Mercari Acquisition Corp. announces entering into an Amalgamation Agreement with Concordia Healthcare Inc.

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TORONTO, Dec. 13, 2013 /CNW/ - Mercari Acquisition Corp. ("Mercari" NEX: MV.H) is pleased to announce that it, together with its wholly-owned subsidiary Mercari Subco Inc. ("Mercari Subco"), has entered into a definitive agreement dated December 13, 2013 (the "Amalgamation Agreement") pursuant to which Mercari Subco will amalgamate (the "Amalgamation") with Concordia Healthcare Inc. ("Concordia") to complete an arm's length qualifying transaction (the "Transaction") in accordance with the policies of the TSX Venture Exchange (the "TSXV").  The Amalgamation is structured as a three-cornered amalgamation and as a result the amalgamated corporation ("Amalco") will become a wholly-owned subsidiary of Mercari at the time of the completion of the Amalgamation.  The Amalgamation Agreement will be made available on SEDAR at www.sedar.com.  Mercari has received conditional approval from the Toronto Stock Exchange (the "TSX") to have the common shares of the Resulting Issuer (as defined below) listed for trading on the TSX following the Transaction.  Mercari anticipates closing the Transaction on or about December 20, 2013.

About Concordia

Concordia is an integrated healthcare company incorporated under the Business Corporations Act (Ontario) (the "OBCA") that targets three areas: (a) legacy pharmaceutical products; (b) specialized healthcare distribution that services the growing diabetic market; and (c) the acquisition and/or development of orphan drugs. These three business units are run as separate divisions but are inter-related. The cash-flow from legacy pharmaceuticals is used to fund operations and is also intended to fund the expansion of indications for potential orphan drugs.  The specialized healthcare distribution division provides additional growth and cash-flow generation.  Additionally, through its registered pharmacy operation this business is intended to provide a specialty distribution capability for orphan drugs once acquired and/or developed. All three of these divisions are operated through a corporate organization that provides executive leadership, industry experience, financial and capital markets experience, and an efficient tax structure. Concordia operates out of facilities in Oakville, Ontario, Kansas City, Missouri and Bridgetown, Barbados.

Concordia's legacy pharmaceutical business was acquired in May 2013.  Concordia's legacy pharmaceutical business includes the management and acquisition of legacy pharmaceutical products, both with patent life and exclusivity remaining (pre-legacy) and products that have reached full maturity but continue on a predictable revenue generation path, collectively referred to as legacy products.

Concordia's existing portfolio of legacy drugs (the "Existing Portfolio") consists of Kapvay (clonidine extended release tablets), Ulesfia (benzyl alcohol) Lotion 5% and Orapred ODT (prednisolone sodium phosphate orally disintegrating tablets).

Concordia's specialized healthcare division (the "SHD Division") was acquired in October, 2013, with an effective date of August 1, 2013. The SHD Division is a United States national Internet and mail-order provider of diabetes testing supplies, pharmaceuticals, diabetic shoes, orthotic braces and other home medical equipment. The SHD Division operates primarily out of office and warehouse facilities located near Kansas City, Kansas.

Concordia's orphan drugs division is intended to provide growth opportunities through the expansion into new indications for existing legacy products or the acquisition of approved orphan drugs and further expansion within their identified markets. In the initial execution of its orphan drug strategy Concordia, through its subsidiaries, entered into an agreement and plan of merger (the "Pinnacle Purchase Agreement") on November 8, 2013 to acquire Pinnacle Biologics, Inc. ("Pinnacle").  The legacy pharmaceutical product owned by Pinnacle has three oncology indications approved by the FDA and is being developed for the treatment of an additional rare form of cancer. Closing of the Pinnacle Purchase Agreement is not a pre-condition to completing the Amalgamation.

Summary of Financial Information for Concordia

The following table sets forth selected consolidated financial information for Concordia as of and from the date of incorporation on December 5, 2012 to the period ended September 30, 2013.  Concordia's first transaction was consummated on May 6, 2013. This information is derived from audited consolidated financial statements for the period ended September 30, 2013 prepared in accordance with International Financial Reporting Standards.  All of the following information is reported in US dollars.

