Industry Consolidator Makes First Public
Acquisition
Forms Diversified Leader to Create, Manage
and Safeguard Crypto
21,000+ Mining Servers; 28 MW Power
Consumption; 5 Product Offerings
TORONTO, April 3, 2018 /CNW/ - CryptoGlobal Corp.
("CryptoGlobal" or the "Company") (TSXV: CPTO)
and HyperBlock Technologies Corp. ("HyperBlock") are pleased
to announce that they have entered into a definitive arrangement
agreement (the "Arrangement Agreement") dated April 3, 2018 pursuant to which HyperBlock will
acquire all of the issued and outstanding common shares of
CryptoGlobal by way of an acquisition arrangement (the
"Transaction"). Pursuant to the Transaction, the parties
will apply to list the combined company, which will operate under
the name HyperBlock Technologies Corp., on the Canadian Securities
Exchange on closing. The parties intend to promptly call the
required meetings of shareholders of both HyperBlock and
CryptoGlobal with the goal of completing the Transaction by the end
of May 2018, subject to the
satisfaction of customary conditions to closing.
The Transaction has been unanimously approved by the board of
directors of each of CryptoGlobal and HyperBlock, and is supported
by the management teams as well as the significant shareholders of
both companies. Under the Transaction, HyperBlock will acquire all
of the issued and outstanding shares of CryptoGlobal by issuing
0.4229 of a common share of HyperBlock for each CryptoGlobal common
share, valuing each CryptoGlobal common share at $0.74, which represents a 48% premium to the
closing price of $0.50 of
CryptoGlobal's common shares on March 29,
2018, and a 31% premium to the 10-day VWAP of CryptoGlobal's
common shares, on the TSX Venture Exchange (the "TSXV"). The
implied value of CryptoGlobal's equity under the Transaction is
approximately $106 million.
A Leading Diversified Consolidator to Create, Manage and
Safeguard Crypto Assets
HyperBlock is a leading private
company that is focused on strategic consolidation within the North
American Cryptocurrency space — and on building direct-to-consumer
Cryptocurrency products and services.
The company recently completed the major acquisition of one of
North America's largest US-based
Crypto mining and hosting facilities — and this acquisition,
combined with the agreement to acquire CryptoGlobal is a
significant step toward its goal to build a leading North American
Crypto company.
HyperBlock founder and industrial Cryptocurrency mining veteran
Sean Walsh will become the CEO of
the combined company. CryptoGlobal co-founders Rob Segal, James
Millership — and Blockchain Dynamics Founder Chris McGarrigle — will join with Walsh to lead
the combined company. Segal will also join the board of directors
of the combined company.
"Combining HyperBlock's large-scale Mining-as-a-Service model
with CryptoGlobal's existing mining, custodial storage and crypto
trading businesses, creates a strong foundation for both organic
growth and growth through acquisition. We are poised to become a
global leader and consolidator in Cryptocurrency mining and asset
management," stated Hyperblock CEO Sean
Walsh.
The Combined Company at a Glance
- 21,000+ combined operational mining servers
- 28 MW of existing utilization with ability to grow to over
90 MW
- Diversified business model and vision for an integrated
Crypto ecosystem that includes:
-
- Mining-as-a-Service hashrate rentals
- Server hosting
- Self-mining
- Server sales
- Crypto custodial storage, and trading
- SaaS-based Crypto Insights platform
- Experienced management team with significant share
ownership
Acquisition Background and Rationale
Diversified Revenue Streams
- HyperBlock generates positive cash flow through four distinct
profit centers: Mining-as-a-Service (hashrate rental), server
hosting, self-mining and server resale. CryptoGlobal derives most
of its existing revenue from mining and is in the process of
expanding its revenue streams — through the acquisition of
Blockchain Dynamics — to include: an SaaS-based Insights platform,
specialized Crypto custodial storage and trading services.
Combined Scale and Power
- The combined company will have a portfolio of over 21,000
servers (miners) on 28 MW of current operating power across
multiple locations in the USA and
Canada.
- HyperBlock currently operates a 20 MW mining facility in the
North West United States, which
has expansion capacity to 80 MW. HyperBlock's existing facility is
powered by hydro-electric energy that represents some of the lowest
power consumption rates in North
America at under USD$0.04 per
KW/h. CryptoGlobal currently operates across multiple facilities in
Canada, representing 8 MW of
power.
Experienced and Complementary Management Team
- Sean Walsh, current HyperBlock
CEO and CEO of the combined company, will be the largest
shareholder, owning approximately 16.7% of the combined company.
Rob Segal and James Millership will collectively own
approximately 9.5% of the combined company.
- As the founder of one of North
America's largest industrial Cryptocurrency mining data
centers, Walsh is an internationally renowned Cryptocurrency
thought leader and advocate. Walsh has been involved in
commercial-scale Bitcoin mining since 2013 and has been interviewed
by Bloomberg, Forbes, CNBC, Reuters, TheStreet.com and others.
- Rob Segal — a leading North
American marketing executive and entrepreneur — and James Millership — an early stage investor and
operational expert — co-founded CryptoGlobal along with engineers
Roozbeh Ebbadi and Jacob Shultis.
