BSM Technologies and Datacom Wireless Announce Letter Agreement for a Business Combination to Create a Major Player in the Canadian Telematic market.
Woodbridge, Ontario, CANADA and Laval, Quebec, CANADA ‐ BSM Technologies Inc. (“BSM”)(TSX-V:GPS) and Datacom Wireless Corporation (“Datacom”) (TSX-V:DAT) are pleased to announce that they have entered into a binding Letter Agreement dated July 2nd, 2009 (the “Letter Agreement”), whereby BSM and Datacom have agreed upon the terms and conditions with respect to a proposed business combination of the two companies (the “Proposed Transaction”).
The Proposed Transaction
Pursuant to the terms of the Letter Agreement, and subject to any regulatory, shareholder, director or such other approvals that may be required, to the satisfaction by each of BSM and Datacom, through a due diligence, that each of BSM and Datacom publicly filed disclosure record represents full, true and plain disclosure about their business and affairs and to other conditions contained in the Letter Agreement, the parties intend to negotiate and enter into a definitive agreement (the “Definitive Agreement”) with respect to the Proposed Transaction on or before July 22nd, 2009 and then close the Proposed Transaction on or about September 18th, 2009. The Definitive Agreement will contain customary representations and warranties by BSM in favour of Datacom and by Datacom in favour of BSM and such other terms, covenants and conditions as would be customary for a transaction of this nature.
As of the date hereof, the number of common shares in the capital of Datacom (the “Datacom Shares”) that are outstanding is 27,951,221. There are 1,068,791 Datacom Shares issuable upon exercise of outstanding stock options of Datacom. The number of common shares in the capital of BSM (the “BSM Common Shares”) that are outstanding is 85,907,730 (including 547,900 in escrow subject to BSM’s performance). There are 6,175,000 BSM Common Shares issuable upon the exercise of outstanding stock options of BSM (the “BSM Options”), 57,309,522 BSM Common Shares issuable upon the exercise of outstanding common share purchase warrants of BSM (the “BSM Warrants”) and 56,309,522 BSM Common Shares are issuable upon the conversion of outstanding convertible debenture of BSM (the “BSM Debentures”).
Immediately prior to completion of the Proposed Transaction, subject to regulatory and shareholder approval as required, $1.75 million of the BSM Debentures and BSM Warrants, out of a total of $3.45 million in principal value, held by certain holders, will be purchased by some other existing debenture holders and other new investors. Thereafter, BSM would amend its articles to establish one class of convertible preferred shares (the “BSM Preferred Shares”), exchange its outstanding BSM Debentures into the BSM Preferred Shares and exchange BSM Warrants into BSM Common Shares (the “BSM Pre Merger Reorganization”).
As a result of the proposed BSM Pre Merger Reorganization, and prior to the Proposed Transaction, the share capital of BSM will be 107,599,230 BSM Common Shares and 61,311,111 BSM Preferred Shares, and there will be 6 175 000 BSM Options outstanding.
It is then expected that the Proposed Transaction will be in the form of an amalgamation of Datacom with a wholly-owned subsidiary of BSM, unless an alternative form of transaction is deemed advisable. Each Datacom Share will then be exchanged for approximately 4.1 BSM Common Shares such that, upon completion of the Proposed Transaction, the former holders of BSM Common Shares, BSM Preferred Shares and BSM options will own 59.5% (175,085,350 out of 294,261,093) of all BSM securities outstanding, on a fully diluted basis, and former holders of Datacom Shares and Datacom options will own 40.5% (119,175,743 out of 294,261,093) of all BSM securities outstanding, on a fully diluted basis. It is intended that BSM will continue to be listed on the TSX Venture Exchange.
All options to purchase BSM Common Shares that are outstanding at the time of the closing of the Proposed Transaction will remain outstanding in accordance with their terms. Each option to purchase Datacom Shares will be replaced with approximately 4.1 options to purchase BSM Common Shares and the exercise price for such option will be the original exercise price divided by approximately 4.1. It will be the same conversion ratio as that used to convert Datacom Shares into BSM Common Shares. A fairness opinion will be obtained to confirm that the above exchange ratio reflects appropriate value.
On completion of the Proposed Transaction, the board of directors shall initially be comprised of seven or nine directors, four of the seven or five of the nine will be nominees of BSM, the others will be nominees of Datacom.
Description of Conditions to Closing
Completion of the Proposed Transaction is subject to a number of conditions, including, but not limited to, acceptance from the TSX Venture Exchange (the “Exchange”) and other shareholders, third party and regulatory approvals as may be required. In addition, other necessary conditions to close the Proposed Transaction include both parties entering into support agreement, the completion of the Definitive Agreement setting forth the terms and conditions set forth in the Letter Agreement, satisfaction, through a due diligence, that each of BSM and Datacom publicly filed disclosure record represents full, true and plain disclosure about their business and affairs and the completion of BSM Pre Merger Reorganization. The Letter Agreement provides for a reciprocal break fee in the amount of $500,000 and notification by each party of the receipt of alternative proposals from third parties. Each party has agreed not to solicit other proposals but has reserved the right for each board to exercise its fiduciary duties. BSM has been advised by the Exchange that the Exchange will require BSM to obtain disinterested shareholder approval for the issuance of BSM Preferred Shares, the purchase of $1.75 million of the BSM Debentures and BSM Warrants (held by certain holders) by some other existing debenture holders and other new investors, the exchange of BSM Debentures into BSM Preferred Shares and the exchange of BSM Warrants into BSM Common Shares. Datacom needs its Shareholders’ approval for the amalgamation. No definitive agreements have been reached other than the Letter Agreement. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.
