71 Capital Corp.
TSX VENTURE : SVN.P

August 18, 2009 18:46 ET

71 Capital Corp. Announces Letter of Intent for Qualifying Transaction

TORONTO, ONTARIO--(Marketwire - Aug. 18, 2009) -

NOT FOR DISSEMINATION TO U.S. NEWSWIRE SERVICES

71 Capital Corp. (the "Corporation") (TSX VENTURE:SVN.P) has entered into a letter of intent (the "Letter of Intent") dated August 18, 2009, for the acquisition of all of the issued and outstanding securities of Prairie Pulse Inc. ("Prairie Pulse"). Prairie Pulse was founded in 1994 and owns and operates a processing facility in Vanscoy, Saskatchewan, where it sources and processes lentils, canary seed, peas, and chickpeas, and then exports these specialty crops to international destinations. The Corporation is a capital pool company and intends for the acquisition of Prairie Pulse to constitute the Qualifying Transaction of the Corporation (the "Qualifying Transaction") as such term is defined in the policies of the TSX Venture Exchange (the "Exchange").

Term of Acquisition

Pursuant to the terms of the Letter of Intent, subject to completion of satisfactory due diligence, a definitive purchase agreement (the "Agreement") and receipt of applicable approvals, the Corporation intends to acquire all of the issued and outstanding common shares of Prairie Pulse for consideration consisting of 83,809,524 common shares at a deemed price of $0.2625 per share. Common shares of Prairie Pulse will be converted into common shares of the Corporation on the basis of approximately 52.97 Corporation shares for each Prairie Pulse share.

The Qualifying Transaction is an arm's length transaction. No insiders of the Corporation own securities in Prairie Pulse and no insiders of Prairie Pulse own securities in the Corporation. It is intended that the Corporation will complete a consolidation of its shares and a name change in connection with the Qualifying Transaction and it will therefore be seeking shareholder approval.

Upon completion of the Qualifying Transaction, the Corporation will be engaged in the business of Prairie Pulse and interests as may be subsequently acquired by the Corporation.

Prairie Pulse

Prairie Pulse owns and operates a processing (cleaning, sizing, sorting, and bagging) facility in Vanscoy, Saskatchewan. It was incorporated under the laws of the Province of Saskatchewan in September 1994 and commenced business operations in June 1995. Prairie Pulse's business is sourcing, processing, and exporting specialty crops to international destinations. Lentils have been the primary product handled with canary seed, peas, and chickpeas being secondary. Prairie Pulse's facility is only 26 km west of Saskatoon on the main rail-line to Calgary with a 25 car roll-by spot. This is an ideal location and without question, the close proximity to Saskatoon has been a key component to the company's success. Prairie Pulse has been providing its private shareholders with audited financial statements since July 1, 2000. Based on the audited financial statements for the fiscal year ended June 30, 2008 Prairie Pulse had total assets of $7,480,000, total liabilities of $2,657,000, revenue of $25,272,000 and net profit of $1,136,000. Based on the unaudited financial statements for the fiscal year ended June 30, 2009 Prairie Pulse had total assets of $8,929,000, total liabilities of $3,141,000, revenue of $29,600,000 and net profit of $2,030,000. Prairie Pulse is excited about its future and over the next 18 months intends to expand its operations through strategic acquisitions and the construction of a splitting facility.

Prairie Pulse currently has 573,001 Class A shares, 352,030 Class C shares, 352,030 Class D shares and 305,156 Class E shares outstanding and no convertible securities. Currently, Hakan Bahceci, Cedar Holdings Corp., a corporation controlled indirectly by Howard Wagner, Investment Quest Inc., a corporation controlled indirectly by Allan Wagner, and Alfred and Marie Slinkard (jointly) each hold more than 10% of the outstanding shares of Prairie Pulse. The current directors of Prairie Pulse are Allan Wagner, Howard Wagner and Albert Vandenberg and the current officers of Prairie Pulse are Allan Wagner (Managing Director and Secretary) and Howard Wagner (President).

