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Bullboard - Stock Discussion Forum HS Govtech Solutions Inc HDSLF

HS Govtech Solutions Inc. is a Canada-based software-as-a-service company. The Company's principal business activity is the development and sale of information and communication management systems for health inspection departments of federal, provincial, state, and municipal governments in Canada and the United States of America. The Company is focused on providing an efficient data and... see more

OTCQB:HDSLF - Post Discussion

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Post by freedom45 on Sep 18, 2023 8:24am

NEWS

HS GOVTECH ANNOUNCES EXECUTION OF ARRANGEMENT AGREEMENT

Canada NewsWire

All Cash Transaction Values the Company at approximately $33.3 million

VANCOUVER, BCSept. 18, 2023 /CNW/ - HS GovTech Solutions Inc. ("HS GovTech", or the "Company") (CSE: HS) (Frankfurt: 38H) (OTC: HDSLF), a leading provider of SaaS applications for government, is pleased to announce that it has entered into a definitive arrangement agreement (the "Arrangement Agreement") with a British Columbia subsidiary of a US private equity fund operated by Banneker Partners LLC (the  "Purchaser"), pursuant to which the Purchaser will acquire all of the issued and outstanding common shares of the Company (the "Shares"), on a fully diluted basis, for an all-cash consideration of $0.54 per Share (the "Transaction").

Key Transaction Highlights
  • HS GovTech shareholders to receive $0.54 per Share in cash, representing an aggregate transaction value of approximately $33.3 million.
  • The purchase price represents a 151.2% premium to the closing price of $0.215 and a 174.1% premium to the 20-day volume weighted price of $0.197 per Share on September 15, 2023.
  • Both a special committee comprised of directors of HS GovTech (the "Special Committee") and the board of directors (the "Board") of the Company (with conflicted directors abstaining) unanimously recommend that HS GovTech securityholders vote in favour of the Transaction.
  • The Transaction is subject to customary closing conditions, including approval from HS GovTech securityholders.

Ali Hakimzadeh, Chair of the Company's Board, commented, "We are pleased to announce this Transaction with Banneker Partners, which offers our securityholders a significant premium to the recent trading price of the Company's shares. After careful consideration, the Special Committee and the Company's Board have both unanimously concluded (with conflicted directors abstaining) that the Transaction is fair to HS GovTech's securityholders and recommends that they vote in favour of the Transaction."

Kenneth Frank, Partner at Banneker Partners, commented "HS GovTech's robust technology platform, innovative product portfolio and committed team have proven themselves in delivering mission-critical tools to agencies supporting our communities." Hugh Kirkpatrick, Principal at Banneker, added "We are excited to partner with HS GovTech's talented management team to drive continued growth, as we build upon their leading government software platform and bring new solutions to the market."

Silas Garrison, Chief Executive Officer of the Company, stated "I am excited about partnering with Banneker Partners to continue delivering the best service and platform available in the market.  This partnership will allow us to invest even more into new features and products that will further our mission of helping government agencies operate more efficiently by going beyond data management."

Transaction Summary

Pursuant to the terms and conditions of the Arrangement Agreement, the Purhaser has agreed to acquire 100% of the issued and outstanding Shares for consideration of $0.54 in cash per Share. The consideration reflects a 151.2% premium to the closing price of the Shares on the Canadian Securities Exchange (the "CSE") of $0.215 on September 15, 2023, the last trading day of the Shares prior to the announcement of the Transaction. The Transaction will be implemented by way of a court-approved plan of arrangement under the Business Corporations Act (British Columbia) (the "Arrangement"). Pursuant to the Arrangement, the Purchaser will pay a total of approximately $31,622,489 million for the fully diluted equity of the Company.

In connection with entry into the Arrangement Agreement, the Purchaser has also provided a US$500,000 non-convertible, unsecured, 10% interest bearing loan to the Company, in part to pay expenses related to the Transaction.

