This short form prospectus constitutes a public offering of these securities
only in those jurisdictions where they may be lawfully offered for sale and
therein only by persons permitted to sell such securities. No securities
commission or any similar authority in Canada has in any way passed upon the
merits of the securities offered hereunder and any representation to the
contrary is an offence. Information has been incorporated by reference in this
short form prospectus from documents filed with securities commissions or
similar authorities in Canada. Copies of the documents incorporated herein by
reference may be obtained on request without charge from the Secretary of Envoy
Communications Group Inc. at 26 Duncan Street, Toronto, Ontario, M5V 2B9
(telephone (416) 593-1212).
The securities to be issued hereunder have not been and will not be registered
under the United States Securities Act of 1933, as amended, and, subject to
certain exceptions, may not be offered or sold directly or indirectly in the
United States of America or to United States persons. See "Plan of
Distribution".
New Issue May 29, 2000
$9,999,997
ENVOY COMMUNICATIONS GROUP INC.
1,428,571 Common Shares
Envoy Communications Group Inc. ("Envoy" or the "Company") is hereby offering
1,428,571 common shares of Envoy ("Common Shares") at a price of $7.00 per
Common Share pursuant to the provisions of an underwriting agreement dated as
of May 26, 2000 (the "Underwriting Agreement") between Envoy and Canaccord
Capital Corporation (the "Underwriter"). The Common Shares being offered
hereunder will be issued and sold by the Company to the Underwriter. The
offering price of the Common Shares has been determined by negotiation between
Envoy and the Underwriter.
The Common Shares are listed for trading on The Toronto Stock Exchange
(the "TSE"). On May 26, 2000, the closing price of the Common Shares on the TSE
was $6.95.
An investment in the Common Shares involves certain risks which should be
carefully considered by prospective investors. See "Risk Factors".
The Common Shares will qualify for investment as set out under "Eligibility for
Investment".
Price: $7.00 per Common Share
Price to Public Underwriter's Fee Net Proceeds to Envoy(1)
Per Common Share 7.00 $0.4725 $6.5275
Total $9,999,997 $674,999.80 $9,324,997.20
Notes:
(1) Before deduction of expenses of the offering, estimated at $300,000,
which, together with the Underwriter's Fee, will be paid by Envoy.
(2) The Company has granted to the Underwriter an option to acquire, at
the issue price of the Common Shares offered hereunder, up to an
aggregate of 214,285 additional Common Shares to cover
over-allotments, if any, and for market stabilization purposes
(the "Over-Allotment Option"). The Over-Allotment Option expires
30 days following the closing of the offering. If the Over-Allotment
Option is exercised in full, the total Price to the Public,
Underwriter's Fee and Net Proceeds to Envoy, before deducting
expenses of the offering, will be $11,499,992, $776,249.46 and
$10,723,742.54, respectively. This short form prospectus qualifies
the Common Shares issuable upon the exercise of the Over-Allotment
Option. See "Plan of Distribution".
(3) As additional compensation, Envoy has agreed to issue to the
Underwriter Common Share purchase warrants (the "Compensation
Warrants") to purchase up to 71,428 Common Shares at 110 percent of
the issue price of the Common Shares offered hereunder for a period of
12 months from the closing of the offering. This prospectus qualifies
the distribution of the Compensation Warrants. See "Plan of
Distribution".
The Underwriter, as principal, conditionally offers the Common Shares subject
to prior sale, if, as and when issued and sold by Envoy and accepted by the
Underwriter in accordance with the conditions contained in the Underwriting
Agreement and subject to the approval of certain legal matters on behalf of
Envoy by Blake, Cassels & Graydon LLP and on behalf of the Underwriter by
Swinton & Company.
Subscriptions will be received subject to rejection or allotment in whole or
in part and the right is reserved to close the subscription books at any time
without notice. It is intended that the closing of the offering will occur on
or about June 2, 2000 but not later than June 7, 2000 and that certificates
evidencing the Common Shares will be available for delivery at closing or
shortly thereafter.
