VANCOUVER, June 27, 2013 /CNW/ - KCO Capital Inc. ("KCO") (TSXV: KCO.P), a Capital Pool Company ("CPC") trading on the TSX Venture Exchange (the "Exchange"), is pleased to announce that it has entered into a letter of intent
dated May 17, 2013 (the "Agreement") regarding a proposed transaction (the "Transaction") with Grey Hawk Exploration Inc. ("Grey Hawk"), a privately held company incorporated under the Business Corporations Act (British Columbia), which operates as an exploration company with
various oil and gas interests in the State of Utah.
It is intended that the Transaction will constitute KCO's "Qualifying Transaction" in accordance with the Policy 2.4 of the Exchange. KCO and Grey Hawk
are at arm's length; and accordingly, the Transaction is not a "Non-Arm's Length Qualifying Transaction". As such, it is anticipated that the approval of the shareholders of
KCO will not be required. Subject to any regulatory, director or other
approvals that may be required, the completion of satisfactory due
diligence by KCO and other conditions contained in the Agreement, it is
anticipated that the Transaction will involve an acquisition, merger,
amalgamation, plan of arrangement, reorganization, sale of all or
substantially all of the assets, or exchange of assets or securities in
a similar transaction. Upon completion of the Qualifying Transaction,
it is expected that KCO will be listed on the Exchange as a Tier 2 oil
and gas issuer.
KCO has engaged Canaccord Genuity Corporation ("Canaccord") as advisor for the Transaction and agent for the proposed concurrent
private placement as set out below.
About Grey Hawk Exploration Inc.
Grey Hawk was incorporated on May 24, 2011 pursuant to the Business Corporations Act (British Columbia). Grey Hawk's head office and registered office are
located in Vancouver, British Columbia. Grey Hawk's wholly owned
subsidiary, Grey Hawk Exploration (USA) Inc. ("Grey Hawk USA"), was incorporated on January 26, 2012 pursuant to the Nevada Revised
Statute 78.055. Since incorporation, Grey Hawk USA has been actively
involved in the business of exploring and developing oil and gas
concessions, and has interests in two wells with associated acreage in
the Uinta Basin, a prolific oil and gas development area in Utah.
Grey Hawk's growth strategy will initially focus on acquiring and
enhancing producing wells in the Uinta Basin and sharing exploration
risk with partners for drilling new wells. Grey Hawk plans to leverage
its operating expertise and relationships in the Uinta Basin to acquire
distressed assets that it can add value to with the application of new
technologies and operating efficiencies.
Grey Hawk's major shareholder is New Times Energy Corporation Ltd. ("New Times") (HKEx: 166), an integrated natural resources company engaged in the
acquisition, development and operation of oil and gas projects in
Argentina, China and USA. New Times currently owns 45% of the shares
of Grey Hawk.
Grey Hawk has a 50% working interest in 80 acres of land in West Willow
Area of the Uinta Basin, in northeastern Utah, containing two oil wells
which are currently in production, and are scheduled to undergo a work
program to increase production capacity.
In addition to these wells, Grey Hawk has the right to earn up to an
additional 1,544.52 acres by drilling wells which will earn 320 acres
each. Grey Hawk pays 100% of capital to earn an 85% working interest
before payout and a 75% working interest after payout in these
Oil exploration and development in the Uinta Basin has been active over
the last decade with production growing from approximately 20,000
bbl/day in 2002 to more than 50,000 bbl/day by the end of 2011. In
2012 more than 275 wells were drilled in the Uinta Basin. There is
good infrastructure for oil and gas exploration and development in the
Uinta Basin and the State of Utah has a total refining capacity of over
165,000 bbl/day. Recent mergers and acquisitions activity in the Uinta
Basin has included acquisitions by Anadarko Petroleum, Exxon Mobil,
Crescent Point Energy and Linn Energy.
The greater Uinta-Piceance Basin is a structural basin of latest
Cretaceous and Tertiary age located in northeast Utah and northwest
Colorado. It is subdivided into two lesser basins, the Piceance Basin
located in Colorado east of the Douglas Creek Arch and the Uinta Basin
located in Utah. The Uinta Basin is sharply asymmetrical with a steep
north flank bounded by the Uinta Mountains and a gently dipping south
flank filled by as much as 17,000 feet of Cretaceous and Paleogene
lacystrine and fluvial sedimentary rocks.
