Pollard Banknote Limited Announces Intention to Make All Cash Offer to Acquire INNOVA Gaming Group Inc.

  • All-cash offer of $2.10 per Share
  • Significant premium to INNOVA's closing price prior to announcement of Pollard Banknote's interest in INNOVA
  • Allows all shareholders to realize immediate liquidity and certainty of value
  • Supported by largest shareholder holding approximately 41% of the outstanding Shares who has provided Pollard Banknote with a right to match
  • Minimum tender condition will be satisfied if more than 50% of outstanding Shares tendered
  • Offer not subject to due diligence or financing conditions
  • Provides certainty to strategic review process

WINNIPEG, April 17, 2017 /CNW/ - Pollard Banknote Limited (TSX:PBL) ("Pollard Banknote") today announced that it intends to make a formal offer (the "Offer") to acquire all of the issued and outstanding common shares ("Shares") of INNOVA Gaming Group Inc. ("INNOVA") for cash consideration of $2.10 per Share (the "Offer Price").

The Offer Price represents a significant premium of approximately 39% to the closing price of $1.51 per Share on the Toronto Stock Exchange (the "TSX") as of March 9, 2017, the last trading day prior to Pollard Banknote's announcement of its initial proposal to the board of directors of INNOVA (the "INNOVA Board") to acquire all of the Shares. The Offer Price also represents an approximate 36% premium to the volume weighted average trading price of $1.54 per Share on the TSX over the 20 trading days ended March 9, 2017. The Offer Price values INNOVA at an equity value of approximately $43 million.

Background to the Offer

On March 10, 2017, Pollard Banknote announced that it had presented a proposal to INNOVA to acquire all of the issued and outstanding Shares at the Offer Price. Pollard Banknote also announced that it had entered into an agreement (the "Amaya Support Agreement") with Amaya Inc. ("Amaya"), pursuant to which Amaya agreed to vote all of its Shares (representing approximately 41% of the outstanding Shares) in favour of, and/or tender all of its Shares to, the proposed transaction in any form, including a plan of arrangement, take-over bid or other acquisition method, subject to the terms of the Amaya Support Agreement. Amaya has also provided Pollard Banknote with the right to match any superior offer received by Amaya, including any superior offer supported by INNOVA, subject to the terms of the Amaya Support Agreement.

Following execution of the Amaya Support Agreement, Pollard Banknote engaged in discussions with INNOVA regarding the terms of Pollard Banknote's proposal. However, Pollard Banknote and INNOVA could not agree to terms on which the INNOVA Board would support the proposed transaction, and INNOVA has since commenced a strategic review process. As a result, Pollard Banknote has decided to make the Offer directly to Shareholders.

Reasons to Accept the Offer

Pollard Banknote believes the Offer is compelling and represents a clearly superior alternative to continuing on the course set by the current INNOVA Board and management of INNOVA, for the following reasons:

  • Significant Premium to Market Price. The Offer represents a significant premium of approximately 39% to the closing price of $1.51 per Share on the TSX as of March 9, 2017, the last trading day prior to Pollard Banknote's announcement of its initial proposal to the INNOVA Board to acquire all of the Shares. The Offer also represents a significant premium of approximately 36% to the volume weighted average trading price of $1.54 per Share on the TSX over the 20 trading days ended March 9, 2017.

  • Liquidity and Certainty of Value. The Shares are thinly traded and the Offer provides an attractive liquidity event and an opportunity for Shareholders to realize cash proceeds and certainty of value for their entire investment.

  • Fully Financed Cash Offer. The Offer is not subject to a financing condition. Pollard Banknote has secured, on a firm, committed basis, all of the financing required to fund the entire consideration payable for the Shares and to complete the transaction.

  • High Likelihood of Completion. Pollard Banknote is a highly credible counterparty with significant experience in the gaming industry. Pollard Banknote believes that its experience in the gaming industry will lower any risk associated with obtaining the required regulatory approvals. In addition, Pollard Banknote believes that there is a high likelihood that more than 50% of the outstanding Shares will be tendered to the Offer, and therefore the minimum tender condition will be satisfied, given that the Offer is supported by Amaya, which holds approximately 41% of the outstanding Shares.

  • Support of Major Shareholder. Amaya, which indirectly owns 8,180,000 Shares, representing approximately 41% of the total issued and outstanding Shares on a non-diluted basis, has agreed to tender all of its Shares to the Offer, subject to the terms of the Amaya Support Agreement. The Offer Price was the subject of extensive negotiations between Pollard Banknote and Amaya over several months prior to entering into the Amaya Support Agreement. Amaya has also provided Pollard Banknote with the right to match any superior offer received by Amaya, including any superior offer supported by INNOVA, subject to the terms of the Amaya Support Agreement.

