It looks like NES has raised capital to cancel the deal.Newstrikes last audited filed statements show cash of $3.6M
The purchase agreement calls for a $5.5 termination fee by either side. Assuming a modest reduction in NES's cash position since their last date of filing...the loan might suggest that NES raised a quick $2M to cancel the deal or try to renegotiate the deal given the sudden decrease in the pps of both companies. When the deal was issued, TMM was at $1.28 and NES was at $0.96. The swap calls for an exchange of NES shares for TMM shares at a rate of NES:TMM x0.9. One month ago that meant that a $0.96 share of NES was valued at 0.9 x $1.28 = $1.15 which was a nice 20% premium given that NES shares were $0.96 that day. Today, a $0.72 NES share is worth .9 x $0.82 or $.74 which is only a 3% premium which is essentially nothing. Interesting is the maturity of the loan agreement which calls for it to end at the closing of the TMM deal. The loan agreement that NES just took out was also arranged for by two shareholders of NES. To me, it looks like NES has raised capital to cancel the TMM deal.
The NES loan terms:
The Debenture will mature on the date that is the earlier of: (i) the closing of the arrangement (the “Arrangement”) contemplated by the Arrangement Agreement (the “Arrangement Agreement”) dated February 16, 2015 between the Company and Timmins Gold Corp. (“Timmins”); and (ii) August 31, 2015 (the “Maturity Date”).
TMM and NES Agreement terms:
Under the terms of the Arrangement, Newstrike shareholders will receive 0.9 (the “Exchange Ratio”) of a Timmins Gold common share (a “Timmins Gold Share”) and C$0.0001 in cash for each Newstrike common share (a “Newstrike Share”), representing the equivalent of C$1.15 per Newstrike Share and a premium of 20.0% based on the closing prices of the Timmins Gold Shares on the Toronto Stock Exchange (“TSX”) and the Newstrike Shares on the TSX Venture Exchange (“TSX-V”) on February 13, 2015, and C$1.20 per Newstrike Share and a premium of 22.4% based on the 20-day volume-weightedaverage-price (“VWAP”) of the Timmins Gold Shares on the TSX and the Newstrike Shares on the TSX-V as of February 13, 2015. The Exchange Ratio implies a total transaction value of approximately C$140 million on a fully-diluted in the money basis. In addition, each outstanding option to purchase a Newstrike Share will be exchanged for an option to purchase a Timmins Gold Share, based upon the Exchange Ratio.
TMM and NES termination clause:
The Arrangement Agreement includes a reciprocal non-solicitation covenant, the right of either Newstrike or Timmins Gold to accept a superior proposal in certain circumstances, with each party having a 5 business day right to match any such superior proposal for the other party. The Arrangement Agreement also provides for the payment by each of Newstrike and Timmins Gold of a C$5.5 million termination fee if the Arrangement is terminated in certain specified circumstances.