TABLE OF CONTENTS
DOCUMENTS INCORPORATED BY REFERENCE 2
THE COMPANY 3
RECENT DEVELOPMENTS 4
SELECTED CONSOLIDATED FINANCIAL INFORMATION 4
DESCRIPTION OF SHARE CAPITAL 6
USE OF PROCEEDS 6
PLAN OF DISTRIBUTION 6
DIVIDEND POLICY 7
RISK FACTORS 7
ELIGIBILITY FOR INVESTMENT 7
LEGAL MATTERS 7
AUDITORS, TRANSFER AGENT AND REGISTRAR 8
PURCHASERS' STATUTORY RIGHTS 8
CERTIFICATE OF THE COMPANY C-1
CERTIFICATE OF THE UNDERWRITER C-2
___________
DOCUMENTS INCORPORATED BY REFERENCE
The following documents of Envoy filed with the securities commissions
or similar regulatory authorities in the provinces of British Columbia,
Alberta, Ontario and Quebec are specifically incorporated by reference
into, and form an integral part of, this short form prospectus:
(a) the Annual Information Form of the Company, consisting of the Annual
Report of the Company filed on Form 20-F dated February 16, 2000,
including Management's Discussion and Analysis of Financial Condition
and Results of Operations in respect of the fiscal year ended
September 30, 1999;
(b) the audited consolidated financial statements of the Company, including
the notes thereto, for the fiscal years ended September 30, 1999 and
September 30, 1998, together with the auditors' report thereon;
(c) the Management Information Circular dated January 26, 2000 prepared in
connection with the annual and special meeting of shareholders of the
Company held on March 7, 2000, except the sections entitled
Executive Compensation , Composition of the Compensation
Committee, Report on Executive Compensation and
Performance Graph; and
(d) the unaudited interim consolidated financial statements of the Company
for the three months ended December 31, 1999.
Any documents of the types referred to above and any material change
reports (excluding confidential reports) and press releases filed by
Envoy pursuant to the requirements of applicable securities legislation
after the date of this short form prospectus and prior to the completion
or withdrawal of the offering shall be deemed to be incorporated by
reference in and form an integral part of this short form prospectus.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for the purposes of this short form prospectus to the extent
that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified
or superseded shall not constitute a part of this short form prospectus,
except as so modified or superseded. The modifying or superseding
statement need not state that it has modified or superseded a prior
statement or include any other information set forth in the document
which it modifies or supersedes. The making of such a modifying or
superseding statement shall not be deemed an admission for any purposes
that the modified or superseded statement, when made, constituted a
misrepresentation, an untrue statement of a material fact or an
omission to state a material fact that is required to be stated or that
is necessary to make a statement not misleading in light of the
circumstances in which it was made. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this short form prospectus.
THE COMPANY
Envoy is an integrated marketing communications company which is
focusing upon its rapidly growing integrated e-marketing communications
services business. Envoy's objective is to be a leading provider of
integrated e-marketing communications services. Envoy is committed to
building brands both on and off-line.
Envoy offers clients a strategy that delivers integrated marketing
communications services through seven separate but complementary
operating divisions providing cohesive services:
Communique Advertising: advertising utilizing traditional media,
primarily television, radio and print, as
well as on-line advertising.
Devlin: website development and design and other
interactive digital communications services.
Communique Live: event marketing, including corporate meeting
and conference planning services and incentive
travel programs.
Fusion: corporate identity and branding services.
Communique
Public Relations: strategic communications.
Hampel Stefanides: U.S. based e-marketing communications
services and advertising.
Watt Group: design, packaging and marketing identity
services to retailers.
Envoy delivers cohesive marketing communications solutions to its
clients utilizing the services of one or more of its operating
divisions. By using the integrated services of several Envoy operating
divisions, its clients can communicate in one clear voice executed
through a range of media channels.
Envoy's employees have expertise in a broad range of disciplines
including business strategy, marketing, branding, information technology
and creative design. Envoy works with a client from the analysis of its
business objectives to the implementation of an appropriate solution. As
a result, clients benefit not only from the time and cost savings of
working with a single firm, but also from the integrated marketing
communications strategy made possible by Envoy's integrated and
coordinated range of marketing communications services. Based upon
various competitors' public information and management's dealings with
clients and prospective clients, management believes that this
differentiates it from advertising or Internet service providers that
focus on a single aspect of the range of marketing communications
services.
Envoy provides integrated e-marketing communications services, including
digital interactive new media communication services. Envoy defines its
integrated e-marketing communications services as its services, whether
on or off-line, performed for its clients' Internet businesses and
businesses related to the Internet, together with its on-line services
performed for its other clients.
These activities include on-line advertising and promotions, branding,
the design, development and maintenance of its clients' websites,
research and strategic consulting regarding e-marketing, creating
advertising and other promotional programs, whether or not on-line,
designed to drive traffic to its clients' websites, to sell goods
and services on the clients' websites or to promote its clients'
Internet related businesses, the development of proprietary
interactive software and on-line media planning and buying.