Description of The Resulting Corporations
The Proposed Transaction is expected to generate cost synergies and drive an improved cost structure. Based on both corporations’ last reported financial results, it is expected that the resulting corporations would have approximate pro forma assets of $11.3 million, and annual revenues of approximately $18 million.
Aly Rahmetulla, chief executive officer of BSM, will be CEO of the resulting corporations. ‘‘The combination of the BSM and Datacom business units will create value for all stakeholders. The resulting corporations will have the scale, geographical coverage, technology leadership, and platform for accelerated growth going forward. I am delighted at the opportunity to lead the resulting corporations and will move quickly to implement synergies and to leverage the combined talents of both BSM and Datacom” said Rahemtulla.
Pierre Bélanger, acting president and CEO of Datacom said, “We believe the business models of Datacom and BSM are highly complementary. By combining the two corporations, shareholder value can be created through synergistic benefits and leveraging on each corporation’s strengths. We are confident that the resulting corporations, under the direction of Aly Rahemtulla, will achieve value creation targets anticipated by our customers, partners and shareholders.”
About Datacom Wireless Corporation
Founded in 1999, Datacom has grown to become one of the Canadian leaders in the design, development and marketing of mission critical vehicle fleet management and theft prevention solutions. Its products and services use wireless communications and satellite-based tracking technologies (GPS) and a state-of-the-art ASP information portal.
About BSM Technologies
BSM Technologies designs, manufactures and markets a comprehensive line of AVSL (“Automatic Vehicle Security and Tracking”) solutions for Commercial and Government Fleet Management, including Law Enforcement, through its subsidiary BSM Wireless. The BSM line of products range from Fleet Management and Consumer Vehicle Protection offerings to the full featured ”Stinger” product featured in news media worldwide as the key technology behind the Bait and Covert application used by hundreds of Law Enforcement agencies to deter vehicular, trailer and heavy equipment theft.
Superior functionality, seamless switching between two separate footprints, enhanced reliability, advanced security features, and excellent value characterize BSM products. By incorporating advanced wireless locating and mapping technology, and IP‐based communications protocols, the BSM line of products provides sophisticated real‐time monitoring and control of commercial and personal vehicle assets to meet the demanding needs and stringent requirements of today’s mobile environments. BSM’s unique end to end solutions feature sophisticated wireless hardware, firmware and software all developed by and proprietary to BSM. The BSM product line can be easily adapted and customized to match any customer user requirement while BSM’s in‐house support infrastructure assures that all clients receive the premium AVSL solution in the industry to meet their needs.
SecTrack sells Inmarsat D+ transceivers and airtime subscription to value added resellers around the world. These VARs are typically local companies who have built a proper monitoring and tracking service for end‐users in a multitude of maritime and land based sectors including nuclear transport monitoring, mining, security tracking of trucks, trailers and other vehicles and tracking of airplanes and rescue helicopters. The company’s customer base is spread over Europe, Asia, Africa and Central and South America
About Netistix Technologies Incorporated in 2002, Netistix Technologies Corporation is headquartered in Ottawa, Canada and has developed a comprehensive and customizable wireless fleet management solution known as “FleetPulse”. The Netistix “FleetPulse”, Wireless Fleet Management System, delivers actionable information that reduces fleet operation and environmental costs, improves productivity and increases safety. For more information, please visit http://www.netistix.com
For more information please contact:
Mr. Aly Rahemtulla President & CEO
BSM Technologies Inc.
1‐ (905) 265‐1200
Pierre Bélanger, Acting President and CEO
Except for historical information contained herein, certain statements contained in this release constitute forward-looking information. These statements relate to future events or future performance. The use of any of the words “could”, “intend”, “expect”, “believe”, “will”, “projected”, “estimated” and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on BSM’s or Datacom’s current belief or assumptions as to the outcome and timing of such future events. Actual future results may differ materially. In particular, this release contains forward-looking information relating to: the intention of Datacom and BSM to enter into the Definitive Agreement and the terms and conditions of the Proposed Transaction, including securities to be issued pursuant thereto, the board composition of BSM following the Proposed Transaction and the closing date of the Proposed Transaction.
Various assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. Those assumptions and factors are based on information currently available to BSM or Datacom. The material factors and assumptions include: the ability to obtain the necessary director, shareholder and regulatory approvals; Exchange policies not changing; completion of satisfactory due diligence; and the structure of the Proposed Transaction being the most tax efficient way of completing the Proposed Transaction. Risk Factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking information include, among other things: conditions imposed by the Exchange, the failure to obtain the necessary directors’ and shareholders’ approval to the Proposed Transaction; changes in tax laws, general economic and business conditions; and changes in the regulatory requirements. BSM cautions the reader that the above list of risk factors is not exhaustive. The forward-looking information contained in this release is made as of the date hereof and BSM is not obligated to update or revise any forward looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Because of the risks, uncertainties and assumptions contained herein, the reader should not place undue reliance on forward-looking information. The foregoing statements expressly qualify any forward-looking information contained herein.
Neither 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 release. ◄