Amicus Capital Corp.
TSX VENTURE : AIC.P

May 02, 2008 09:15 ET

Amicus Capital Corp. Announces Its Acquisition of a China-Based Manufacturer and Retailer of Nutritional Supplements and Personal Care Products as Its Qualifying Transaction

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 2, 2008) - Amicus Capital Corp. ("Amicus") (TSX VENTURE:AIC.P) is pleased to announce that it has entered into a letter of intent (the "LOI") dated April 18, 2008 with Rainbow Trend Limited ("Rainbow"), a British Virgin Islands company, for the acquisition of all the outstanding shares of Rainbow, which will hold a 55.6% equity interest in Sino-Canada Beijing Polo Biotech Co. Ltd. ("Polo JV"), a Sino-foreign joint venture organized under the laws of China (the "Acquisition"). The residual 44.4% equity interest in Polo JV will be held by Polo Biology Science Park Co. Ltd. ("Polo Biology"), a Chinese company controlled by Li (Polo) Wu and Qing (Paul) Wu. Pursuant to the terms of the LOI, Amicus has paid to Rainbow a contribution of $25,000 to be applied against closing expenses and is refundable upon certain conditions (the "Contribution to Expenses"). It is anticipated that the Acquisition will constitute Amicus' Qualifying Transaction and that Polo JV will be organized and will hold the necessary assets (or the contractual right to substantially all of the economic benefits of such assets) as described below, prior to the completion of the Qualifying Transaction.

The principal shareholders of Rainbow are Kinderville Limited ("Kinderville"), Li (Polo) Wu, Qing (Paul) Wu and Jie (Miranda) Liu. Hong Ridley holds 99% of the voting securities of Kinderville. Rainbow has 113 other individual shareholders, each of whom holds less than 1% of the common shares of Rainbow.

Polo Biology currently develops and distributes quality health supplements and personal and home care products in Asia (predominantly in China) under Polo Biology's trademark. Polo Biology currently operates through a network of retail outlets, managed by licensed agents, for its products. Polo Biology has transferred certain of its assets to Polo JV and the economic benefit of certain of its assets has been made available to Polo JV under contractual arrangements until they can be transferred to Polo JV in accordance with Chinese law. Further, certain of the operations of Polo Biology that were recently carried on through arrangements with Polo (Beijing) Technology Development Ltd. ("Polo Beijing"), an affiliated entity, have been re-established between Polo JV and a newly created subsidiary of Polo JV.

Prior to the completion of the Acquisition, it is intended that Rainbow will amend its capital to create a new class of Class B common shares and that Rainbow will then complete a private placement of subscription receipts (each, a "Subscription Receipt") exchangeable for Class B common shares of Rainbow at a price (the "Private Placement Price"), subject to the approval of the TSX Venture Exchange (the "Exchange"), of $0.50 per Subscription Receipt for gross proceeds of approximately $3.5 million. Rainbow will also grant to its agent an option (the "Over-Allotment Option") exercisable in whole or in part to offer for sale up to an additional 15% of the Subscription Receipts offering for additional gross proceeds of approximately $525,000 (the entire offering of Subscription Receipts, the "Private Placement"). It is expected that Blackmont Capital Inc. (the "Agent") will be retained as the agent for Rainbow for the Private Placement and that, in consideration of its agency services, the Agent will receive a cash fee equal to 9% of the gross proceeds of the Private Placement (except for the gross proceeds received from those persons purchasing Subscription Receipts who are on the President's list, in which case the commission will be equal to 5% of such gross proceeds) and warrants (the "Agent's Warrants") to acquire Class B common shares of Rainbow equal to 10% of the Subscription Receipts sold under the Private Placement exercisable for two years at the Private Placement Price. The net proceeds from the Private Placement will be used by Rainbow to: (a) subject to obtaining the requisite Chinese government approvals, make an equivalent cash investment in Polo JV to increase Rainbow's equity interest in Polo JV to 90%, (b) pay for the transaction expenses, and (c) for working capital.

