Aug. 16, 2012
Pan American Fertilizer Corp. has inked a letter of intent to acquire Pacific Potash Corp.
Pacific Potash is focused on exploring the Provost potash property targets the Prairie Evaporite Formation, and also has an option to acquire up to an 80 per cent interest in Western Potash's Amazonas Basin claims in Brazil.
"Pan American considers the combination of the assets held by Pacific Potash and its subsidiaries to be consistent with Pan American’s mission to bring its shareholders quality projects within the fertilizer industry," said president and CEO of Pan American, Randy Wright.
"We look forward to building an exceptional company by expanding and diversifying our interest in the growing fertilizer market, which in turn will result in meaningful value creation for our shareholders."
Under the terms of the deal, Pan American will issue to Pacific Potash shareholders a number of its common shares such that prior to the completion of a concurrent financing, current investors in Pan American will hold 62.5 per cent of the company.
Former shareholders of Pacific Potash will hold the remaining 37.5 per cent of Pan American, on an undiluted basis.
At the same time, Pan American plans to complete a non-brokered private placement financing through subscription receipts, for minimum gross proceeds of $2.0 million, and a maximum of up to $5.0 million.
Each subscription receipt will be converted into units at no additional consideration once the transaction is completed.
Each unit will be made up of one common share of Pan American and one-half of one share purchase warrant.
Pan American said it will use the new funds to finance the costs of the the acquisition and to fund the general working capital expenses of the resulting issuer.
“We are very pleased with the proposed transaction as it provides our shareholders with a meaningful ownership in a stronger combined fertilizer-focused company," said Balbir Johal of Pacific Potash.
"We believe this Transaction to be mutually beneficial to both parties and strategically positions the new company well for future value creation.”
Both parties said they plan to apply for the listing of Pan American’s common shares on the TSX Venture Exchange.
The deal is subject to a number of conditions, including a definitive agreement, due diligence, board, shareholder and regulatory approvals, and the completion of the financing.