ESTec Systems Corp. Enters Into Letter of Intent for a Going Private Transaction

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EDMONTON, Oct. 24, 2016 /CNW/ - (TSX Venture: ESE) – ESTec Systems Corp. ("ESTec" or the "Company") is pleased to announce it has entered into a letter of intent (the "LOI") with 2000285 Alberta Ltd. ("AcquisitionCo"), an entity controlled indirectly by Anthony B. Nelson, a director, officer and shareholder of the Company. The LOI sets out the non-binding intention of the parties to negotiate and enter into a definitive agreement  pursuant to which AcquisitionCo would, through a series of transactions, acquire all of the issued and outstanding common shares ("Common Shares") in the capital of the Company (the "Transaction"). Pursuant to the proposed Transaction, shareholders of the Company who are not also shareholders of AcquisitionCo (or an affiliated entity) at the time of closing of the Transaction would receive $0.12 in cash for each Common Share held.

The Transaction is anticipated to be structured as an amalgamation of AcquisitionCo and ESTec under the laws of the Province of Alberta. Provided all conditions and approvals are met, upon closing of the Transaction, shareholders of ESTec immediately prior to the time of closing (other than shareholders of ESTec who are also shareholders of AcquisitionCo or its affiliates) would be entitled to receive one redeemable preferred share of the amalgamated entity for each Common Share held. Each redeemable preferred share would be immediately redeemed for $0.12 in cash. Shareholders of the amalgamated entity (or an affiliate thereof) following the cash distribution to minority shareholders upon closing of the Transaction would consist of the Nelson family and other ESTec shareholders acting jointly and in concert with the Nelson family (collectively, the "Interested Shareholders"). It is anticipated that the Interested Shareholders will transfer substantially all of their Common Shares to AcquisitionCo (or an affiliate thereof) immediately prior to the closing of the Transaction.

Under the LOI, the Company and AcquisitionCo shall use their reasonable commercial efforts to negotiate a definitive agreement in respect of the Transaction by October 31, 2016.

Pursuant to Multilateral Instrument 61-101 ("MI 61-101"), the proposed transaction is a "business combination" and the completion of the Transaction will require simple majority approval of the Company's minority shareholders. Of the 10,461,629 currently issued and outstanding Common Shares, Interested Shareholders own or control, directly or indirectly, approximately 7,726,758 Common Shares in aggregate, and the votes attached to such shares would be excluded for the purposes of obtaining minority shareholder approval under MI 61-101.

The Board of Directors of the Company (the "Board") formed an independent special committee (the "Special Committee") consisting of David Wright and Barbara Fraser in connection with the Transaction. The Special Committee has retained Quantum Advisory Inc. to provide a fairness opinion with respect to whether the consideration offered under the Transaction is fair from a financial point of view to the ESTec shareholders (other than AcquisitionCo or its affiliates). The Special Committee will review and recommend or reject that the Board approve the Transaction, after considering all aspects of the Transaction and the outcome of the fairness opinion to be provided from the Company's financial advisor. The Board may proceed to approve the Transaction at a later date and advise that shareholders vote in favour of the Transaction after considering the recommendation of the Special Committee, all aspects of the Transaction and the outcome of the fairness opinion to be provided from the Company's financial advisor.

The acquisition price of $0.12 represents a 26% premium to the closing price of the Common Shares on October 21, 2016 and a premium of approximately 32% to the 30 day weighted average price of the Common Shares on the TXV Venture Exchange up to and including October 21, 2016.  Following completion of the Transaction, it is anticipated that the Common Shares will be de-listed from the TSX Venture Exchange and the Company will apply to the applicable securities commissions to cease to be a reporting issuer.

The Company and AcquisitionCo have agreed, on a binding basis, to a period of exclusivity commencing on the date hereof and ending on the earlier of the date the LOI is terminated or the date that a definitive agreement in connection with the Transaction is executed, during which period the Company will work exclusively and in good faith with AcquisitionCo in an effort to negotiate a definitive agreement and will not solicit or initiate discussions regarding any other business combination or sale of material assets. The Company has also provided AcquisitionCo the right to match any unsolicited acquisition proposals.

The Transaction is subject to a number of conditions including the receipt of the required shareholder approvals and regulatory and TSX Venture Exchange approval. It is anticipated that an annual and special meeting of shareholders of the Company will be held on or about December 9, 2016 at which the Transaction would be considered and that meeting materials in respect of such meeting will be mailed on or about November 17, 2016. The Transaction must be approved by 66 2/3% of all shareholders of ESTec as well as a simple majority of the Company's minority shareholders (as described above). It is anticipated that closing of the Transaction would occur within seven business days of shareholder approval and, in any event, not later than December 30, 2016.

Reader Advisories

Forward-Looking Statements: This news release contains certain forward-looking statements, including but not limited to, the Transaction and its proposed terms, the anticipated date of the annual and special shareholders meeting and date of mailing in connection therewith, the anticipated date of closing and the expectation that the Common Shares will be delisted following the closing of the Transaction and the expectation that Company will apply to cease to be a reporting issuer following the closing of the Transaction, which forward-looking statements involve substantial known and unknown risks, uncertainties and assumptions, certain of which are beyond the Company's control.  Such risks, uncertainties and assumptions include, without limitation, those associated with required shareholder approvals and regulatory and stock exchange approvals, and other conditions of the Transaction, as well as the receipt of a favourable fairness opinion, and those generally associated with changes capital markets and general economic conditions, and other risks, uncertainties and assumptions. Without limiting the foregoing, the words "believe", "expect", "anticipate", "intend", "estimate", "plan" and similar expressions identify forward-looking statements. The Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that the Company or its shareholders will derive there from.  Readers are cautioned that the foregoing list of factors is not exhaustive.  Additional information on these and other factors that could affect the Company's operations and financial results are included in reports, including the Company's Management Discussion and Analysis for the year ended June 30, 2016, on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). All subsequent forward looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements.  Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Neither the TSX Venture Exchange nor its 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 news release.

This news release is not for dissemination in the United States or to U.S. persons.

SOURCE ESTec Systems Corp.

For further information: ESTec Systems Corp., Mark A. Bamford, Chief Financial Officer, (780) 483-7120, Fax: (780) 489-9557, Email: mbamford@estec.com

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