Black Sparrow Capital Corp. Enters Into Letter of Intent With Pure
Natures Wellness Inc. to Complete Qualifying Transaction
TORONTO, ONTARIO--(Marketwired - Jun 26, 2014) - Black Sparrow
Capital Corp. ("Black Sparrow" or the "Company")
(TSX-VENTURE:BLC.H) announced today that it has entered into a
non-binding letter of intent (the "LOI") with Pure Natures Wellness
Inc. doing business as Aphria ("Aphria") which outlines the general
terms and conditions of a proposed transaction pursuant to which a
direct wholly-owned subsidiary of Black Sparrow will amalgamate
with Aphria, resulting in Black Sparrow owning all of the issued
and outstanding securities of Aphria. Holders of shares of Aphria
will receive shares of Black Sparrow on the basis of one Black
Sparrow share for each Aphria share, pursuant to the amalgamation
on the terms, and subject to the conditions contained in the
Definitive Agreement (as defined below) (the "Proposed
Transaction"). The LOI was negotiated at arm's length and is
effective as of June 26, 2014.
Black Sparrow is a capital pool company listed on the NEX board
of the TSX Venture Exchange (the "TSXV") and the Proposed
Transaction would constitute the Company's qualifying transaction
under TSXV Policy 2.4 - Capital Pool Companies.
Aphria, based in Leamington, Ontario, is in the business of
producing and supplying medical marijuana pursuant to the
Marihuana for Medical Purposes Regulations (the
"Regulations"). It is expected that, prior to the closing of the
Proposed Transaction, Aphria will have received its final license
(the "License") from Health Canada designating Aphria as a
"licensed producer" pursuant to the Regulations.
The transaction terms outlined in the LOI are non-binding on the
parties and the LOI is expected to be superseded by a definitive
agreement (the "Definitive Agreement") to be signed between the
parties. The Proposed Transaction is subject to regulatory
approval, including the approval of the TSXV, and the satisfaction
of customary closing conditions, including the approval of the
Definitive Agreement and the Proposed Transaction by the directors
of each of Black Sparrow and Aphria and completion of due diligence
investigations to the satisfaction of each of Black Sparrow and
Aphria, as well as the conditions described below. The definitive
legal structure for the Proposed Transaction will be determined
after the parties have considered all applicable tax, corporate and
securities law, and accounting efficiencies.
Trading in the common shares of Black Sparrow (the "Black
Sparrow Shares") will be halted as a result of this announcement
and will remain halted until the resumption of trading is approved
by the TSXV.
The Proposed Transaction
As of the date hereof, (i) Black Sparrow has 5,000,000 Black
Sparrow Shares outstanding; and (ii) Aphria has 38,679,587 common
shares (the "Aphria Shares"), 5,791,460 common share purchase
warrants (the "Aphria Warrants") and 2,600,000 options (the "Aphria
Options") outstanding. In addition, pursuant to an engagement
letter dated June 25, 2014 between Aphria and Clarus Securities
Inc., prior to the completion of the Proposed Transaction, Aphria
expects to complete a concurrent private placement financing and
issue up to an aggregate of 8,846,154 Aphria Shares (assuming the
full exercise of the over-allotment option by the agents in the
financing) and 5,351,923 Aphria Warrants (including broker warrants
to be issued), as described further below.
Pursuant to the terms of the Proposed Transaction, and based on
the foregoing, Black Sparrow will: (i) subject to the receipt of
all regulatory approval, including the approval of its shareholders
and the TSXV, reorganize its share structure such that it will have
only 2,300,000 common shares issued and outstanding following the
issuance of any finder's fee compensation and immediately prior to
the issuance of the Consideration Shares (as defined below); (ii)
acquire all of the issued and outstanding securities of Aphria, and
as consideration, will issue, on a one-for-one basis, approximately
47,525,741 Black Sparrow Shares (the "Consideration Shares") in
exchange for the then issued and outstanding Aphria Shares (which
for greater certainty includes the Aphria Shares to be issued in
the concurrent financing); and (iii) issue convertible securities
of Black Sparrow in exchange for the then issued and outstanding
convertible securities of Aphria with substantially the same terms
with appropriate adjustments (the "Replacement Convertible
Securities").
Following the completion of the Proposed Transaction there will
be 49,825,741 (on a non-diluted basis) and 65,769,124 (on a
fully-diluted basis) common shares of the resulting issuer (the
"Resulting Issuer Shares").
It is expected that following completion of the Proposed
Transaction but prior to giving effect to the concurrent financing
(described below), the current holders of Black Sparrow Shares will
hold approximately 5.6% of the outstanding Resulting Issuer Shares
and the then current holders of Aphria Shares will hold
approximately 94.4% of the Resulting Issuer Shares, all on a
non-diluted basis. Following completion of the Proposed Transaction
and after giving effect to the concurrent financing, it is expected
that the then current holders of Black Sparrow Shares will hold
approximately 4.6% of the outstanding Resulting Issuer Shares and
the then current holders of Aphria Shares (including the concurrent
financing participants) will hold approximately 95.4% of the
Resulting Issuer Shares, all on a non-diluted basis.