A more detailed summary of financial information in respect of Grey
Hawk, and an audited balance sheet, will be included in the Filing
Statements which will be prepared and filed by KCO on SEDAR in
connection with the proposed Transaction.
KCO will acquire 100% of all of the issued and outstanding securities of
Grey Hawk Exploration Inc. ("Grey Hawk") from all of its shareholders in exchange for 23,750,000 common shares
of KCO valued at $0.50 per share to complete a Qualifying Transaction
under the rules and policies of the Exchange. It is anticipated that
the Transaction will be by way of a share exchange transaction or some
other form of business combination transaction whereby KCO will acquire
all of the outstanding shares issued by Grey Hawk.
Concurrently with closing of the Transaction, the directors of KCO will
pass a resolution to approve a change of KCO's name to "Grey Hawk
Energy Inc." or such other name as may be selected by KCO.
Subject to Exchange approval, in connection with the Transaction, by way
of a finder's fee (representing 5% of the Transaction value, being Cdn.
$11,875,000), Colin I. Wilson will be issued 890,625 common shares in
the capital of KCO and a cash finder's fee of Cdn.$148,437.
Upon completion of the Transaction, KCO will have 31,750,000 common
shares outstanding, before any dilution pursuant to the issuance of the
finder's fee of 890,625 common shares and the common shares issued in
connection with the proposed Concurrent Financing.
KCO has agreed to advance Grey Hawk $100,000 in a secured loan subject
to the approval of the Exchange.
Capital Structure of Grey Hawk
Grey Hawk currently has 19,000,100 common shares ("Grey Hawk Shares") issued and outstanding. The principal stakeholders of Grey Hawk are:
Name & Jurisdiction of Residence
# of Shares
% of Shares
Prominent Sino Holdings Limited (Hong Kong)
Value Train Investments Ltd. (B.V.I)
Satvir Dhillon (British Columbia)
Mark Schipperheijn (British Columbia)
Prominent Sino Holdings Limited and Value Train Investments Ltd are both
wholly-owned by New Times Energy Corp. Ltd., a Hong Kong Stock Exchange
traded company (HKEx: 166). The remaining 6,200,000 Grey Hawk Shares
are held by approximately 19 other shareholders.
In addition, Grey Hawk also has the following convertible securities
outstanding: approximately $700,000 in convertible debentures
exercisable into Grey Hawk Shares at an exercise price of $0.15. The
convertible debentures are held by Prominent Sino Holdings Limited. On
a fully diluted basis, Prominent Sino Holdings Limited will own
approximately 9,666,667 Grey Hawk Shares or 40.84% of the issued and
outstanding shares of Grey Hawk.
Proposed Concurrent Financing
In conjunction with the Transaction, it is expected that KCO will
undertake a brokered private placement (the "Offering") to raise gross proceeds of up to $3,000,000 through the issuance of
6,000,000 shares of KCO at $0.50 per share. KCO has engaged Canaccord
as agent in conjunction with the Offering. The specific terms of the
Offering and the terms of any related agent's compensation will be
disclosed in a future press release. The Offering shall close
concurrently with the Transaction.
The proceeds from the Offering will be used for exploration and
development of the Grey Hawk oil and gas properties and general working
capital requirements. Additional amounts have been allocated for costs
required to complete the Transaction and for unallocated working
capital. There may be circumstances where, for sound business reasons,
a reallocation of funds may be necessary in order for KCO to achieve
its business objectives.
Sponsorship of the Transaction of a CPC is generally required by the
Exchange, unless exempted in accordance with Exchange policies. KCO
intends to apply for an exemption from the sponsorship requirement
based on the considerations as contemplated in section 3.4 (Exemptions
from Sponsorship) of Exchange Policy 2.2.
However, there is no assurance that KCO will be able to obtain such an
exemption. In the event that KCO is not able to obtain an exemption
from the sponsorship requirement, Canaccord has agreed to provide
sponsorship services in accordance with Exchange Policy 2.2.