Also, prior to the completion of the Acquisition, it is intended that, subject to shareholder approval, Amicus will complete a share consolidation (the "Consolidation"), such that the existing Amicus securities will be consolidated on the basis of 0.8666667 for 1. The existing Amicus shareholders will hold 7,800,000 post-Consolidated common shares immediately prior to the acquisition of Rainbow by Amicus (of which the founders of Amicus will hold 3,466,667 post-Consolidated common shares (the "Founders' Shares")) and that the existing holders of Amicus Warrants (as defined below) will hold warrants to acquire 433,333 post-Consolidated common shares of Amicus at $0.1154 per share and that the existing holders of Amicus Options (as defined below) will hold options to acquire 780,000 post-Consolidated common shares of Amicus at $0.1154 per share.

Prior to the completion of the Acquisition, it is expected that, subject to the prior consent of the Exchange and applicable securities laws, each of the Amicus Founders will transfer pro rata one-half of their post-Consolidated common shares for a combined aggregate sale price of $200,000 to Li (Polo) Wu, Qing (Paul) Wu or Jie (Miranda) Liu or their nominees.

For purposes of the Acquisition, subject to the final pricing of the Private Placement, Rainbow has been valued at $18 million. Pursuant to the terms of the Acquisition, Amicus will acquire from the shareholders of Rainbow the 50,000 common shares of Rainbow currently issued and outstanding (each having a deemed value of $360), and Amicus will, subject to the approval of the Exchange, issue: (a) 720 Amicus common shares in exchange for each issued Rainbow common share; and (b) one Amicus common share in exchange for each issued Rainbow Class B common share. Amicus will also issue one common share for each Class B common share of Rainbow held by the subscribers under the Private Placement, resulting in the issuance to Rainbow Class B common shareholders of 7,000,000 Amicus common shares (or 8,050,000 Amicus common shares if the entire Over-Allotment Option is exercised). Amicus will also issue share purchase warrants bearing the same terms and conditions as the Agent's Warrants in exchange for the Agent's Warrants on a one-for-one basis. The common shares of Amicus to be issued to the shareholders of Rainbow will be issued pursuant to exemptions from the prospectus requirements of the applicable securities legislations, will be subject to resale restrictions as required under the applicable securities legislation and may be subject to escrow restrictions as required by the Exchange.

Upon completion of the Acquisition, a finder's fee equal to 6% of the value of Rainbow will be paid to Evans & Evans, Inc., of which two-thirds of the finder's fee will be payable in common shares of Amicus at a deemed price of $0.50 per share and one-third of the finder's fee will be payable in cash. The payment of this finder's fee will be subject to applicable Exchange escrow provisions and the approval of the Exchange.

Following the completion of the Acquisition, Amicus will have 52,240,000 post-Consolidated common shares (or 53,290,000 post-Consolidated common shares if the entire Over-Allotment Option is exercised) outstanding (on an undiluted basis) following the completion of the Acquisition. Amicus also currently has outstanding director and employee share options to acquire 900,000 pre-Consolidated (or 780,000 post-Consolidated) common shares at an exercise price of $0.10 per pre-Consolidated share (or $0.1154 per post-Consolidated share) (the "Amicus Options"). It is expected that the holders of the Amicus Options will retain such options subsequent to the completion of the Acquisition in accordance with the current share option plan. In addition, Amicus currently has outstanding agent's options to acquire 500,000 pre-Consolidated (or 433,333 post-Consolidated) common shares at an exercise price of $0.10 per pre-Consolidated share (or $0.1154 per post-Consolidated share) that were issued in connection with Amicus' initial public offering (the "Amicus Warrants").