US$        
For the period ended September 30, 2013      
Revenue       $23,763,479
Net Income       9,499,287
         
Basic earnings per share     2.08
Diluted earnings per share     1.63
       
Total Assets     79,370,498
Total Liabilities     59,727,063

Proposed Concordia Financing

Before the effective time of the Amalgamation, Concordia proposes to complete a private placement (the "Private Placement") of subscription receipts (the "Subscription Receipts").  Pursuant to the Private Placement, Concordia will offer up to CDN$30,000,000 of Subscription Receipts at a price of $6.25 per Subscription Receipt. Each Subscription Receipt will be exchangeable for one common share of Concordia.  Pursuant to the terms of the Amalgamation Agreement, holders of Concordia common shares exchanged for the Subscription Receipts will receive common shares of Mercari upon completion of the Amalgamation (the "Resulting Issuer") on the basis of one Resulting Issuer common share for each Concordia common share held.  The completion of the Private Placement is not a condition to closing the Transaction.  In addition, Concordia has granted an option to the agents of the Private Placement (the "Agents") to purchase up to an additional 15% of the number of Subscription Receipts sold under the Private Placement on the same terms as under the Private Placement.

The Agents will be entitled to receive a cash commission equal to 6% of the gross proceeds from the Private Placement (the "Agents' Commission") together with options (the "Agents' Compensation Options") entitling the Agents to subscribe for that number of common shares of Concordia as is equal to 4.0% of the total number of Concordia common shares issued pursuant to the exercise of Subscription Receipts under the Private Placement. Each Agents' Compensation Option will be exercisable to purchase one Concordia common share at the price of CDN$6.25 per common share for a period of 24 months from the date that the proceeds of the Private Placement are released from escrow in accordance with the terms of the Private Placement. The Agents' Compensation Options will be exchanged for Resulting Issuer Options, pursuant to the Amalgamation Agreement.

It is anticipated that the net proceeds from the Private Placement will be used as follows:

Gross proceeds from the Private Placement        $30 million
       
Agents' Commission          $1.8 million
       
To be applied to Pinnacle acquisition        $28.2 million

Notwithstanding the foregoing, management of Concordia and the Resulting Issuer may determine that it is in the best interests of Concordia or the Resulting Issuer to allocate the net proceeds of the Private Placement in a manner that is different than the foregoing and the net proceeds may be allocated accordingly. There may be circumstances, where for sound business reasons, the reallocation of funds may be necessary in order for the Resulting Issuer to achieve its stated business objectives.

About the Transaction

Mercari will hold a special meeting of its shareholders on December 16, 2013 to approve, among other things, (i) a change in the name of Mercari from "Mercari Acquisition Corp." to "Concordia Healthcare Corp." or such other name as is agreed to by Concordia and Mercari; (ii) the appointment of the proposed directors for the Resulting Issuer; (iii) approval of a stock option plan for the Resulting Issuer; (iv) a consolidation of the common shares of Mercari on the basis of one (1) post-consolidation Mercari common share for every 48.08 pre-consolidation common shares of Mercari; and (v) and a change in Mercari's registered office address to the registered office address of Concordia.  Details regarding the special meeting of the shareholders of Mercari are available in a management information circular dated November 11, 2013 that has been provided to shareholders of Mercari.  In addition, the Amalgamation will be approved by the shareholders of Concordia by way of consent resolution prior to the Amalgamation.

Pursuant to the terms of the warrant certificates representing the Concordia common share purchase warrants (the "Concordia Warrants"), the holders thereof may exercise the Concordia Warrants by delivering to Concordia prior to the date of the Amalgamation, a completed exercise form and payment of the aggregate sum of $1.00. It is intended that all of the issued and outstanding Concordia Warrants will be exercised in such manner prior to the Amalgamation.