Chris McGarrigle (founder of
Blockchain Dynamics, which was recently acquired by CryptoGlobal) —
an encryption and crypto security expert — will also join the
leadership team of the combined company.
Cost and Revenue Synergies
- The combined company also intends to generate cost and revenue
synergies by leveraging HyperBlock's relationship with Bitcoin.com
to drive hashrate rental from CryptoGlobal's portfolio of servers,
and by further increasing its consumer footprint through offering
additional services by CryptoGlobal, including trading and
custodial services.
Transaction Summary
Under the terms of the Arrangement
Agreement, HyperBlock will acquire all of the issued and
outstanding common shares of CryptoGlobal (on a fully-diluted
basis) for consideration of $0.74 per
CryptoGlobal common share, representing a total equity value of
CryptoGlobal of approximately $106
million.
CryptoGlobal shareholders will receive 0.4229 of a HyperBlock
common share for each CryptoGlobal common share held which, based
on HyperBlock's recently completed subscription receipt financing
of $1.75 per subscription receipt,
equates to $0.74 of value per
CryptoGlobal common share. The Transaction consideration of
$0.74 per CryptoGlobal common share
represents a 48% premium to the closing price of $0.50 of CryptoGlobal's common shares on
March 29, 2018, and a 31% premium to
the 10-day VWAP of CryptoGlobal's common shares, on the
TSXV.
HyperBlock expects to issue up to approximately 60.4 million
HyperBlock common shares to CryptoGlobal shareholders in connection
with the Transaction. Upon closing of the Transaction,
CryptoGlobal shareholders will own approximately 25.2% of the
combined company.
The Transaction is expected to be accretive to HyperBlock's cash
flow over the next 12-month period.
The closing of the Transaction remains subject to the
satisfaction of certain customary closing conditions, including
approval of the shareholders of both CryptoGlobal and HyperBlock,
approval of the Transaction by the Ontario Superior Court of
Justice, conditional listing approval of the combined company's
common shares on the Canadian Securities Exchange and delisting of
CryptoGlobal's common shares from the TSXV.
HyperBlock has secured irrevocable hard lock-up agreements to
vote in favour of the Transaction from CryptoGlobal shareholders
representing approximately 58% of the currently issued and
outstanding CryptoGlobal common shares. CryptoGlobal has secured
irrevocable hard lock-up agreements to vote in favour of the
Transaction from HyperBlock shareholders representing approximately
50% of the currently issued outstanding HyperBlock common
shares.
The Arrangement Agreement provides for, among other things, a
non-solicitation covenant on the part of CryptoGlobal, as well as a
provision that entitles CryptoGlobal to consider a superior
proposal in certain circumstances, and a right in favour of
HyperBlock to match any superior proposal. CryptoGlobal is not
permitted to terminate the Arrangement Agreement as a result of a
superior proposal. If the Arrangement Agreement is terminated in
certain circumstances, including if CryptoGlobal enters into a
definitive agreement with respect to a superior proposal,
HyperBlock is entitled to a termination payment of $4.0 million.
To the knowledge of CryptoGlobal, no non-arm's length party to
CryptoGlobal has any direct or indirect interest in
HyperBlock. To the knowledge of HyperBlock, no non-arm's
length party to HyperBlock has any direct or indirect interest in
CryptoGlobal. Neither party is aware of any relationship
between their respective non-arm's length parties.
Board of Director Recommendations
The board of
directors of CryptoGlobal unanimously recommends that CryptoGlobal
shareholders vote in favour of the resolution to approve the
Transaction, which is expected to be subject to a special meeting
of CrytpGlobal shareholders to be held in May 2018. In conjunction with the Transaction, an
independent special committee of the board of directors of
CryptoGlobal received a fairness opinion from Clarus Securities
Inc., its independent financial advisor, that as of April 2, 2018, and subject to the assumptions,
limitations and qualifications set out therein, the Transaction
consideration is fair, from a financial point of view, to
CryptoGlobal shareholders.
The board of directors of HyperBlock unanimously recommends that
HyperBlock shareholders vote in favour of the resolution to approve
the Transaction, which is expected to be subject to a special
meeting of HyperBlock shareholders to be held in May 2018.
The Transaction is currently expected to close at the end of
May 2018, subject to the satisfaction
of customary conditions to closing. Holders of subscription
receipts of HyperBlock pursuant to the subscription receipt
offering that closed in March 2018
will receive common shares of the combined company on conversion of
their subscription receipts, subject to the terms and conditions of
the definitive documentation relating thereto.
Further information regarding the transaction will be included
in the joint management information circular to be mailed to
CryptoGlobal and HyperBlock shareholders in advance of the special
meetings of CryptoGlobal and HyperBlock shareholders expected to be
held in May 2018, and in
CryptoGlobal's material change report in respect of the
announcement of the Transaction, each of which will be filed with
the Canadian securities regulators and will be available at
www.sedar.com.
CryptoGlobal Pending Acquisition and Debt
Offering
Under the terms of the Transaction, CryptoGlobal
has extended the due diligence period related to its agreement to
acquire BitCity Inc. to April 30,
2018. CryptoGlobal has also cancelled its previously
announced $15.0 million debt
financing agreement.