Resulting Issuer Capital Structure
Assuming the close of the Transaction and the Offering being conducted
at $0.50 per share, KCO will have the following capital structure:
# of Common Shares
% of Shares
Shares held by pre-existing KCO shareholders
Shares held by former Grey Hawk shareholders
Shares issued as Finder's Fee in Transaction
CPC Agent's Warrants
Offering closed concurrently with Transaction
Agent's Warrants issued in connection with Offering
Agent's Corporate Finance Fee Shares
KCO pre-existing CPC stock option plan
KCO new stock option plan
Total (fully diluted)
On a non-diluted basis KCO will have approximately 38,735,625 common
shares issued and outstanding upon completion of the Transaction and the Offering.
On a non-diluted basis immediately after the Transaction, Prominent Sino
Holdings Limited will hold approximately 25.04% of KCO common shares
and Value Train Investments Ltd. will hold approximately 9.07% of KCO
common shares giving New Times Energy Corp. Ltd. an indirect beneficial
ownership of 34.11% of KCO common shares. On a fully diluted basis
after the close of the Transaction, New Times Energy Corp. Ltd. will
have an indirect beneficial ownership of approximately 30.38% of KCO
The closing of the Transaction with Grey Hawk is subject to a number of
conditions, including, but not limited to the following:
completion of all due diligence reviews;
receipt of all director and shareholder approvals as may be required
under applicable laws or regulatory policies;
execution of a formal agreement;
entry into any regulatory required escrow agreements by Grey Hawk
completion of the proposed Offering;
confirmation of ownership of key oil and gas properties in Utah;
confirmation acquisition of all shares of Grey Hawk will be free and
clear of all liens, claims, charges or encumbrances;
no material actions, suits or proceedings at time of closing involving
no material adverse change to assets, liabilities, business, operations,
or financial condition at time of closing of either party;
completion or exemption of sponsorship;
receipt of all required regulatory approvals, including the approval of
the Exchange, of the Transaction;
satisfaction of the Minimum Listing Requirements of the Exchange and all
requirements under the Exchange rules relating to completion of a
"Qualifying Transaction"; and
a new slate of directors be appointed as agreed by the parties.
A filing statement in respect of the proposed Transaction will be
prepared and filed in accordance with Policy 2.4 of the Exchange on
SEDAR at www.sedar.com no less than seven business days prior to the closing of the proposed
Transaction. A press release will be issued once the filing statement
has been filed as required pursuant to Exchange policies.
Directors of Resulting Issuer
Following the completion of the Transaction, the directors of the "Resulting Issuer" (as defined in Exchange Policy 2.4) will be as follows:
Satvir Dhillon - Director
Mr. Satvir Dhillon has worked in the banking, investment and securities
industries for the past 20 years for various companies in both the
public and the private markets. Mr. Dhillon has been involved in
raising over $75 million in for the venture capital markets during this
time. He has been involved in the growth, development and corporate
communications of U.S. Geothermal Inc. (NYSE MKT: HTM & TSX:GTH), since
the early stages of the company publicly listing on the Venture
Exchange in 2004, as well as providing his skills and knowledge to
several other private and public companies.
Kim Oishi - Director
Mr. Kim Oishi has 20 years of experience in financing and advising
growth companies, and has served in senior management and board
positions on a number of public and private companies. Mr. Oishi is the
Founder and President of Grand Rock Capital Inc., a company that
invests in growth companies and provides consulting services for
investor relations, corporate finance, business development, mergers
and acquisitions for companies listed on the Toronto Stock Exchange ("TSX"). He is currently a director of China Health Labs & Diagnostics Ltd.
(TSXV:CHO) and Great Northern Gold Exploration Corporation (TSXV: GGE).
Since June 2011 Mr. Oishi has been serving on the board of directors of
Liberty Mines Inc. (TSX:LBE).
Previously, Mr. Oishi served from June 2007 until December 2012 on the
board of Zongshen PEM Power Systems Inc. (TSX:ZPP), a company that
manufactured and sold gas and electric motorcycles in China. He was the
Senior Vice President, Finance and Business Development of Hanwei
Energy Services Corp. (TSX:HE), an energy services company with
products for oil, wind power and clean coal in China, a position he
held from May 2007 to May 2010. Mr. Oishi was also a director of
Hanfeng Evergreen Inc. (TSX:HF), a specialty fertilizer manufacturer in
China from March 2006 to March 2008 and served as President until March
2006. He was a director of Cantronic Systems Inc. (TSXV:CTS), a
developer of infrared imaging and night vision systems, from March 2009
to June 2010. Mr. Oishi was a director of Grand Power Logistics Group
Inc. (TSXV:GPW), a logistics and freight forwarding company from
December 2007 until November 2010. Mr. Oishi received a Bachelor of
Sciences degree and a MBA from the University of British Columbia.