The completion of the Acquisition is subject to a number of conditions precedent including, but not limited to, the following:

1. the execution of a definitive agreement with respect to the Acquisition (the "Definitive Agreement");

2. the approval of the Consolidation by the majority of the votes cast by the shareholders of Amicus at a properly constituted meeting of the common shareholders of Amicus;

3. the approval of the Acquisition by the majority of the votes cast by the shareholders of Rainbow at a properly constituted meeting of the common shareholders of Rainbow;

4. the receipt of all necessary regulatory, corporate and third party approvals, including the approval of the Exchange, and compliance with all applicable regulatory requirements and conditions in connection with the Acquisition;

5. the maintenance of Amicus' listing on the Exchange;

6. the confirmation of the representations and warranties of each party to the Definitive Agreement as set out in such agreement;

7. the absence of any material adverse effect on the financial and operational condition or the assets of each of the parties to the Definitive Agreement;

8. the delivery of standard completion documentation including, but not limited to, legal opinions from Canadian and Chinese legal counsels, officers' certificates and certificates of good standing; and

9. other conditions precedent customary for a transaction such as the Acquisition.

The completion of the Private Placement is a condition precedent in favour of Rainbow. In addition, the completion of the Acquisition is also subject to the principal shareholders of Rainbow, and the Polo Biology corporate group and its principal shareholders, confirming to their own satisfaction, acting reasonably, that neither they nor the Polo corporate group or its constituents will be subject to any significant adverse tax consequences as a result of the Acquisition or otherwise.

The completion of the Acquisition is intended to occur on the tenth business day following the satisfaction or waiver of the conditions precedent or such other date as is mutually agreed to by the parties, but in any event no later than September 1, 2008. If the Acquisition is not completed on or before September 1, 2008, the terms of the LOI or the Definitive Agreement (if applicable) will be terminated. The Definitive Agreement will also include a break fee in favour of Amicus in that if the Transaction does not complete on or before September 1, 2008 (or such other date as may be agreed to by the parties) due solely to the fault of Rainbow, which for this purpose shall be deemed to have occurred if: (a) Rainbow fails to use reasonable commercial efforts to complete such acts which are solely within its control to close the Transaction; (b) there is a determination made by Rainbow's shareholders or the Polo Biology corporate group or Polo Biology's shareholders that they will be subject to significant adverse tax consequences in connection with the Transaction; or (c) Rainbow fails to obtain the approval of its shareholders for the Transaction, then Rainbow will pay to Amicus in cash an amount equal to 3% of the value of Rainbow as at the date of the Definitive Agreement and in accordance with applicable TSX-V policies, and no additional amounts will be owed by Rainbow. Each of Amicus and Rainbow will be responsible for the payment of its own costs and expenses incurred in connection with the Acquisition. Amicus will also be responsible for the payment of 50% of the work fee, sponsorship fee and related costs and expenses of the Agent for the Private Placement and the sponsor for the Qualifying Transaction.

The Contribution to Expenses paid by Amicus to Rainbow is a non-refundable contribution to closing expenses. However, if: (a) approval from the China Securities Regulatory Commission or other Chinese government authority is required for the completion of Amicus' Qualifying Transaction; or (b) the parties do not enter a Definitive Agreement on or before June 1, 2008 due solely to the fault of Rainbow, which shall be deemed to occur if Rainbow fails to negotiate in good faith a Definitive Agreement consistent with the terms hereof, and Amicus elects to terminate the LOI, then Rainbow will refund the Contribution to Expenses to Amicus and, if the circumstances set out in (b) prevail, Rainbow will pay an additional $100,000 to Amicus and no additional amounts will be owed by Rainbow. In addition, if the parties do not enter a Definitive Agreement on or before June 1, 2008 due solely to the fault of Amicus, which shall be deemed to occur if Amicus fails to negotiate in good faith a Definitive Agreement consistent with the terms hereof, and Rainbow elects to terminate the LOI, then Amicus will pay $100,000 to Rainbow and no additional amounts will be owed by Amicus. Neither party will be required to make a $100,000 payment if such party determines, acting reasonably, not to proceed to enter a Definitive Agreement based on its due diligence activities with respect to the other party.

Amicus expects to call a shareholders' meeting to be held in June or July 2008 to consider the Consolidation. It is expected that the principal shareholders of Amicus, including Thomas Lamb, John Sutherland, David Ingram, Peter Smith and Corry Silbernagel, will enter into a voting support agreement to approve the Consolidation at the meeting of the Amicus shareholders.

