RE:RE:RE:Halt trading: pending news Pediapharm Announces Closing of Subscription Receipt Offering for Total Gross Proceeds of $62 Million
Pediapharm Inc. ("Pediapharm") (TSXV: PDP, OTCQB: PDDPF) is pleased to announce the closing today of its previously announced private placement offering (the "Offering") of Subscription Receipts (as defined below). The Offering consisted of both a brokered private placement (the "Brokered Offering"), co-led by Cormark Securities Inc. and Mackie Research Capital Corporation, as co-lead agents and joint bookrunners (the "Agents"), and a concurrent non-brokered private placement (the "Non-Brokered Offering"). The Non-Brokered Offering was assisted by Goodwood Inc. ("Goodwood"). Due to substantial interest, Pediapharm increased the size of the Offering from the initially announced $60 million and today closed the Offering for aggregate gross proceeds of approximately $62 million.
The Offering consisted of the issuance of a combination of (i) subscription receipts exchangeable for units ("Units"), with such Units being comprised of one (1) common share of Pediapharm ("Common Share") and one half (1/2) of one Common Share purchase warrant ("Unit Subscription Receipts"), and (ii) subscription receipts exchangeable for convertible debentures ("Convertible Debentures"), with such Convertible Debentures being convertible into units, each comprised of one (1) Common Share and one half (1/2) of one Common Share purchase warrant ("Debenture Subscription Receipts", and, together with the Unit Subscription Receipts, the "Subscription Receipts"). Pursuant to the Offering, Pediapharm issued 58,676,397 Unit Subscription Receipts, representing aggregate subscription proceeds of approximately $20 million, and 42,000 Debenture Subscription Receipts, representing aggregate subscription proceeds of $42 million.
In connection with the Offering, the Agents (a) earned cash commissions in the aggregate amount of approximately $2,236,500 (the “Cash Commission”), equal to a cash fee of 7.0% for the aggregate gross proceeds raised in the Offering in excess of $30,000,000, which Cash Commission will be held in escrow pending satisfaction of the escrow release conditions set out in the Subscription Receipt Agreement (as defined below); and (b) received 2,867,306 Common Share purchase warrants ("Compensation Warrants"), each one (1) Compensation Warrant being exercisable for one Common Share at an exercise price of $0.63 per Common Share. The Compensation Warrants are exercisable for a period of 36 months following closing. Pediapharm will also pay cash commissions in the total amount of approximately $1,090,090 to registered dealers involved in the Non-Brokered Offering (the "Dealers' Commission") on satisfaction of the escrow release conditions set out in the Subscription Receipt Agreement.
The Offering was completed in connection with Pediapharm's previously announced acquisitions of Medac Pharma, Inc. and Medexus Inc. (the "Acquisitions"). A portion of the net proceeds from the Offering will be used to fund the cash purchase price of Pediapharm's previously announced acquisition of Medac Pharma, Inc., with the balance of the proceeds to be used for the ongoing operations and strategic initiatives of Pediapharm.
The proceeds from the sale of Subscription Receipts pursuant to the Offering (including the Agents’ Cash Commission and the Dealers' Commission but less certain expenses of the Agents) will be held in escrow, pursuant to the terms of a subscription receipt agreement entered into between Pediapharm, the Agents, Goodwood, and the subscription receipt agent (the “Subscription Receipt Agreement”) concurrently with closing of the Offering, pending satisfaction of the escrow release conditions set out in the Subscription Receipt Agreement. It is expected that the Acquisitions will be completed on or about October 16, 2018, following which and assuming the satisfaction of the other escrow release conditions set out in the Subscription Receipt Agreement, the Subscription Receipts will be automatically exchanged into Convertible Debentures or Units, as applicable, and the net proceeds of the Offering will be released to Pediapharm.
The Subscription Receipts were distributed to subscribers in Canada, to investors in the United States pursuant to available exemptions from the registration requirements of the United States Securities Act of 1933, as amended, and in certain other jurisdictions. Completion of the Offering is subject regulatory approval including, but not limited to, approval of the TSX Venture Exchange. The Subscription Receipts are, and the underlying securities issuable upon exchange of the Subscription Receipts will be, subject to a four month hold period from the date of issuance of the Subscription Receipts.
Please visit Pediapharm's profile on www.sedar.com for further information with respect to the Offering and Acquisitions, including Pediapharm's news release dated September 6, 2018 announcing the Acquisitions and the Offering.
Related Party Participation in the Offering
Insiders subscribed for an aggregate of 5,982,352 Unit Subscription Receipts in the Offering. As insiders of Pediapharm participated in this Offering, it is deemed to be a “related party transaction” as defined under Multilateral Instrument 61-101-Protection of Minority Security Holders in Special Transactions ("MI 61-101").
Neither Pediapharm, nor to the knowledge of Pediapharm after reasonable inquiry, a related party, has knowledge of any material information concerning Pediapharm or its securities that has not been generally disclosed.
The Offering is exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 pursuant to subsections 5.5(c) and 5.7(1)(b)) of MI 61-101 as it was a distribution of securities for cash and neither the fair market value of the Subscription Receipts distributed to, nor the consideration received from, interested parties exceeded $2,500,000.
Pediapharm did not file a material change report more than 21 days before the expected closing of the Offering because the details of the participation therein by related parties of Pediapharm were not settled until shortly prior to closing of the Offering and Pediapharm wished to close on an expedited basis for commercial reasons.