Robert Maddigan - Director
Mr. Maddigan received a Bachelor of Science and Engineering from the
University of Alberta in 1986. He is a professional engineer and has
held various positions with private and public companies. From 2000 to
2009, Mr. Maddigan was the owner and Chief Executive Officer of FSC
International, a private company that was engaged in the design, build
and construction of various projects in Russia with an aggregate value
of $450 million. Mr. Maddigan was the President and Chief Executive
Officer of Taman Petroleum, the Corporation's wholly owned subsidiary
with oil and gas interests in Russia. Mr. Maddigan has and continues to
serve as a director, officer and/or consultant to various public junior
Tommy Cheng - Director
Mr. Tommy M.K. Cheng is the CEO and a director of New Times Energy. Mr.
Cheng has over ten years of corporate finance and operational
experience in the PRC. He founded Neo & Thompson Group Inc. in 2003, a
private equity investment firm focusing on direct investment
opportunities in the PRC. He was the former Vice President of Mandra
Capital from July to November 2003. Prior to that Mr. Cheng was an
assistant general manager of New World China Land Limited (HKEx: 0917)
from 1995 to 2003, a real estate developer in China and an assistant to
managing director of New World Development Company Limited (HKEx:
0017)("New World Development") from 1995 to 2003, a diversified conglomerate and a constituent stock
of the Hang Seng Index of the Hong Kong Stock Exchange. During his
tenure, he has worked with credit rating agencies to secure investment
grade ratings for New World Development's bond issuance and was
involved with New World Development's various equity offerings. Mr.
Cheng was the Chairman, Chief Executive Officer and Chief Financial
Officer of Neo Alliance Minerals Inc (TSX: NAM)(nka Synergy
Acquisitions Inc. NEX: SAQ.H) a TSX Venture listed company from March
29, 2006 to March 19, 2007. Mr. Cheng received his Bachelor of
Commerce in Accounting from the University of Alberta in Canada.
Mr. Oishi owns a total of 2,160,000 shares of KCO indirectly through his
holding company Grand Rock Capital Inc. Mr. Dhillon owns a total of
2,150,100 shares of Grey Hawk. None of the other proposed directors
and officers and or companies controlled by them own any securities of
KCO or Grey Hawk.
New Incentive Stock Option Plan
As part of the Transaction, KCO intends to implement a new incentive
stock option plan, the terms and conditions of which will be
implemented and determined by the board of directors of KCO, but will
not allow for the issuance of options to acquire in excess of 10% of
the issued and outstanding shares of KCO.
Completion of the transaction is subject to a number of conditions,
including but not limited to, Exchange acceptance and if applicable
pursuant to Exchange 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 management
information circular or 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 the securities of a capital pool company should
be considered highly speculative.
The TSX Venture Exchange Inc. has in no way passed upon the merits of
the proposed transaction and has neither approved nor disapproved the
contents of this press release.
KCO, a capital pool company within the meaning of the policies of the
Exchange, was incorporated in British Columbia on July 29, 2011 and was
listed on the Exchange on October 26, 2012. KCO does not have any
operations and has no assets other than cash. KCO's business is to
identify and evaluate businesses and assets with a view to completing a
This news release contains certain forward-looking statements, including
statements regarding the business and anticipated financial performance
of KCO. These statements are subject to a number of risks and
uncertainties. Actual results may differ materially from results
contemplated by the forward-looking statements. When relying on
forward-looking statements to make decisions, investors and others
should carefully consider the foregoing factors and other uncertainties
and should not place undue reliance on such forward-looking statements.
KCO does not undertake to update any forward looking statements, oral
or written, made by itself or on its behalf.
SOURCE: KCO Capital Inc.
For further information:
Mr. Kim Oishi.
Telephone: (778) 997-6228