Mr. Dirk Schlimm of Zuni reports
ZUNI HOLDINGS AND PACIFIC SAFETY PRODUCTS AGREE TO BUSINESS COMBINATION
Zuni Holdings Inc. and Pacific Safety Products Inc. have signed a letter of intent to complete a business combination by way of a court-approved plan of arrangement of Zuni. Under the LOI, PSP has agreed to acquire all of the outstanding common shares of Zuni in exchange for PSP common shares at an agreed exchange ratio of one PSP common share for each Zuni common share.
Under the terms of the LOI:
- Zuni shareholders will receive one PSP common share for each Zuni common share.
- Following completion of the merger, PSP will be owned 45.8 per cent by current PSP shareholders and 54.2 per cent by current Zuni shareholders, based on the current shares issued and outstanding. On a partially diluted basis, assuming exercise or conversion of all outstanding warrants and debentures of PSP, PSP will be owned 55.7 per cent by current PSP shareholders and 44.3 per cent by current Zuni shareholders.
- Upon completion of the merger, PSP's board will be composed of each of the present directors of Zuni and PSP. Daniel Marks will continue as executive chairman of PSP, and Doug Lucky will continue as chief executive officer of PSP.
Each of Zuni and PSP formed a special committee composed of independent directors to negotiate the LOI and consider the merger.
The LOI includes reciprocal commitments by Zuni and PSP not to solicit or initiate discussions concerning alternative transactions to the proposed merger. If the merger is terminated, and, within six months of such termination, the terminating party enters into an agreement relating to the acquisition of a material portion of the shares of such party, or such party's assets or business in whole or in substantial part, and such alternative transaction is consummated, then, upon closing of such transaction, the terminating party will pay to the non-terminating party: (i) $150,000 if no definitive agreement in respect of the merger has been executed; or (ii) $150,000 plus expenses incurred by the non-terminating party in relation to the merger up to a maximum of $100,000 if a definitive agreement in respect of the merger has been executed.
The board of directors of Zuni believes this transaction optimizes the value of the remaining assets of the company. The board of directors of PSP believes this transaction will solidify its capital position and allow it to take advantage of significant growth opportunities that are available to the company. Both boards anticipate that the merger will create savings with the elimination of numerous redundant administrative, public company and other costs.
The merger will be subject to a number of conditions, including the negotiation of a mutually satisfactory merger agreement, completion of due diligence to the satisfaction of each of Zuni and PSP, and customary closing conditions, including receipt of all necessary shareholder, court and regulatory approvals, including the approval of the NEX and the TSX Venture Exchange. Full details of the merger will be included in the management information circular to be filed with the regulatory authorities and mailed to shareholders in accordance with applicable securities laws. The merger is currently expected to close in late December, 2010.