Envoy intends to pursue acquisitions of companies operating in the
marketing-communications and technology industries that will extend and
complement its business. Envoy aims to broaden its scope of operations
in the United States and to expand into the United Kingdom as a
bridgehead to Europe, as well as to add to its client roster. In
evaluating potential acquisitions, Envoy generally looks for businesses
which have experienced management; a growing, high-quality client base;
a reputation for creative excellence; an above-average growth rate; and
a history of profitability. Envoy typically satisfies at least a
portion of the purchase price through the issuance of Common Shares.
Envoy expects this strategy will reduce the capital required to
complete acquisitions and incentivize the managers of newly acquired
businesses by maximizing their interest in the growth and profitability
of the Company. Furthermore, the Company plans to structure its
acquisitions utilizing "earn-outs" whereby a substantial portion of
the purchase price is contingent on performance and is paid over a
period of two to four years.
Envoy is incorporated under the laws of Ontario. Its head office and
principal place of business is located at 26 Duncan Street, Toronto,
Ontario, M5V 2B9.
RECENT DEVELOPMENTS
Since December 31, 1999, Envoy's Communique Advertising division has
been appointed agency of record in Canada for a number of new clients,
including Hummingbird Communications Ltd., The Canadian Football League
and Soloman Canada Ltd. and its Taylor Made division in Canada. In
March, 2000, The Watt Group, Envoy's retail and package design
subsidiary, received a significant assignment to assist Wal-mart in the
rollout of Wal-mart brands in ASDA stores in the U.K. Most recently,
Juno Online Services, Inc., a provider of Internet-related services in
the U.S., appointed Envoy's Hampel Stefanides subsidiary as its agency
of record in the U.S.
The Company's agency of record contract with Microsoft Canada Co.
expired in April, 2000. The Company decided not to rebid for the
Microsoft Canada account, primarily because potential conflicts
of interest which resulted from the account precluded Envoy
from pursuing other attractive client opportunities in related
industry segments.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected financial information has been derived from
the consolidated financial statements of the Company for the three
years ended September 30, 1999 and the three-month period ended
December 31, 1999 and December 31, 1998. The following selected
consolidated financial information should be read in conjunction with
such consolidated financial statements and the notes thereto and
Management's Discussion and Analysis of such financial statements.
Statement of Operations Data
1999 1998 1999 1998 1997
For the Three-Month For the Fiscal
Period Ended Year Ended September 30
December 31
(unaudited) (audited)
(in thousands of dollars, except per share amounts)
Revenue $46,810 $33,390 $138,331 $37,844 $23,444
Cost of sales,
being pass-through costs 34,106 25,280 96,544 24,353 14,769
Gross Margin 12,704 8,110 41,787 13,491 8,675
Operating Expenses
Salaries and benefits 7,805 4,956 25,710 5,939 2,665
General and
administrative 2,373 1,167 6,983 5,057 4,310
Occupancy costs 458 330 1,878 414 307
Earnings Before the
Undernoted 2,068 1,653 7,216 2,081 1,393
Depreciation 379 345 1,444 463 169
Interest expense 76 65 282 11 -
Income before income taxes
and goodwill amortization 1,613 1,243 5,490 1,607 1,224
Income taxes 703 468 2,003 - -
Income before goodwill
amortization 910 775 3,487 1,607 1,224
Goodwill amortization,
net of taxes 263 99 610 104 45
Net Income $647 $676 $2,877 $1,503 $1,179
Earnings per share, before
goodwill:
Basic $0.05 $0.06 $0.24 $0.16 $0.17
Fully diluted $0.05 $0.06 $0.24 $0.16 $0.12
Earnings Per Share
Basic $0.04 $0.05 $0.20 $0.15 $0.16
Fully diluted $0.04 $0.05 $0.20 $0.15 $0.12
Balance Sheet Data
1999 1998 1999 1998
As at December 31 As at September 30
(unaudited) (audited)
(in thousands of dollars)
Current Assets $45,164 $28,190 $47,233 $15,684
Total Assets $76,482 $46,696 $78,460 $25,330
Current Liabilities(1) $31,183 $24,720 $33,870 $11,713
Long-Term Liabilities(2) 3,936 5,367 3,978 301
Total Liabilities 35,119 30,087 37,848 12,014
Shareholders' Equity 41,363 16,609 40,612 13,316
$76,482 $46,696 $78,460 $25,330
______
Notes:
(1) Excluding current portion of long-term debt.
(2) Including current portion of long-term debt.
DESCRIPTION OF SHARE CAPITAL
The authorized share capital of Envoy currently consists of 50,000,000
Common Shares. As at March 31, 2000, there were 18,496,505 Common Shares
issued and outstanding.
