Potash One and Potash North Announce Business Combination Press Release Thursday, January 22, 2009
Potash One Inc. ("Potash One") (TSX:KCL) and Potash North Resource Corporation ("Potash North") (TSX VENTURE:PON) are pleased to announce that they have entered into a binding letter of intent ("LOI") containing the principal terms by which, subject to satisfaction of certain conditions, Potash One will acquire all of the issued and outstanding common shares of Potash North through a Plan of Arrangement or other form of business combination (the "Business Combination").
The LOI contemplates that each Potash North shareholder will receive 0.3125 common shares of Potash One for each common share of Potash North. In addition, all outstanding convertible securities of Potash North will be exchanged for comparable convertible securities of Potash One in an amount and at exercise prices adjusted in accordance with the same exchange ratio. The exchange ratio represents an approximate 29% premium for the shares of Potash North over the 20-trading day period prior to the execution of the LOI.
There are currently 65,745,002 Potash North common shares issued and outstanding, 2,750,000 outstanding options to purchase Potash North common shares, 38,672,000 Potash North common shares issuable pursuant to outstanding share purchase warrants and an additional 5,000,000 common shares and 5,000,000 common share purchase warrants issuable pursuant to an outstanding unsecured convertible note. Potash One owns 7,583,850 common shares of Potash North which represents 11.5% of the currently outstanding shares of Potash North and an additional 7,583,850 share purchase warrants.
Certain shareholders including Potash One and all the directors and officers of Potash North have agreed to vote their shares in favour of the Business Combination.
The Business Combination will require the approval of Potash North securityholders, the Toronto Stock Exchange and the TSX Venture Exchange, and will be subject to other customary conditions, including the execution of a definitive agreement and completion of due diligence.
The LOI provides that Potash North shall not, directly or indirectly, solicit, initiate or encourage letter of intent offers from, or negotiations with, any third party with respect to any other potential merger or acquisition of all or a material portion of Potash North's business, assets or outstanding securities except where required to satisfy fiduciary obligations of directors. Potash North and Potash One have both agreed to pay a non-completion fee of $2.5 million under certain circumstances. The transaction is expected to close by May 15, 2009.
The Business Combination, once completed, will create one of the strongest junior potash development companies in Canada. Potash One will be fully funded through to completion of feasibility on its solution mining amenable potash development property located in southern Saskatchewan (the "Legacy Project"). Current cash of the resulting company would be approximately $50 million.
Paul F. Matysek, President and CEO of Potash One, stated, "I am very pleased that Potash One has been able to execute this binding LOI with Potash North as this transaction strengthens our balance sheet, further consolidates the potash junior industry and positions the company with over 500,000 acres of subsurface Potash permit holdings, in Saskatchewan. This includes a very prospective exploration stage potash property adjacent to the largest potash mine in the world. In addition, we are pleased to have the support of a number of significant shareholders who together with our present shareholders are committed to the continued development and progress of the Legacy Project. This Business Combination further strengthens our exploration and development position in the Potash industry, bringing us closer to our goal of becoming the first greenfield potash producer in Canada in decades."
Craig A Angus, President and CEO of Potash North, stated; "I am very excited with the opportunity that this transaction presents to our shareholders. As a result of the turmoil in world capital markets, it is increasingly apparent that the successful companies in the junior potash space will be those that have large cash treasuries and advanced stage projects moving toward feasibility and development. This business combination will create the best capitalized Canadian Junior potash development company working in the Saskatchewan basin. Our shareholders will have the opportunity to participate in the advancement of the Legacy Project to completion of feasibility and potentially through to production in the coming years while maintaining the exploration exposure to our KP 416 and 417 Permit areas near Esterhazy."
Canaccord Capital Corporation has acted as advisor to an independent committee of the Board of Directors of Potash North and has provided to such independent committee of Potash North their verbal advice, subject to final review of documentation, that the consideration offered pursuant to the transaction is fair, from a financial point of view, to the shareholders of Potash North, other than Potash One.
STB Price at posting:
7.4¢ Sentiment: LT Buy Disclosure: Held
