ESI Announces Proposed Going Private Transaction
BURNABY, BC, Sept. 11, 2013 /CNW/ - ESI Entertainment Systems Inc. (CNSX:ESY) ("ESI" or the "Company") today announced that it has entered into an arrangement agreement with Bastion Finance Corporation ("Bastion") whereby the Company will effect a going private transaction through a statutory plan of arrangement (the "Proposal"). Bastion is a private B.C. company owned by a group of insiders of the Company including Michael Meeks, a director and the Chief Executive Officer, Bernadette Greening, spouse of former CEO Tony Greening, Mary Betts, VP of Regulatory Compliance, and Christopher Freeman, Chairman of the Board (the "Insider Group").
"Given the Company's ongoing financial situation and difficulty in raising capital at reasonable valuations, coupled with a thinly traded stock and the high cost of maintaining a stock exchange listing, I believe that it is in the best interests of the Company that it be taken private" said Michael Meeks, CEO and President of ESI.
Under the Proposal, the going private transaction will be accomplished through a statutory plan of arrangement under Part 5 of the Business Corporations Act (B.C.) (the "Arrangement"). Under the Arrangement, all of the Company's issued and outstanding common shares (the "Common Shares") will be purchased by Bastion through its wholly owned subsidiary, 0979854 B.C. LTD., at a price of $0.055 per share other than shares owned by the Insider Group or any of their associates or affiliates. The result will be that the Company will have fewer than 51 securityholders in Canada in total. Following completion of the Arrangement, ESI will apply to have its Common Shares delisted from the Canadian National Stock Exchange ("CNSX") and it will also apply to the applicable Canadian securities regulatory authorities to cease to be a reporting issuer in each province in which it is currently a reporting issuer.
Holders of stock options will have their options cancelled. If the exercise price of their options is less than $0.055 per share, the option holder will be paid the difference between the exercise price and $0.055 for each option held.
The $0.055 price per Common Share represents a 550% premium to the weighted average trading price of the Common Shares in the 10 trading days prior to June 30, 2013 ($0.01), a 366.67% premium to the weighted average trading price of the Common Shares in the 30 trading days prior to June 30, 2013 ($0.015), as well as a 305.56% premium to the weighted average trading price of the Common Shares in the 90 trading days prior to June 30, 2013 ($0.018).
The Proposal was considered by an independent special committee of the board of directors represented by William Koyle (the "Special Committee"). The Special Committee engaged Evans & Evans, Inc. ("Evans"), an independent financial advisor, to prepare a comprehensive valuation report and fairness opinion with respect to the Proposal (the "Valuation Report"). Subject to the qualifications, restrictions and assumptions set forth in the Valuation Report, in the opinion of Evans, as at August 2, 2013, the terms of the Proposal are fair, from a financial point of view, to the minority shareholders of the Company (the "Minority Shareholders").
After consideration of all of the circumstances including the Valuation Report, the Special Committee concluded that the Proposal is in the best interests of the Company and fair to the Minority Shareholders. Accordingly, the Special Committee recommended that the Board resolve to agree to the terms expressed in the Proposal and to approve the negotiation and execution of a formal agreement with Bastion to implement the Arrangement, subject to the receipt of all required court, shareholder and regulatory approvals.
The Company has scheduled an annual special shareholder's meeting for October 28, 2013 at which shareholders and option holders will be asked to approve the Arrangement. Shareholders of record of September 23, 2013 will be entitled to receive notice of and vote at the meeting. Prior to the record date, the Company will be applying to the Supreme Court of British Columbia for an interim order permitting the holding of the meeting and approval of certain other matters in connection with the Arrangement.
About ESI Entertainment Systems Inc.
ESI Entertainment Systems Inc, (CNSX: ESY) is an idea generation and software development company that develops concepts, creates prototypes, establishes partnerships and validates potential markets. Since formation in 1999 ESI Entertainment Systems Inc. has created three independently operated and controlled subsidiaries based on validated and proven products: Citadel Commerce Corp., ESI Integrity Inc. (which was sold to Spectra Systems), and PlayLine Inc.
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