The holders of Common Shares are entitled to dividends if, as and when
declared by the board of directors, to one vote per Common Share and,
upon the dissolution of Envoy, to receive the remaining property and
the assets of Envoy available for distribution.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Shares
offered hereunder are estimated to be approximately $9,024,997.20
($10,423,742.54 if the Over-Allotment Option is exercised in full),
after deducting expenses payable by the Company, including the
Underwriter's Fee (as defined herein).
The Company expects to use the net proceeds from the offering primarily
to assist the Company in executing its acquisition strategy in North
America, the U.K. and Europe.
PLAN OF DISTRIBUTION
Pursuant to an underwriting agreement dated as of May 26, 2000 (the
"Underwriting Agreement") between Envoy and Canaccord Capital
Corporation (the "Underwriter"), Envoy has agreed to sell and the
Underwriter has agreed to purchase on June 2, 2000 or such later date
as Envoy and the Underwriter may agree, but in any event not later than
June 7, 2000, all but not less than all the 1,428,571 Common Shares
offered hereunder at a price of $7.00 per Common Share. The
Underwriting Agreement provides for Envoy to pay the Underwriter a fee
(the "Underwriter's Fee") of $0.4725 per Common Share sold pursuant to
the offering.
As additional compensation, the Company has agreed to issue to the
Underwriter Common Share purchase warrants (the "Compensation Warrants")
to purchase up to 71,428 Common Shares at 110 percent of the issue price
of the Common Shares offered hereunder for a period of 12 months from
the closing of the offering. This prospectus also qualifies the
distribution of the Compensation Warrants.
The Underwriting Agreement provides that the obligations of the
Underwriter may, at its discretion, be terminated on the basis of
its assessment of the state of financial markets and may also be
terminated upon the occurrence of certain stated events.
Envoy has also granted to the Underwriter an option (the
"Over-Allotment Option") to acquire, at the issue price of the Common
Shares offered hereunder, up to an aggregate of 214,285 additional
Common Shares. If the Underwriter exercises such option in full, the
total issue price will be $11,499,992, the total Underwriter's Fee
will be $776,249.46 and the total net proceeds to Envoy (before
deducting expenses payable by the Company) will be $10,723,742.54.
The Underwriter may exercise the Over-Allotment Option in whole or in
part at any time up to 30 days following the closing of the offering
to cover over-allotments, if any, and for market stabilization purposes.
This short form prospectus qualifies the Common Shares issuable upon
exercise of the Over-Allotment Option.
The purchaser of Common Shares on the resale of such shares by the
Underwriter may be required to pay a commission at a rate to be
negotiated with the Underwriter.
The Company has applied to list the Common Shares offered hereunder
(including the Common Shares issuable on the exercise of the
Over-Allotment Option) on the TSE. Listing will be subject to the
Company fulfilling all the listing requirements of the TSE.
Envoy has agreed to indemnify the Underwriter and its directors,
officers, employees and agents against certain civil liabilities.
Pursuant to policy statements of the Ontario Securities Commission,
the Underwriter may not, throughout the period of distribution under
the offering, bid for or purchase the Common Shares. The foregoing
restriction is subject to exceptions, on the condition that the bid
or purchase not be engaged in for the purpose of creating actual or
apparent active trading in, or raising the price of, the Common Shares.
Such exceptions include a bid or purchase permitted under the by-laws
and rules of the TSE relating to market stabilization and passive
market-making activities and a bid or purchase made for and on
behalf of a customer where the order was not solicited during the
period of distribution. Pursuant to the first-mentioned exception, in
connection with this offering and subject to applicable Canadian law,
the Underwriter may over-allot or effect transactions which stabilize
or maintain the market price of the Common Shares at levels other than
those which might otherwise prevail on the open market. Such
transactions, if commenced, may be discontinued at any time.
The Common Shares offered hereunder have not been and will not be
registered under the United States Securities Act of 1933, as amended
(the "1933 Act"), and may not be offered or sold in the United States
except in a transaction exempt from the registration requirements of
the 1933 Act. The Underwriter has agreed that, except as permitted
under the Underwriting Agreement, it will not offer or sell the
Common Shares at any time within the United States. In addition, until
40 days after the commencement of this offering, any offer or sale of
Common Shares in the United States by a dealer (whether or not
participating in the offering) may violate the registration
requirements of the 1933 Act if such offer or sale is made otherwise
than in accordance with an exemption under the 1933 Act. Certificates
representing any common shares which are sold within the United States,
or any certificate issued upon transfer or exchange thereof, will
contain, for so long as such may be required under the 1933 Act, a
legend to the effect that the securities represented thereby are not
registered under the 1933 Act and may not be offered or sold (other
than to the Company) in the absence of registration under the 1933 Act
or pursuant to certain exemptions therefrom.