Under the terms of the Amalgamation Agreement, at the effective time of the Amalgamation, among other things:

(a)  each holder of Concordia common shares (except for Concordia common shares held by holders that have validly exercised their dissent rights in connection with the special resolution approving the Amalgamation) shall exchange their Concordia common shares for common shares of the Resulting Issuer instead of common shares of Amalco, on the basis of one (1) fully paid and non-assessable Resulting Issuer common share for every one (1) Concordia common share held; and
   
(b)  subject to receipt of all required regulatory approvals, each holder of options issued under Concordia's stock option plan (each a "Concordia Option") or Agents' Compensation Options outstanding immediately before the effective date of the Amalgamation shall exchange each such Concordia Option or Agents' Compensation Option, as the case may be, for one (1) option issued under the Resulting Issuer's stock option plan (each a "Resulting Issuer Option") with such Resulting Issuer Option having the same terms as the Concordia Option or Agent's Compensation Option, as the case may be, being exchanged, and each such Concordia Option or Agents' Compensation Option shall be cancelled. The exercise price for each Resulting Issuer common share underlying the Resulting Issuer Option will be equal to the exercise price per Concordia common share under the Concordia Option or the Agents' Compensation Option, as the case may be, in effect immediately prior to the Amalgamation on a post-consolidation basis.

The completion of the Amalgamation is conditional on obtaining all necessary regulatory and shareholder approvals in connection with the matters described above and other conditions customary for a transaction of this type.

Immediately after the completion of the Transaction, on a non-diluted basis and after giving effect to the Mercari consolidation, the shareholders of Mercari will own approximately 276,622 common shares of the Resulting Issuer and the shareholders of Concordia will own approximately 16,763,051 common shares of the Resulting Issuer (assuming 5,520,000 Subscription Receipts are issued pursuant to the Private Placement).

Terei International Limited, a corporation incorporated under the laws of Hong Kong, will, after giving effect to the Transaction, beneficially own, control or direct, directly or indirectly, approximately 3,072,500 common shares of the Resulting Issuer, representing approximately 14.37% of the issued and outstanding common shares of the Resulting Issuer on a fully diluted basis. Mark Thompson, a resident of Toronto, Ontario, will, after giving effect to the Transaction, beneficially own, control or direct, directly or indirectly, approximately 2,398,750 common shares of the Resulting Issuer, representing approximately 11.22% of the issued and outstanding common shares of the Resulting Issuer on a fully diluted basis.

Arm's Length Transaction

The Transaction is an arm's length transaction in accordance with the policies of the TSXV and is not subject to Mercari shareholder approval.

Proposed Management and Board of Directors of the Resulting Issuer

Upon completion of the Transaction, it is anticipated that the persons identified below will serve as directors and officers of the Resulting Issuer.

Mark Thompson - Chief Executive Officer, President, Director

Mr. Thompson is the founder, CEO, President and a director of Concordia. He previously served as the former Senior Vice President and General Counsel of Legacy Pharma Limited Partnership and was a co-founder of Trimel Pharmaceuticals and Tribute Pharmaceuticals Inc.  From 2002 to 2005, Mr. Thompson was employed by Biovail Corporation (currently Valeant), where he held the title of Vice-President, Business Development and, before that, Associate General Counsel. While at Biovail Corporation, Mr. Thompson was actively involved in mergers and acquisitions transactions valued at over $2 billion. Prior to joining Biovail Corporation, Mark was an associate at Osler, Hoskin and Harcourt LLP. Mark holds an H.BA, and MA from York University and an LL.B from the University of Ottawa.

Leith Tessy - Chief Financial Officer, Secretary-Treasurer

Mr. Tessy has 25 years of international experience as a finance and operations executive. He has been successful driving mergers and acquisitions transactions (with total transaction value exceeding $1 billion), integrating acquired companies and expanding operating margins. Previous roles held include: CFO then COO of LG Nortel, a JV between Nortel Networks and LG Electronics based in Seoul, South Korea (under Mr. Tessy 's leadership, the company grew from approximately $500 million to approximately $1 billion, delivering 30% EBITDA margin), CFO of Nortel Networks' Global Carrier Networks group (at approximately $5 billion revenue, Nortel's largest, most profitable division), and SVP Finance at Nuance Communications (a highly acquisitive software company). Mr. Tessy holds an Industrial Engineering degree from University of Toronto and an MBA from Ivey School of Business, University of Western Ontario.