The Board (other than non-independent directors who abstained from voting on the Transaction), after receiving the unanimous recommendation of the Special Committee, has determined that the Arrangement, including the transactions contemplated thereunder, is fair to holders of Shares (the "Shareholders"), holders of options ("Options") to acquire Shares (the "Option Holders"), holders of restricted share units ("RSUs") to acquire Shares (the "RSU Holders"), and holders of warrants ( "Warrants") to acquire Shares (the "Warrant Holders", together with the Shareholders, the Option Holders, and the RSU Holders, the "Securityholders"), and is in the best interests of the Company. Accordingly, the Board approved the Arrangement Agreement and recommends that Securityholders vote their securities in favour of the Arrangement. In making its recommendation, the Board considered a number of factors, including the receipt of a fairness opinion from Echelon Capital Markets which determined that, subject to the assumptions, limitations, qualifications and other matters set forth therein, the consideration offered to Securityholders is fair, from a financial point of view, to the Shareholders.

Each of the directors and executive officers of the Company who hold in the aggregate approximately 8.99% of the issued and outstanding Shares (assuming no exercise of existing convertible securities) have entered into voting and support agreements with the Purchaser and have agreed to, among other things, vote their securities in favour of the Arrangement.

The Arrangement Agreement

Pursuant to the Arrangement, each Share outstanding immediately prior to the effective time of the Arrangement will be transferred to and purchased by the Purchaser for consideration of $0.54 per Share and each Option, Warrant, and RSU outstanding immediately prior to the effective time of the Arrangement will be cancelled in exchange for a cash payment equal to the amount (if any) by which $0.54 exceeds the exercise price of such Option, Warrant, or RSU, as applicable. The Company's outstanding non-convertible debentures with a principal amount of $2,195,000 plus interest at a rate of 10% per annum will be repaid in connection with closing of the Arrangement. Pursant to section 3.7 of the Company's RSU Plan, the payment of consideration under the Arrangement to RSU Holders who are U.S. persons will be conditional upon receipt by the Company of an indemnity from such RSU Holder respecting the payment of applicable income or other taxes.

The implementation of the Arrangement will require court approval and the approval of (i) at least two-thirds (66%) of the votes cast by the Shareholders, (ii) at least two-thirds (66%) of the votes cast by all the Securityholders, voting together as a single class, and (iii) at least a simple majority of the votes cast by Shareholders, excluding votes from certain shareholders as required under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions, at a special meeting (the "Special Meeting") of the Securityholders. An announcement about the exact timing of the Special Meeting will follow in the near future.

In addition to Securityholder and court approvals, the Arrangement is subject to applicable regulatory approvals and the satisfaction of certain other closing conditions customary in transactions of this nature. Subject to the satisfaction (or waiver) of the conditions precedent, the Arrangement is expected to close in late November, 2023. The Arrangement Agreement includes customary provisions relating to non-solicitation of alternative transactions, subject to customary "fiduciary out" provisions that entitle the Company to consider and accept a superior proposal if not matched by the Purchaser. The Company has also agreed to pay a termination fee to the Purchaser of $1,375,000 in connection with termination of the Arrangement Agreement due to the occurrence of certain events, including if the Arrangement is not completed as a result of a superior proposal. Further, the Arrangement Agreement provides for a reciprocal expense reimbursement fee of up to $400,000 if the Arrangement Agreement is terminated by the Company or the Purchaser, as the case may be, in certain specified circumstances.

Full details of the Arrangement Agreement and the Special Meeting will be included in a management information circular of the Company (the "Management Information Circular") to be filed with applicable regulatory authorities and mailed to Securityholders in accordance with applicable securities laws.

Securityholders and other interested parties are advised to read the materials relating to the proposed Arrangement, including the Arrangement Agreement that will be filed by the Company with securities regulatory authorities in Canada when they become available.  Anyone may obtain copies of these documents when available free of charge on the Company's profile at the Canadian Securities Administrators' website at www.sedarplus.ca.

Upon completion of the Transaction, no securities of the Company will be listed on any public market and the Company will cease to be a reporting issuer under Canadian laws.

Echelon Capital Markets acted as financial advisor to the Company and the Special CommitteeMcMillan LLP acted as legal counsel to the Company, Stikeman Elliott LLP, and Orrick Herrington & Sutcliffe LLP acted as legal counsel to the Purchaser, and Wildeboer Dellelce LLP acted as counsel to Echelon Capital Markets. 

This announcement is for informational purposes only and does not constitute a solicitation or a proxy.  All amounts are in Canadian currency unless otherwise stated.

Comment by bluemoons20 on Nov 02, 2023 4:18pm
Does anyone  know when this is likely to take place??  Have not seen anything about a meeting  or?? Any information would be great. thanks GLTA
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