A potential buyer of Crocus Investment Fund has made an offer that includes cash and shares for the fund’s investors. The offer has made Crocus unitholders more optimistic than they have been since the beleaguered labour-sponsored fund ceased trading in December 2004.

David Levi, CEO of GrowthWorks Capital Ltd. , presented about 650 Crocus unitholders with an offer at a special meeting in Winnipeg last month. The proposal, which has been presented to the Crocus receiver, Deloitte & Touche LLP, would provide each investor with $1.55 a share in cash plus $4.43 worth of shares in the GrowthWorks Canadian Fund.

“We’re proposing to merge the shares of Crocus into our Canadian fund,” Levi says. “We’re also proposing to pay out $22 million of the cash that’s on hand. That’s about 50% more than the receiver’s stated proposal.”

As good as it gets

In January, Deloitte asked a Manitoba court to approve a $14.2-million payout to the fund’s 33,662 shareholders. A decision is pending.

Bernie Bellan, the disgruntled Crocus shareholder who called the meeting, says the GrowthWorks offer is even better than what was originally proposed to the Crocus Investors Association.

“I think this is about as good as we can get,” he says. “This is the first time we’ve had an offer that does two things: first, it promises to put a considerable amount of cash in everyone’s pocket immediately. Second, it doesn’t require that our lawsuit be dropped. That gives us more reason to be optimistic than anything else that has happened in the past year-and-a-half.”

Bellan is leading the charge in a $200-million civil lawsuit against Crocus’s former officers and directors; investment dealers Wellington West Capital Inc. and BMO Nesbitt Burns Inc. ; auditor PricewaterhouseCoopers LLP; and the Manitoba Securities Commission.

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

Deloitte acknowledged receipt of the GrowthWorks offer in a statement: “Deloitte will review the proposal and may be able to report on it in its next quarterly report to the Manitoba Court of Queen’s Bench, which is to be filed by mid-April.

“In reviewing the proposal, Deloitte must consider the interests of all parties and assess the impact of the proposal on any agreements [that] Crocus may have entered into with its investee companies, among others.”

If GrowthWorks is successful in acquiring Crocus, it will mark the fourth struggling fund it has taken over in the past 18 months. The others were Canadian Science and Technology Growth Fund and Capital Alliance Ventures Fund, both formerly owned by Fullarton Capital Corp. of London, Ont.; and Workers Investment Fund, an independent fund based in New Brunswick.

Bellan is collecting signatures to hold another specially convened meeting of Crocus shareholders, at which the GrowthWorks proposal would be put to a vote. More than 600 unitholders signed up at the early March meeting and, he says, more signatures are rolling in daily. His goal is 1,700, representing 5% of Crocus shareholders — a threshold he feels is sufficient to force such a meeting.

But Bellan isn’t optimistic one will be granted by Russ Holmes, the Deloitte partner in charge of the Crocus receivership.

“We expect he’ll turn us down immediately, based on everything else he’s done. He hasn’t been that co-operative. Then we’ll take it to court,” Bellan says.

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 MSC and an RCMP investigation into allegations of criminal activity.