John McCleery - Managing Director, Chief Financial Officer (of Concordia Pharmaceuticals Inc. and Concordia Laboratories Inc.)

Mr. McCleery is the Managing Director and CFO of Concordia Pharmaceuticals Inc. and Concordia Laboratories Inc., which are subsidiaries of Concordia. He has 30 years of international experience as a senior financial and operational executive. He developed and managed the Enterprise Risk Management and Compliance program for Valeant Pharmaceuticals International Inc. (formerly Biovail Corporation), reporting company risks to the board of directors. Mr. McCleery chaired the Compliance Committee and the Canadian Investment (RSP; DPSP) Committee. Mr. McCleery served as Vice President and General Manager of Valeant Laboratories (Barbados) SRL (formerly Biovail Laboratories International SRL) the principal operating subsidiary where he had responsibility for managing intellectual property, treasury activities, research and development programs and business partner relationships with Merck, Johnson and Johnson, Wyeth, Forest and Teva etc. He was also a Director and Vice President, Treasurer of Valeant Insurance Incorporated (formerly Biovail Insurance Incorporated). Mr. McCleery served as Vice President, General Manager and Chief Financial Officer of Trimel BioPharma SRL and was responsible for all operational and financial management of the principal operating subsidiary of Trimel Pharmaceuticals Corporation. John is a Chartered Professional Accountant (CPA) and a Chartered Accountant (CA) having earned his designations with the Toronto office of PricewaterhouseCoopers.

John Huss - Director

After 20 years in the pharmaceutical and biotechnology industry, Mr. Huss founded H&P Labs Inc., a biotechnology company focused on early stages of drug development (Phase I & II) in humans. Before that Mr. Huss was President and CEO of Theratechnologies in Montreal. Since his return to Canada in 2010, he sits on the Board of BioQuebec and since 2012 he also serves on its Executive Committee, as Vice-President. Mr. Huss worked for sanofi from 1999 to 2010 in Germany, Canada, Switzerland and France. He joined sanofi in 1999 as a Business Unit Director for the German affiliate. In 2001, Mr. Huss joined the Canadian affiliate as Vice-President, Sales and Marketing in Toronto and moved to Montreal after the acquisition of Aventis. He became General Manager of the Swiss affiliate of sanofi-aventis in January 2007, based in Geneva. In August 2009, Mr. Huss joined the Head Office in Paris and worked next to the Chief Executive Officer, Chris Viehbacher, as Chief of Staff. Mr. Huss joined the pharmaceutical industry in 1990 and for 6 years performed various Sales and Marketing functions for Merck & Co. in the United States, Germany and Switzerland. In 1996, he was offered a position with F. Hoffman-La Roche as an Internal Product Manager at their Basel headquarters.

Ron Schmeichel - Director, Non-Executive Chairman of the Board of Directors

Mr. Schmeichel has 18 years of experience in high-yield credit, leveraged loans, buy-outs and equity capital markets in Canada and the US. For the past 3 years, he has served as the President and CEO of Windsor Private Capital, a firm that manages both credit and private equity capital funds. The firm specializes in providing credit and equity lines for management buy-outs, recapitalizations, bridge and mezzanine loans and minority equity ownership to small/mid market United States and Canadian companies. Prior to this, Mr. Schmeichel was one of the founders and partners of JJR Capital Corp., a Toronto based merchant banking firm that specialized in reverse merger transactions on the TSXV. Since Concordia's inception, Mr. Schmeichel has served as the non-executive Chairman of the Concordia board of directors as well as a mergers and acquisitions advisor on six pharmaceutical/healthcare transactions, including the two foundational acquisitions that make up Concordia currently. Mr. Schmeichel has been on the board of over 15 venture-listed public companies and has served as a director and audit committee chair of one TSX-listed company. For the past 12 years, Mr. Schmeichel has been a guest lecturer at the University of Western Ontario, Faculty of Law, as well as the Ivey School of Business. He currently serves as a member of the Ontario Local Area Committee to the Toronto Stock Exchange-Venture Group. Mr. Schmeichel received a BA degree, with Merit, from York University in 1992 and a Juris Doctorate degree from the University of Western Ontario in 1995.

