TORONTO, ONTARIO--(Marketwired - July 26, 2013) -
NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES.
Whiteknight Acquisitions II Inc. ("Whiteknight") (TSX VENTURE:WKN.P), a Capital Pool Company, is pleased to announce the restructuring of its Qualifying Transaction by reverse take-over ("RTO") with Diamond Estates Wines & Spirits Ltd. ("Diamond Estates") previously announced on December 19, 2012 and updated by press release on April 16, 2013. Whiteknight previously announced that it would be completing a share consolidation in anticipation of the Qualifying Transaction with Diamond Estates and under the restructured terms of the transaction there will no longer be a consolidation. Subject to regulatory approval, pursuant to the RTO, Whiteknight will acquire all of the issued and outstanding common shares of Diamond Estates, to be satisfied by issuing one common share of WKN for each common share of Diamond Estates issued and outstanding, at a deemed issuance price of $0.20 per share. Diamond Estates currently has 19,431,102 voting shares issued and outstanding. The total number of common shares exchanged will be 26,463,978 assuming conversion of all outstanding convertible securities of Diamond Estates prior to closing of the Qualifying Transaction.
Diamond Estates has signed a term sheet for an equity financing from Oakwest Corporation Limited ("Oakwest"), whereby Oakwest will subscribe in the offering for up to a maximum of $4.25 million, provided that minimum gross proceeds (including its subscription) of $8.75 million (being a minimum of 43,750,000 sub receipts sold) are raised in the offering (the "Offering"). Oakwest, a corporation controlled by the Beutel family, currently owns approximately 8% of the issued and outstanding voting shares of Diamond Estates. Paradigm Capital Inc. will continue to act as lead agent (the "Agent"), on behalf of a syndicate of agents, including Canaccord Genuity Corp., for Diamond Estates to sell on a "best efforts" private placement basis, and without underwriter liability, subscription receipts of Diamond Estates (the "Subscription Receipts") offered at a subscription price of $0.20 per Subscription Receipt. It is now intended that the Offering and the RTO will close in August 2013.
Each Subscription Receipt will be convertible for one common share of Diamond Estates upon satisfaction of certain conditions (the "Conditions"), as discussed below, which must be satisfied within 120 days following the closing of the Offering. The gross proceeds of the Offering will be held in escrow until the Conditions have been satisfied. In connection with the RTO, the common shares issued pursuant to conversion of the Subscription Receipts will be exchanged for an equivalent number of common shares of the issuer resulting from the RTO (the "Resulting Issuer"). The Conditions are: (i) a definitive agreement between Whiteknight and Diamond Estates regarding the RTO shall have been entered into on terms acceptable to the Agent and certain conditions precedent to the RTO shall have occurred, (ii) the TSX Venture Exchange shall have conditionally approved the listing of common shares of the Resulting Issuer, (iii) the receipt of all regulatory, shareholder and third-party approvals, if any, required in connection with the RTO, and (iv) Diamond Estates and Whiteknight shall not be in breach of any conditions of agreements entered into between Diamond Estates and Whiteknight and the Agent pursuant to the Offering, including compliance with all of the covenants prescribed by the lenders to Diamond Estates in respect of outstanding indebtedness, and the refinancing (or conversion into Resulting Issuer securities upon closing of the RTO) of existing indebtedness in a manner satisfactory to the Agent. Upon completion of the Offering and the RTO, Oakwest will hold approximately 22,962,382 common shares of the Resulting Issuer, being approximately 33% of all issued and outstanding common shares of the Resulting Issuer.
The material conditions required to be fulfilled by the parties prior to closing include the following: (i) closing of the Offering for minimum gross proceeds of $8.75 million; (ii) restructuring Diamond's existing debt; (iii) receiving all necessary regulatory and third party approvals and authorizations; (vi) approval by each of the board of directors of Diamond and WKN, and the shareholders, if necessary; (vii) the entering into of satisfactory employment agreements for senior management; (viii) confirmation of no material adverse change having occurred to either entity prior to close; (ix) the completion of a definitive agreement setting forth the terms and conditions for the transaction; (x) the completion of due diligence satisfactory to each party; (xi) the completion of a sponsorship report satisfactory to the Exchange (or waiver by the Exchange of that requirement); and (xii) satisfaction of WKN and Diamond with the terms and amounts of "Key-person" life insurance policies on senior management personnel.
It is intended that the resulting issuer will be listed as a Tier 2 industrial company. The parties will be seeking a waiver of any requirement for a Sponsor, but in the event a waiver is not available, will seek a sponsorship relationship for this transaction with an Exchange member firm, and will update the markets accordingly. The proposed Qualifying Transaction will constitute an arm's length transaction, and as such, will not require approval by the shareholders of WKN.
Debt Restructuring:
Diamond Estates has received an offer from its principal banker, Meridian Credit Union ("Meridian"), for a $10 million first mortgage, secured as to a first charge on the land and buildings at the Diamond Estates winery in Niagara-on-the-Lake. Pursuant to this offer Meridian would retain its mortgage on the De Sousa (Beamsville) winery (approximately $950,000), and the current operating line of up to $13 million (using a borrowing base of eligible inventory and receivables) would remain in place.