Management and Board of Directors of the Resulting Issuer

Upon completion of the Qualifying Transaction, it is anticipated that the Corporation's board of directors will consist of two current board members of the Corporation and three new board members. It is intended that one of the three new board members will be Allan Wagner, the current Managing Director and Secretary of Prairie Pulse and the two other board members will be qualified independent directors to be identified in future disclosure. It is also intended that Gregory Hewitt will resign as President and Chief Executive Officer of the Corporation and George Matthew will resign as Chief Financial Officer and Secretary of the Corporation, and Allan Wagner will become the new President and Chief Executive Officer of the Corporation. The Corporation will be working with Prairie Pulse to identify a suitable chief financial officer and corporate secretary for the resulting issuer. Once identified the Corporation will provide the required disclosure regarding this proposed officer.

Allan Howard Wagner - President, Chief Executive Officer and Director

Since October 1994 Mr. Wagner has held the position of Secretary-Treasurer and Managing Director for Prairie Pulse. He was born and raised on a farm in West Central Saskatchewan. After receiving his Bachelor of Science in Agriculture from the University of Saskatchewan in 1986, Mr. Wagner relocated to Winnipeg where he started his international marketing career with Balfour Grain Ltd.. In 1991 Mr. Wagner established and managed a company in Saskatoon called Knight Seed Ltd. for its USA parent company until June 2000. From July 1, 2000 Mr. Wagner has managed all aspects and strategic direction for Prairie Pulse. He is directly responsible for international trade, corporate finance, and the overall management of the business. In addition to his main responsibilities, he has successfully managed the development and implementation of information technology that has dramatically improved management and reporting aspects of the business. Mr. Wagner also plays an integral role in conceptual planning, decisions related to facility upgrades, and new project designs. The solid business relationships developed and maintained by Mr. Wagner with agents and buyers internationally, have established Prairie Pulse as a significant player in the specialty crop industry.

Gregory William Hewitt - Director

Since November 2008 Mr. Hewitt has been a Senior Vice President at DHL Express (USA). Mr. Hewitt was asked to join the US team to help them through a major corporate restructure, with a specific focus on supporting customer retention and implementing process re-engineering in the areas of sales and marketing. Prior to this role, from February 2002 Mr. Hewitt has been a Senior Vice President at DHL Express (Canada). Mr. Hewitt is responsible for leading the commercial team including sales, customer service, pricing, billing, collections and marketing personnel. He oversees all aspects of revenue generation and sets the annual shipment and yield targets for the company as it continues to expand its business in the Canadian express and logistics market. Between November 1993 and February 2002 Mr. Hewitt was employed with Loomis Courier Services. Mr. Hewitt joined the Loomis Courier Service sales team in 1993, and quickly rose to the role of Regional Director of Sales for Eastern Canada. When Loomis restructured and re-branded as Mayne Logistics Loomis in 2001, he was named National Sales Manager, and the following year, was promoted to Vice President - Sales, Marketing and Customer Service. After the merger of Mayne Logistics Loomis and DHL, Mr. Hewitt was named Vice President - Field Sales for DHL Express (Canada) and was responsible for leading the integration of the Loomis and DHL sales teams. He was pivotal in the development of a variety of innovative new tools for the integrated team, including a sales training curriculum, a sales compensation program, field sales strategies, sales revenue growth forecasts, as well as departmental expense budgets. In connection with his positions with DHL and Loomis, Mr. Hewitt has previously been an officer of Mayne Nickless Transport Inc. and Deutche Post World Net, issuers listed on the Australian Stock Exchange and German Stock Exchange, respectively. Mr. Hewitt holds a Bachelor of Commerce (Honours) degree from Queen's University.

Eric Roblin - Director

Mr. Roblin is a Partner with the law firm Fogler, Rubinoff LLP and has been a lawyer with Fogler, Rubinoff LLP since May 1997. Mr. Roblin's practice is focused on corporate finance and securities law. Specifically, he has acted on numerous public and private securities offerings as counsel for agents and underwriters as well as for issuers listed on the Toronto Stock Exchange, the New York Stock Exchange, the TSX Venture Exchange, the American Stock Exchange, AIM and NASDAQ. Mr. Roblin has acted as counsel on a number of merger and acquisition transactions, both friendly and hostile, and also acts for a number of public and private issuers in respect of ongoing general corporate and securities law matters Mr. Roblin holds a Bachelor of Commerce (Honours) degree from Queen's University and a Juris Doctor from the University of Toronto.