Other Conditions to the Proposed Transaction
Completion of the Proposed Transaction is subject to a number of
conditions, including, but not limited to, TSXV acceptance. Where
applicable, the Proposed Transaction cannot close until the
required shareholder approval is obtained. There can be no
assurance that the Proposed Transaction will be completed as
proposed, or at all.
Other conditions to completion of the Proposed Transaction
include, but are not limited to:
- Negotiation and execution of the Definitive Agreement in
respect of the Proposed Transaction;
- Preparation and filing of a management information circular
outlining the definitive terms of the Proposed Transaction in
accordance with the rules of the TSXV;
- Receipt of all requisite approvals from directors, shareholders
and regulatory authorities relating to the Proposed Transaction,
including, without limitation, TSXV approval; and
- Receipt by Aphria of the License.
Concurrent Financing
Pursuant to the engagement letter with Clarus Securities Inc.,
it is expected that prior to the completion of the Proposed
Transaction, Aphria will complete a private placement (the "Private
Placement") of subscription receipts (the "Offered Securities").
The conversion of the Offered Securities into Aphria Shares and
Aphria Warrants, respectively, will be conditional upon the
satisfaction of various conditions, including the satisfaction of
conditions necessary for the completion of the Proposed Transaction
(the "Escrow Release Condition"). An aggregate of 8,846,154 Aphria
Shares are expected to be issued pursuant to the Private Placement
at a subscription price of $1.30 for gross proceeds of
approximately $11.5 million (assuming the exercise in full of the
over-allotment option by the agents in the financing). An aggregate
of 5,351,923 Aphria Warrants (which includes an aggregate of
928,846 broker warrants) are also expected to be issued pursuant to
the Private Placement. Each Aphria Warrant issued in connection
with the Private Placement, other than the broker warrants, will be
exercisable for one Aphria Share at a price of $1.70. Each broker
warrant will be exercisable for one Aphria Share and one half of
one Aphria Warrant at a price of $1.30. The Aphria Warrants
(including the broker warrants) are exercisable on or before the
date that is 24 months following the satisfaction of the Escrow
Release Condition.
Board of Directors and Management
The proposed board and management team of the Resulting Issuer
is expected to consist of, among others, the following individuals:
Vic Neufeld (President and Chief Executive Officer and director),
John Cervini (Chief Administrative Officer and director), Cole
Cacciavillani (Chief Operating Officer and director), Dennis Staudt
(director), and Jonathan Leong (as Chief Financial Officer).
Further Information
Further details about the Proposed Transaction and the resulting
issuer will be provided in a comprehensive press release when the
parties enter into a Definitive Agreement and in the disclosure
document to be prepared and filed in respect of the Proposed
Transaction.
Investors are cautioned that, except as disclosed in the
disclosure document to be prepared in connection with the
Transaction, any information released or received with respect to
the Proposed 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.
The TSXV has in no way passed upon the merits of the proposed
Transaction and has neither approved nor disapproved the contents
of this press release.
Sponsorship for a Qualifying Transaction of a capital pool
company is required by the TSXV, unless an exemption from the
sponsorship requirement is available. Black Sparrow will engage a
sponsor in connection with the Proposed Transaction if required in
accordance with the requirements of the TSXV.
The Delavaco Group is acting as an advisor to Aphria and Clarus
Securities Inc. is acting as financial advisor to Aphria.
Cautionary Statements
Certain statements contained in this press release
constitute forward-looking information. These statements relate to
future events or future performance. The use of any of the words
"could", "intend", "expect", "believe", "will", "projected",
"estimated" and similar expressions and statements relating to
matters that are not historical facts are intended to identify
forward-looking information and are based on the Corporation's
current belief or assumptions as to the outcome and timing of such
future events. Actual future results may differ materially. In
particular, this release contains forward-looking information
relating to the completion of the Proposed Transaction, the number
of securities of Black Sparrow that may be issued in connection
with the Proposed Transaction, the ownership of Black Sparrow
following the Proposed Transaction, the concurrent financing,
shareholder approval and the parties' ability to satisfy closing
conditions and receive necessary approvals. Various assumptions or
factors are typically applied in drawing conclusions or making the
forecasts or projections set out in forward-looking information.
Those assumptions and factors are based on information currently
available to the Corporation. Although such statements are based on
management's reasonable assumptions, there can be no assurance that
the Proposed Transaction will occur, or that if the Proposed
Transaction does occur, it will be completed on the terms described
above.
The forward-looking information contained in this release is
made as of the date hereof and the Company is not obligated to
update or revise any forward-looking information, whether as a
result of new information, future events or otherwise, except as
required by applicable securities laws. Because of the risks,
uncertainties and assumptions contained herein, investors should
not place undue reliance on forward-looking information. The
foregoing statements expressly qualify any forward-looking
information contained herein.
Neither the TSX Venture Exchange nor it 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.
Black Sparrow Capital Corp.Michael GalloroPresident, Chief
Executive Officer,Chief Financial Officer and Director(416)
907.5644 ext. 105Pure Natures Wellness Inc.Vic NeufeldPresident and
Chief Executive Officer(844) 427-4742
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