It is the intention of Amicus and Rainbow to establish and maintain an Amicus board of directors that consists of directors with a combination of appropriate skill sets and is compliant with all regulatory and corporate governance requirements. The board of directors of Amicus currently consists of five members. Upon completion of the Acquisition, it is intended that three of the five members of the board of directors will be nominated by Rainbow, who are expected to be Li (Polo) Wu, Qing (Paul) Wu and Jie (Miranda) Liu, and two of the five members of the board of directors will be nominated by Amicus, who are expected to be Thomas Lamb and John Sutherland. Two of the five members of the board will be independent directors.

Thomas Lamb, a lawyer, is currently Vice-President, Corporate of Goldgroup Resources Inc. and a director of First Source Resources Inc., an Exchange-listed company. John Sutherland is a Certified General Accountant and is the Vice President and Chief Financial Officer of Goldgroup Resources Inc. and Chief Financial Officer of Uracan Resources Ltd. Li (Polo) Wu is currently Chairman of the board of directors of Polo Biology and he is also a member of the Beijing Parliament, Vice-Chairman of the China Health Industry Promotion Association and Chairman of the Beijing Federation of Industry and Commerce Standing Committee. Qing (Paul) Wu is currently Vice-Chairman of the board of directors and President of Polo Biology and is President of two other companies in the Polo corporate group. Jie (Miranda) Liu is currently the Chief Executive Officer and a director of Polo Biology.

Upon completion of the Acquisition, Polo JV will develop and distribute quality health supplements and personal and home care products in Asia (predominantly in China). Polo JV will operate through a network of retail outlets, managed by licensed agents, for its products. This business, as currently operated by Polo Biology, had revenues of $4.6 million, net income of $1.7 million and earnings per share of $0.015 in the year ended June 30, 2007. These figures are based on the combined unaudited financial statements of Polo Biology and Polo Beijing.

As a result of the Acquisition, Rainbow will become a wholly-owned subsidiary of Amicus, which will thereby indirectly own a 55.6% interest in Polo JV, subject to being increased as described below. The total registered capital of Polo JV is currently US$1.8 million. Rainbow has contributed US$1 million and Polo Biology has transferred certain assets to Polo JV, having a value of approximately US$347,000, and has committed to contribute US$453,000 in cash, for a total value of US$800,000. In addition, Polo Biology has made available to Polo JV under contractual arrangements the economic benefit of certain of its assets until they can be transferred to Polo JV in accordance with Chinese law. Further, certain of the operations of Polo Biology that were recently carried on through arrangements with Polo Beijing, an affiliated entity, have been re-established between Polo JV and a newly created subsidiary of Polo JV.

Subject to obtaining the requisite Chinese government approvals and financing, Rainbow will increase its percentage ownership of Polo JV to 90% by contributing cash to Polo JV from the net proceeds of the Private Placement and thereby diluting the share ownership interest of Polo Biology in Polo JV to 10%. Until such Chinese government approvals are obtained, Polo Biology will agree to waive or forego its right to receive all distributions and dividends received from Polo JV in excess of the portion owed to it based on such 10% ownership in Polo JV.

Amicus, a capital pool company within the meaning of the policies of the Exchange, was incorporated in May 2007 and was listed on the Exchange in December 2007. Amicus does not have any operations and has no assets other than cash. Amicus' business is to identify and evaluate businesses and assets with a view to completing a Qualifying Transaction under the policies of the Exchange.

Trading in the common shares of Amicus has been halted on the Exchange since April 21, 2008 and will resume trading on the completion of the Qualifying Transaction.

Except for statements of historical fact, all statements in this news release, including, but not limited to, statements regarding future plans, objectives and payments are forward-looking statements that involve various risks and uncertainties.

Completion of the transaction is subject to a number of conditions, including but not limited to, TSX Venture Exchange acceptance and, if applicable pursuant to TSX Venture 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 has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this news release.