Management & Board Restructuring:
Diamond Estates has bolstered its executive team to assist it with the build out of the business and is pleased to announce that J. Murray Souter, an individual with significant and valuable experience in retail and sales markets, will serve as Chief Executive Officer and a Director of Diamond Estates. Prior to joining Diamond Estates, Mr. Souter served as the President and CEO of Black's Photography, Canada's largest photo specialty retailer (2004-2008). Mr. Souter has also served as President and Managing Partner of Souter, Care and Associates Ltd. (2002-2004), a management consulting company, and worked with Sprint Canada Inc. (2000-2002) as President, Consumer & Small/Medium Business Division. Mr. Souter is the current Managing Partner of Innuvia Partners Inc., a Toronto based company focused on providing strategic, operational and financial support to entrepreneurs and companies. Mr. Souter has an extensive background in consumer packaged goods with well-known companies such as Nabisco, Frito-Lay, Reebok and Bauer Hockey. Mr. Souter holds a B.B.A. (Hons.) in Business from Wilfred Laurier University. Mr. Souter will work with the current management of Diamond Estates - Mr. Murray Marshall and Mr. Andrew Green.
The Board of Directors of the resulting issuer will consist of Mr. Souter, David Beutel, Craig Graham, John DeSousa (currently a director of Diamond), John Hick, Harold Wolkin, and Keith Harris (currently a board member of Whiteknight).
David Beutel is Vice President of Oakwest Corporation Limited, a private investment company in Toronto. For almost 20 years, Mr. Beutel has been working to build early- and growth-stage businesses as a founder, adviser and investor, in Canada and the United States. During the past five years, Mr. Beutel was President and Co-Founder of Belweather Capital Partners, a boutique merchant banking firm. He has served as a director of several public and private companies in Canada. Mr. Beutel holds a BA from the University of Pennsylvania and an MBA from the Schulich School of Business (York University).
Craig Graham is currently the CEO and Chairman of Rainmaker Entertainment Inc., a producer of full-length animated feature films listed on the Toronto Stock Exchange. He also serves as Chairman and a director of Red Rock Insurance Services and Executive Risk Services. He has over 30 years of experience managing or acting as a director of several public and private corporations in diverse industries including retail, distribution, manufacturing and financial services. These companies include Liquidation World, SunGro Horticultural, Cashway Building Centres, Smithbooks and Entertainment One.
Joao (John) L. De Sousa has a long history in the Ontario wine industry. Though he started as an investor and property owner with an education and background in jewelry and goldsmithing and ultimately his business was sold to a larger chain in 1993, Mr. De Sousa also founded De Sousa Wine Cellars in 1988 and opened a full winery operation and retail store (De Sousa Wines Toronto) in downtown Toronto. Mr. De Sousa founded De Sousa Investments in 1998 with real estate holdings in downtown Toronto, Oakville, Niagara Peninsula and the United States. In 2008, De Sousa Wine Cellars and De Sousa Wines Toronto were both sold to Diamond Estates, while Mr. De Sousa retained his personal vineyards and became a shareholder of Diamond Estates. De Sousa Vineyards, a 40 acre vineyard investment in Niagara supplying quality fruit to Niagara wineries, was founded in 2009. In 2011, Mr. De Sousa joined the Board of Directors of Diamond Estates, where he is currently Chair of the Compensation Committee and a Member of the Audit Committee.
John Hick is the President and Director of John W. W. Hick Consultants Inc., which provides consulting services to public and private companies in the areas of corporate restructuring, acquisitions, financial and executive management and financing. Prior thereto, Mr. Hick was the President and Chief Executive Officer of Medoro Resources Ltd. from October 2009 to September 2010, the Vice Chairman and Director of Rio Narcea Gold Mines, Ltd. from January 2006 to June 2006; and the Chief Executive Officer of Rio Narcea Gold Mines, Ltd. from December 2004 to December 2005.
Harold Wolkin is an executive, investment banker and financial analyst with over 30 years of experience. He has worked on a broad range of operational and financial issues during his time at BMO Capital Markets and the BMO Financial Group, acting as Vice President and Director, Equity Research Analyst from 1983-1992 and as Managing Director, Diversified Industries, Investment and Corporate Banking, from 1992-2008. Mr. Wolkin was also Founder, Vice Chairman and Head of Investment Banking at Sandfire Industries from 2008 and 2009. From 2009 to 2011 Mr. Wolkin served as Executive Vice President and Head of Investment Banking for Dundee Capital Markets. Throughout his career, Mr. Wolkin has been an advisor to CEOs and Boards of Directors of both public and private companies. He has successfully assisted over fifty companies in going public and acquiring investment growth capital. Mr. Wolkin has a Bachelor of Arts from the University of Toronto, and a Master of Arts in Economics from York University, and is a Chartered Financial Analyst.
Keith Harris is the Former President and CEO of Stifel Nicolaus Canada Inc. and co-founder and CFO of Westwind Partners Inc., which was sold to Thomas Weisel Partners Group ("TWPG") in 2008. TWPG was subsequently bought by Stifel Nicolaus in 2010. Keith earned a Bcom from the University of Toronto in 1975.
Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance. There can be no assurance that the transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities law and may not be offered or sold within the United States or to a U.S. Person unless registered under the U.S. Securities Act and applicable state securities laws or under an exemption from such registration is available.