DIVIDEND POLICY
Envoy has not paid any cash dividends on its Common Shares to date. The
Company currently intends to retain earnings to finance the operations
of the business and, therefore, the Company does not anticipate paying
cash dividends in the foreseeable future. The Company's dividend policy
will be reviewed from time to time in the context of the Company's
earnings, financial condition and other relevant factors.
RISK FACTORS
An investment in the Common Shares offered hereunder involves certain
risks which should be carefully considered by prospective investors.
See "Business of Envoy -Risk Factors" in the Annual Report of the
Company filed on Form 20-F dated February 16, 2000 referred to under
"Documents Incorporated by Reference".
ELIGIBILITY FOR INVESTMENT
In the opinion of Blake, Cassels & Graydon LLP and Swinton & Company,
the Common Shares offered hereunder, if issued on the date hereof,
would be qualified investments for the purposes of the Income Tax Act
(Canada) for trusts governed by registered retirement savings plans,
registered retirement income funds, deferred profit sharing plans and,
under proposed amendments to the Regulations under such Act, for trusts
governed by registered education savings plans within the meaning of
such Act.
In addition, in the opinion of such counsel based on the current
provisions of such Act, the Common Shares, if, as and when listed on a
prescribed stock exchange, will be qualified investments under such Act
for trusts governed by registered education savings plans within the
meaning of such Act.
LEGAL MATTERS
Certain legal matters relating to the Common Shares offered hereunder
will be passed upon by Blake, Cassels & Graydon LLP on behalf of the
Company and by Swinton & Company on behalf of the Underwriter. The
partners and associates of Blake, Cassels & Graydon LLP, as a group,
and the partners and associates of Swinton & Company, as a group, each
beneficially own, directly or indirectly, less than one percent of the
outstanding Common Shares.
AUDITORS, TRANSFER AGENT AND REGISTRAR
The auditors of the Company are KPMG LLP, 4120 Yonge Street, Suite 500,
Toronto, Ontario, M5P 2B8.
Montreal Trust Company of Canada is the transfer agent and registrar for
the Common Shares at its principal offices in Toronto, Ontario.
PURCHASERS' STATUTORY RIGHTS
Securities legislation in several of the provinces of Canada provides
purchasers with the right to withdraw from an agreement to purchase
securities within two business days after receipt or deemed receipt of
a prospectus and any amendment thereto. In several of the provinces,
securities legislation further provides a purchaser with remedies for
rescission or, in some jurisdictions, damages where the prospectus and
any amendment contains a misrepresentation or is not delivered to the
purchaser, provided that such remedies for rescission or damages are
exercised by the purchaser within the time limit prescribed by the
securities legislation of the purchaser's province. The purchaser
should refer to any applicable provisions of the securities legislation
of the purchaser's province for the particulars of these rights or
consult with a legal adviser.
CERTIFICATE OF THE COMPANY
Dated: May 29, 2000
The foregoing, together with the documents incorporated herein by
reference, constitutes full, true and plain disclosure of all material
facts relating to the securities offered by this short form prospectus
as required by the securities laws of the provinces of British Columbia,
Alberta and Ontario.
(Signed) GEOFFREY B. GENOVESE
President and
Chief Executive Officer
(Signed) J. JOSEPH LEEDER
Chief Financial Officer
On behalf of the Board of Directors:
(Signed) JOHN H. BAILEY
Director
(Signed) DAVID HULL
Director
CERTIFICATE OF THE UNDERWRITER
Dated: May 29, 2000
To the best of our knowledge, information and belief, the foregoing,
together with the documents incorporated herein by reference,
constitutes full, true and plain disclosure of all material facts
relating to the securities offered by this short form prospectus as
required by the securities laws of the provinces of British Columbia,
Alberta and Ontario.
CANACCORD CAPITAL CORPORATION
By: (Signed) PETER M. BROWN
The following includes the name of each person having an interest,
either directly or indirectly, to the extent of not less than 5% of
the capital of:
CANACCORD CAPITAL CORPORATION: Peter M. Brown (through The MacLachlan
Investments Corporation), Bradley D. Griffiths and Michael G. Greenwood
(directly and through 728541 Alberta Ltd.).
Their interests are held indirectly through Canaccord Investment Ltd.
and Canaccord Holdings Ltd.
