worldwide, customers, banks and suppliers.  The Offer will allow shareholders to become part of a much stronger company, provide better liquidity with Terra Nova shares being listed on the NYSE and allow for the combined company to expand and enhance value.

Highlights of the Offer:

• One Terra Nova share for each Mass share
• Creation of a significant well capitalized company with enhanced growth opportunities and global capabilities
• Creates value through integration of complementary businesses and eliminates overlap in natural resources segment
• Increases the management strength and knowledge base throughout the new merged Terra Nova
• Rationalization of general and administration resulting in cost savings
• For the purposes of the Offer, the adjusted book values of each party is approximately equal; $9.00 per share for Mass and $8.91 per share for Terra Nova
• Allows Mass shareholder to participate in the results of Terra Nova, including receiving an expected distribution of KHD Humboldt Wedag International AG ("KID") shares after completion of the Offer (the "Proposed Fourth Distribution")
• Designed to be a tax-free reorganization for U.S. shareholders
• We estimate after the regulatory approvals and a shareholder meeting of Terra Nova to affirm the acquisition closing to be on or about October 30, 2010

The Offer is part of a multi-step transaction, which includes the subsequent merger of Mass and a Terra Nova subsidiary, designed to effect a combination with an exchange ratio based upon the fully-diluted net value of each company, adjusted in the case of Terra Nova to reflect the fair value of its Wabush royalty interest, the after-tax recovery for past royalty underpayments, excluding pending claims for interest and costs (the "Arbitration Award"), its recently completed Rights Offering and its distribution of shares of KID on September 23, 2010 (the "Third Distribution").  In the case of Mass, its net book value is adjusted to reflect the fair value of certain resource interests. Based upon the foregoing adjustment, for the purposes of the Offer, the Mass shares were valued at $9.00 per share.

Attached as pages 5 to 8 hereto are tables setting forth the balance sheets for Mass, Terra Nova and for Terra Nova after giving pro forma effect to:  (i) the Offer; (ii) the Rights Offering; (iii) the Third Distribution and Proposed Fourth Distribution; (iv) the Arbitration Award; (v) the increase in fair value of the Wabush royalty when Terra Nova adopts International Financial Reporting Standards ("IFRS"); and (vi) the increase in fair value of Mass's resource interests as at the date indicated.  

The agreement between Terra Nova and Mass provides for, among other things, a non-solicitation covenant on the part of Mass, subject to customary "fiduciary out" provisions that entitle Mass to consider and accept a superior proposal, a right in favour of Terra Nova to match any superior proposal and the payment of a reciprocal termination payment of $6 million, if the acquisition is not completed as a result of a superior proposal or other termination of the agreement in certain circumstances.

The Offer will be conditional upon, among other things, Terra Nova acquiring such number of Mass shares that, together with Mass shares held by Terra Nova, constitute not less than 50.1 percent of the Mass shares on a fully-diluted basis and approval by a majority of Terra Nova's shareholders at its shareholders' meeting scheduled for October 29, 2010. In addition, the Offer will be subject to certain customary conditions, relevant regulatory approvals including in the United States and the NYSE, the absence of a material adverse change, and a waiver of the Mass shareholder rights plan.

Further information in respect of the Offer, the agreement and Terra Nova will be included in a take-over circular to be mailed by Terra Nova to Mass shareholders.  Further information regarding Mass's Board recommendations will be set forth in a directors' circular to be mailed to shareholders.

About the Company:

Mass Financial Corp.'s business encompasses a broad spectrum of activities related to the integrated combination of commodities and natural resources, including trading, commercial trade, proprietary investing and financial services.  To obtain further information, please visit our website at http://www.massfinancialcorp.com.

Legal Notice

This announcement is for informational purposes only and does not constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security. The Offer (as the same may be varied or extended in accordance with applicable law) will be made exclusively by means of, and subject to the terms and conditions set out in, the offer and offering circular document to be delivered to Mass and filed with securities regulators and to be mailed to Mass shareholders by Terra Nova. Mass shareholders should read these materials carefully because they contain important information, including the terms and conditions of the Offer. In addition, Mass's Board of Directors will be mailing to shareholders a circular with its recommendation. Mass shareholders should read these materials carefully as they contain important information regarding the Offer.

The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published or distributed should inform themselves about and observe such restrictions.

Neither the content of Terra Nova's website, Mass's website or any other website nor the content of any website accessible from hyperlinks on Terra Nova's website, Mass's website or any other website is incorporated into, or forms part of, this announcement.

Forward-Looking Statements

This document contains statements which are, or may be deemed to be, "forward-looking statements" which are prospective in nature. Forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements.

Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "expects" or "does not expect", "is expected", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Mass to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause actual results, performance or achievements of Mass to differ materially from the expectations of Mass include, among other things, general business and economic conditions globally, commodity price volatility, industry trends, competition, changes in government and other regulation, including in relation to the environment, health and safety and taxation, labor relations and work stoppages, changes in political and economic stability, the failure to meet certain conditions of the Offer and/or the failure to obtain the required approvals or clearances from regulatory and other agencies and bodies on a timely basis or at all, the inability to successfully integrate Mass's operations and programs with those of Terra Nova, incurring and/or experiencing unanticipated costs and/or delays or difficulties relating to integration of Mass, disruptions in business operations due to reorganization activities and interest rate and currency fluctuations. Such forward-looking statements should therefore be construed in light of such factors.

Other than in accordance with its legal or regulatory obligations, Mass is not under any obligation and Mass expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Notes to the Unaudited Pro Forma Consolidated Balance Sheet:

These notes explain the reconciliations of the historical amounts to pro forma accounts based on management assumptions and estimates.  The reconciliations begin from the subtotals of the historical amounts of Terra Nova and Mass, except for the reconciliation of shareholders' equity which begins from the historical amount of Terra Nova as the shareholders' equity of Mass was eliminated on consolidation.

The foregoing tables give pro forma effect to certain items that are not related to the Offer. These pro forma amounts are "non-GAAP" measures. Management considers them a meaningful supplement to assess its liquidity, capital resources, shareholders' equity and book value.  These non-GAAP measures have significant limitations as an analytical tool and should not be considered in isolation or as a substitute for GAAP measures for liquidity, capital resources or shareholders' equity.  Management believes this information to be useful to securities holders and analysts in assessing Terra Nova's pro forma liquidity, capital resources and equity and valuing Terra Nova on an ongoing basis as they reflect actual changes to cash and securities resulting from the Rights Offering and Third Distribution and expected changes to property, plant and equipment and securities resulting from Terra Nova's adoption of IFRS and the Proposed Fourth Distribution of KID shares.

SOURCE Mass Financial Corp.

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