Sponsorship of Qualifying Transaction

Sponsorship of a qualifying transaction of a capital pool company is required by the Exchange unless exempt in accordance with the Exchange policies. The Corporation is currently reviewing the requirements for sponsorship and may apply for exemption from sponsorship requirements pursuant to the policies of the Exchange, however there is no assurance that the Corporation will ultimately obtain this exemption.

Proforma Capital Structure

The Corporation currently has 5,411,271 common shares issued and outstanding and 823,449 reserved for issuance on the exercise of options and or compensation options. Upon closing of the Qualifying Transaction and subject to the completion of a share consolidation, the Corporation will have approximately 89,220,795 common shares issued and outstanding on an undiluted basis. There may also be additional options granted to directors, officers and consultants.

Furthermore it is anticipated that concurrently with the completion of the Qualifying Transaction Prairie Pulse will complete a minimum $10 million financing of which an as yet undetermined portion will be a secondary offering by certain of the current Prairie Pulse shareholders. It is intended that the proceeds of the financing will be used by Prairie Pulse for the construction of a splitting facility and for general corporate purposes. All securities issued by Prairie Pulse in the financing will be replaced by securities of the Corporation with the same terms upon completion of the Qualifying Transaction. Prairie Pulse has engaged Wolverton Securities Ltd. to act as its exclusive agent in connection with the financing.

In accordance with Exchange policy, the Corporation's shares are currently halted from trading and will remain so until the completion of the Qualifying Transaction.

Break Fee

Prairie Pulse has agreed to pay the Corporation a break fee of $2.2 million in the event that its board of directors withdraws or modifies is approval or recommendation of the Qualifying Transaction in certain circumstances or approves or recommends a proposal that is equivalent or superior to the Qualifying Transaction or, in certain circumstances where a superior proposal is made to shareholders of Prairie Pulse prior to November 30, 2010 and such transaction is completed prior to November 30, 2010.

Termination

The letter of intent will terminate (i) on the mutual consent of both the Corporation and Prairie Pulse, (ii) automatically if the Agreement is not executed on or before 5:00 p.m. (Toronto time) on November 30, 2009, (iii) automatically if the required regulatory approvals are not received on or before 5:00 p.m. (Toronto time) on November 30, 2009 and (iv) automatically if the Qualifying Transaction is not completed on or before 5:00 p.m. (Toronto time) on November 30, 2009.

Description of Significant Conditions to Closing

Completion of the Qualifying Transaction is subject to a number of conditions including but not limited to, due diligence, Exchange acceptance and if required by Exchange policies, majority of the minority shareholder approval. Where applicable, the Qualifying Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Qualifying 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 Qualifying Transaction, any information released or received with respect to the Qualifying 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 Corporation will make a subsequent news release with information on sponsorship and summary financial information in accordance with Exchange policy.

This news release contains "forward-looking statements" within the meaning of applicable securities laws relating to the proposal to complete the Qualifying Transaction and associated transactions, including statements regarding the terms and conditions of the Qualifying Transaction and associated transactions. Readers are cautioned not to place undue reliance on forward-looking statements. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, the risks that the parties will not proceed with the Qualifying Transaction and associated transactions, that the ultimate terms of the Qualifying Transaction and associated transactions will differ from those that currently are contemplated, and that the Qualifying Transaction and associated transactions will not be successfully completed for any reason (including the failure to obtain the required approvals or clearances from regulatory authorities). The statements in this news release are made as of the date of this release. The Corporation undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Corporation, Prairie Pulse, or their respective financial or operating results or (as applicable), their securities.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the Qualifying Transaction and has neither approved nor disapproved the contents of this press release.

Contact Information

  • 71 CAPITAL CORP.
    ERIC ROBLIN
    (416) 941-8811