Feb.8/2018 Adira proposed transaction/MUCH more on SEDARUPDATE REGARDING PROPOSED TRANSACTION BETWEEN SMAART HOLDINGS INC. AND ADIRA ENERGY LTD.
Toronto – February 8, 2018 – Adira Energy Ltd. (“Adira” or the “Company”) (TSX-V:ADL) and SMAART Holdings Inc. (the “Target”) wish to provide additional information concerning the background to the proposed transaction between these two companies as most recently outlined in the press release dated August 10, 2017 and the information circular of the Company dated January 10, 2018 (the “Information Circular”). The following disclosure is intended to ensure compliance with Multilateral Instrument 61-101- Protection of Minority Security Holders in Special Transactions (“MI-61-101”).
Background to the Transaction
In the first half of 2015, management, directors and the shareholders of the Company considered the current status of Adira as a publicly listed company. As an oil and gas exploration company, the prevailing conditions in the public capital markets meant that accessing funds to further any exploration efforts was challenging. Without a future capital infusion or access to capital, the Company would not be viable as a going concern and unable to meet its obligations as a public company.
As such, Adira began to explore other means to raise additional capital. Through an existing shareholder of Target, the Company was made aware of this company and its wish to go public. Negotiations ensued in which a transaction was contemplated whereby the Target would go public by utilizing the Company’s status as a reporting issuer in the provinces of British Columbia, Alberta and Ontario.
On November 4, 2015, such negotiations were formalized through the entering into of a nonbinding letter of intent (the “LOI”). Pursuant to the LOI, it was contemplated that the Target would amalgamate with a wholly owned subsidiary of the Company to form a new company (“Amalco”). Adira would therefore own all of the assets of the Target through its 100% ownership of Amalco, and in return the shareholders of the Target would receive shares of Adira (the “Transaction”). Through a proposed consolidation, it was contemplated that the former Adira shareholders would own 10% of Adira following the completion of the Transaction (the “Resulting Issuer”), while the former shareholders of the Target would own the remaining 90%.
Throughout 2016 and the first half of 2017, both Adira and the Target engaged in due diligence concerning each company’s respective operations and relevant financial, legal and accounting matters. In particular, the Target and Adira completed the necessary financial and accounting work necessary to prepare the books of the Target as a prelude to completing the audit that would be required to take the Target public. With such accounting issues satisfactorily completed, the Target and the Company prepared to advance the Transaction.
In order to reflect the prevailing market conditions and consistent with the results of the due diligence review of Adira and the Target, a revised LOI was entered into on August 9, 2017 (the “Revised LOI”). While the structure of the Transaction remained largely consistent with the original LOI, it was determined that the former shareholders of the Target would now own 95%
of the Resulting Issuer, and the former Adira shareholders 5%........