  • Risks of INNOVA Standalone. There is considerable risk to Shareholders if the INNOVA Board and management team continue to pursue their standalone strategy. The INNOVA unaffected share price as of March 9, 2017 has declined approximately 62% since INNOVA's initial public offering on May 5, 2015, representing a loss of approximately $51 million in equity value to investors in that initial public offering. Furthermore, a significant portion of INNOVA's EBITDA is provided by Amaya's EBITDA Support Agreement, which expires not later than June 30, 2020. 

  • Potential for Downward Impact to Share Price if Offer Not Accepted. The Offer Price represents a significant premium to the market price of the Shares prior to the public announcement by Pollard Banknote of its initial proposal to the INNOVA Board to acquire all of the Shares. There is no assurance that the INNOVA Board will proceed with an alternative transaction to the Offer. If the Offer is not successful, and no other offer is made for INNOVA, Pollard Banknote believes it is likely the trading price of the Shares will decline to pre-Offer levels.

"We believe this is a compelling opportunity for INNOVA shareholders to receive a full and fair price for their shares," said John Pollard, Co-Chief Executive Officer of Pollard Banknote. "On completion of the Offer, we expect Pollard Banknote will be well-positioned to expand key customer relationships and achieve economies and efficiencies of scale which exceed what INNOVA could achieve as a standalone company."

Terms and Conditions of the Offer

Under the terms of the Offer, Pollard Banknote would acquire, through a wholly-owned subsidiary, all of the issued and outstanding Shares for $2.10 in cash per Share.

The Offer will be open for acceptance until 5:00 p.m. (Toronto time) on August 3, 2017, unless the Offer is extended or withdrawn. INNOVA has the ability to shorten the deposit period to 35 days to allow Shareholders to sell their Shares under the Offer without delay.

The Offer will be subject to customary conditions, including, among other things: (i) there having been validly deposited under the Offer and not withdrawn that number of Shares representing more than 50% of the outstanding Shares, excluding those Shares beneficially owned, or over which control or direction is exercised, by Pollard Banknote or by any person acting jointly or in concert with Pollard Banknote, which is a non-waivable condition, (ii) Pollard Banknote having determined, in its sole judgment, that there does not exist and there shall not have occurred or been publicly disclosed since the date of the Offer, a material adverse effect in respect of INNOVA, and (iii) certain regulatory approvals having been obtained and/or waiting periods expired.

The Offer is not subject to any due diligence or financing condition.

Full details of the Offer will be included in the formal offer and take-over bid circular to be filed with securities regulatory authorities and mailed to Shareholders. The Offer documents and the Amaya Support Agreement will be accessible under INNOVA's profile on SEDAR on April 19, 2017.

Pollard Banknote has retained Laurel Hill Advisory Group as its depositary and information agent in connection with the Offer.

About Pollard Banknote

Pollard Banknote is a leading lottery partner to more than 60 lotteries worldwide, providing high quality instant ticket products, licensed games, and strategic marketing and management services for both traditional instant games and the emerging iLottery space of web, mobile and social channels. The company is a proven innovator and has decades of experience helping lotteries to maximize player engagement, sales and proceeds for good causes. Pollard Banknote also plays a major role in the charitable pull‐tab and bingo markets in North America. Established in 1907, Pollard Banknote is owned approximately 73.5% by the Pollard family and 26.5% by public shareholders and is publicly traded on the TSX (PBL). For more information, please visit our website at www.pollardbanknote.com.

Forward-looking Statements

Certain statements in this press release may constitute "forward-looking" statements and information, which involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. When used in this document, such statements include such words as "may," "will," "expect," "believe," "plan," and other similar terminology. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this document. There should not be an expectation that such information will in all circumstances be updated, supplemented, or revised whether as a result of new information, changing circumstances, future events, or otherwise.

SHAREHOLDER QUESTIONS

For more information or assistance with tendering your shares, please contact Laurel Hill Advisory Group, depositary and information agent in connection with the Offer, at:

Laurel Hill Advisory Group
North America Toll Free: 1-877-452-7184
Collect Calls Outside North America: 1-416-304-0211
Email: assistance@laurelhill.com

SOURCE Pollard Banknote Limited

For further information: Doug Pollard, Co-Chief Executive Officer, E-mail: dpollard@pbl.ca; John Pollard, Co-Chief Executive Officer, E-mail: jpollard@pbl.ca; Rob Rose, Chief Financial Officer, E-mail: rrose@pbl.ca; Pollard Banknote Limited, Telephone: (204) 474-2323

RELATED LINKS
www.pollardbanknote.com

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