Doug Deeth - Director

Mr. Deeth is a partner with the law firm of Deeth, Williams & Wall LLP. He is the former President of the Intellectual Property Law section of the Canadian Bar Association and has 25 years of experience in the pharmaceutical industry.

Jordan Kupinsky - Director

Since 2008, Mr. Kupinsky has been a Managing Director with Windsor Private Capital Inc. and its predecessor JJR Capital Corp. Prior to joining Windsor, he was a Vice President at Greenhill & Co., an independent global investment banking firm, listed on the NYSE, focused on mergers & acquisitions and financial restructuring from March 2006 to May 2008. Prior to joining Greenhill, Mr. Kupinsky held the positions of Vice President of Corporate Development and General Counsel at Minacs Worldwide Inc., a publicly traded company on the TSX from July 2002 to February 2005. Mr. Kupinsky began his career practicing corporate and securities law at Torys LLP in Toronto (from 1997 to 1999) and was also an investment banking associate at Houlihan Lokey Howard & Zukin from 1999 to 2002. He holds a joint MBA and JD degree from the Schulich School of Business and Osgoode Hall Law School at York University. Mr. Kupinsky is currently a director of Atlas Financial Holdings Inc. (AFH:NASDAQ) where he chairs the audit committee. Mr. Kupinsky has served as a director of companies on the TSX and on the TSXV, including having served as a director of Xceed Mortgage Corporation from May 2012 through July 2013 when the sale of Xceed to MCAN Mortgage Corporation was completed.

Filing Statement

In connection with the Transaction and pursuant to TSXV requirements, Mercari has filed a filing statement dated December 13, 2013 (the "Filing Statement") on SEDAR (www.sedar.com).  The Filing Statement contains details regarding the Transaction, the Amalgamation, the Private Placement, Mercari, Concordia and the Resulting Issuer.

Sponsor

Concordia has engaged GMP Securities L.P. and Canaccord Genuity Corp. (together, the "Sponsors") as its sponsors in connection with the listing of the common shares of the Resulting Issuer on the TSX.

Completion of the Transaction is subject to a number of conditions including, but not limited to, TSXV acceptance and, if applicable pursuant to TSXV requirements, majority of the minority shareholder approval.  Where applicable, the Transaction cannot close until the required shareholder approval is obtained.  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 securities of a capital pool company should be considered highly speculative.

The TSXV has in no way passed upon the merits of the Transaction and has neither approved nor disapproved the content of this press release.

The Sponsors, subject to completion of satisfactory due diligence, have agreed to act as sponsors in connection with the listing of the common shares of the Resulting Issuer on the TSX.  An agreement to sponsor should not be construed as any assurance with respect to the merits of the transaction or the likelihood of completion.

* * *

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction.

ANY SECURITIES REFERRED TO HEREIN WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE "1933 ACT") AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO A U.S. PERSON IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.

Notice regarding forward-looking statements:

This release includes forward-looking statements regarding Mercari, Concordia, and their respective businesses, which may include, but is not limited to, statements with respect to the completion of the Transaction, the Private Placement and the acquisition of Pinnacle, the terms on which the Transaction, Private Placement and acquisition of Pinnacle are intended to be completed, the use of the net proceeds from the Private Placement, the ability to obtain regulatory and shareholder approvals and other factors. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "is expected", "expects", "scheduled", "intends", "contemplates", "anticipates", "believes", "proposes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Such statements are based on the current expectations of the management of each entity. The forward-looking events and circumstances discussed in this release, including completion of the Transaction, the Private Placement and the acquisition of Pinnacle, may not occur by certain specified dates or at all and could differ materially as a result of known and unknown risk factors and uncertainties affecting the companies, including risks regarding the pharmaceutical industry, failure to obtain regulatory or shareholder approvals, economic factors, the equity markets generally and risks associated with growth and competition. Although Mercari and Concordia have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. No forward-looking statement can be guaranteed. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Mercari and Concordia undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. 

 

SOURCE Mercari Acquisition Corp.

For further information:


Elena Masters, Director of Mercari Acquisition Corp. at 416 972 9993.