Financial and Legal Advisors
Canaccord Genuity Corp.
acted as financial advisor and Stikeman Elliott LLP acted as legal
counsel to HyperBlock. Bennett Jones LLP acted as legal counsel and
Clarus Securities Inc. provided a fairness opinion to the board of
directors of CryptoGlobal.
About HyperBlock
HyperBlock is one of
North America's leading
diversified blockchain companies, which includes one of the largest
cryptocurrency mining facilities in the U.S. HyperBlock operates
across multiple revenue channels including Mining-as-a Service
(MAAS), self-mining, server hosting, and server hardware
sales. HyperBlock was incorporated under the laws of the
Province of Ontario on
October 10, 2017. Further information
about HyperBlock is available on its website at
www.hyperblock.co.
About CryptoGlobal – We Power the
Blockchain
CryptoGlobal is a leading Canadian blockchain
and financial technology company built on a strong core of
diversified cryptocurrency mining. Currently, CryptoGlobal focuses
on mining Bitcoin, DASH, Ether and Litecoin — using a mix of
custom-tuned mining technologies. Learn more at
cryptoglobal.io.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: Certain
information in this news release constitutes forward-looking
statements under applicable securities laws. Any statements
that are contained in this news release that are not statements of
historical fact may be deemed to be forward-looking
statements. Forward looking statements are often identified
by terms such as "may", "should", "anticipate", "expect",
"potential", "believe", "intend" or the negative of these terms and
similar expressions. Forward-looking statements in this news
release include, but are not limited to, statements with respect to
accretive earnings, anticipated revenue and costs synergies
associated with the acquisition of CryptoGlobal, statements with
respect to internal expectations, estimated margins, expectations
for future growing capacity, costs and opportunities, the effect of
the transaction on the combined company and its strategy going
forward, expectations for receipt of licenses to cultivate, process
or distribute medical cannabis in Federally legal markets, the
completion of any capital project or expansions, the timing for the
completion of the Transaction and expectations with respect to
future production costs, the anticipated timing for the
special meetings of CryptoGlobal and HyperBlock shareholders and
closing of the transaction; the consideration to be received by
shareholders of CryptoGlobal, which may fluctuate in value due to
HyperBlock common shares forming the consideration; the
satisfaction of closing conditions including, without limitation:
(i) required CryptoGlobal and HyperBlock shareholder approvals;
(ii) necessary court approval in connection with the plan of
arrangement, (iii) certain termination rights available to the
parties under the Arrangement Agreement; (iv) HyperBlock obtaining
the necessary approvals from the Canadian Securities Exchange for
the listing of its common shares in connection with the
Transaction; and (vi) other closing conditions, including, without
limitation, the operation and performance of the CryptoGlobal
business in the ordinary course until closing of the Transaction
and compliance by CryptoGlobal and HyperBlock with various
covenants contained in the Arrangement Agreement. In particular,
there can be no assurance that the Transaction will be
completed. Forward looking statements are based on certain
assumptions regarding CryptoGlobal, including expected growth,
results of operations, performance, industry trends and growth
opportunities. While CryptoGlobal considers these assumptions
to be reasonable, based on information currently available, they
may prove to be incorrect. Readers are cautioned not to place undue
reliance on forward-looking statements. Forward-looking statements
also necessarily involve known and unknown risks, including,
without limitation, risks associated with general economic
conditions; adverse industry events; future legislative and
regulatory developments involving cryptocurrency; inability to
access sufficient capital from internal and external sources,
and/or inability to access sufficient capital on favourable terms;
the cryptocurrency industry in Canada generally, income tax and regulatory
matters; the ability of HyperBlock to implement its business
strategies; competition; currency and interest rate fluctuations
and other risks. Any forward-looking statements or facts (including
financial information) related to CryptoGlobal discussed or
disclosed herein are derived from information obtained directly
from CryptoGlobal and publicly available sources and has not been
independently verified by CryptoGlobal.
Readers are cautioned that the foregoing list is not exhaustive.
Readers are further cautioned not to place undue reliance on
forward-looking statements as there can be no assurance that the
plans, intentions or expectations upon which they are placed will
occur. Such information, although considered reasonable by
management at the time of preparation, may prove to be incorrect
and actual results may differ materially from those
anticipated.
Forward-looking statements contained in this news release are
expressly qualified by this cautionary statement and reflect
our expectations as of the date hereof, and thus are subject to
change thereafter. CryptoGlobal and HyperBlock disclaim any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by law. This news release
has been approved by the Board of Directors of each of HyperBlock
and CryptoGlobal. Factors that could cause anticipated
opportunities and actual results to differ materially include, but
are not limited to, matters referred to above and elsewhere in
CryptoGlobal's fiscal 2017 annual MD&A and the material
change report filed that will be filed in respect of this
Transaction, which are, or will be, available
on www.sedar.com.
Neither the TSXV nor its Regulation Services Provider (as
that term is defined in the policies of the TSXV) accepts
responsibility for the adequacy or accuracy of this news
release.
SOURCE CryptoGlobal Corp.