Blackmont Capital Inc., subject to completion of satisfactory due diligence, has agreed to act as agent, and if required by the TSX Venture Exchange as sponsor in connection with the transaction. An agreement to sponsor should not be construed as any assurance with respect to the merits of the transaction or the likelihood of completion.

FORWARD LOOKING INFORMATION

Certain information in this news release is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions. This forward-looking information includes, among other things, information with respect to Amicus' beliefs, plans, expectations, anticipations, estimates and intentions, such as Amicus' acquisition of Rainbow, the organization of Polo JV, the transfer of certain of the Polo Biology assets to Polo JV, the contractual arrangements relating to the economic benefit of certain Polo Biology assets to be made available to Polo JV, the change in percentage ownership of Polo JV between Rainbow and Polo Biology, the amendment of the share capital of Rainbow, the completion of a private placement of subscription receipts by Rainbow, Amicus' acquisition of Rainbow shares in exchange for Amicus common shares pursuant to prospectus and registration exemptions, the execution of a definitive agreement for the Acquisition, the establishment of a new Amicus board of directors, and the activities of Polo JV after the Acquisition. The words "may", "could", "should", "would", "suspect", "outlook", "believe", "anticipate", "estimate", "expect", "intend", "plan", "target" and similar words and expressions are used to identify forward-looking information. The forward-looking information in this news release describes Amicus' expectations as of the date of this news release.

The results or events anticipated or predicted in such forward-looking information may differ materially from actual results or events. Material factors which could cause actual results or events to differ materially from a conclusion, forecast or projection in such forward-looking information include, among others, risks arising from general economic conditions and adverse industry events, risks arising from operations generally (such as the ability to secure raw materials, arrange for manufacture of products on a timely basis, and maintain an adequate workforce), reliance on contractual rights such as licences and leases in the conduct of its business, reliance on independent distributors for sales of product, reliance on key personnel, adverse publicity concerning product quality or actions of distributors, consumer complaints, market acceptance of the Polo products, competition for distributors, the need to protect intellectual property and other proprietary rights, possible failure of the business model or business plan, fluctuations in the cost of materials and inventory, fluctuations in the exchange rate, regulation of offshore or cross-border transactions by the government of China, competition, environmental matters, and insurance or lack thereof. Risks associated with doing business in China include risks arising from state ownership, economic control measures instituted from time to time by China, governmental intervention and influence over industry, adequacy of infrastructure, regulations relating to capital projects and quality standards, foreign investment, repatriation of profits and currency conversion, income tax, land use rights, appropriation and expropriation, permits and licences, as well as risks associated with a developing legal system, shareholder rights and enforcement of judgments.
While counsel for Polo Biology has advised that approval from the CSRC may not be required upon oral consultation with the CSRC, the CSRC may take a different position and require approval for the Acquisition under recently adopted cross-border mergers and acquisitions regulation. Any requirement to obtain Chinese governmental approvals prior to completion may delay the Acquisition and a failure to obtain the approvals may create uncertainties for the Acquisition, limit Amicus' ability to inject capital into Polo JV or otherwise adversely affect Amicus. Also, the land occupied by the facilities of Polo JV is under a lease from a rural collective authority, is collectively owned and is designated for agricultural or township collective enterprise use only. The grant of industrial land use rights to Polo Biology by the rural collective authority does not comply with Chinese land administration law and, accordingly, the land use rights may not be enforceable. Polo Biology and its principals have undertaken to indemnify Polo JV for any losses suffered as a result of such irregularities. However, based on (i) the proximity of the facilities of Polo Biology to numerous other industrial areas and to parts of Beijing that are highly urbanized and (ii) the rezoning plan for Beijing to be implemented in the next ten years, management of Polo JV is optimistic that the Chinese government will not expropriate the land and will permit industrial use of the land occupied by the Polo Biology facility. Management also believes that Polo JV would be in a favourable position to obtain the industrial land use rights through the appropriate legal processes should such a change occur because of the pre-existing facilities on the land that are occupied by Polo Biology. Amicus cautions that the foregoing list of material factors is not exhaustive. When relying on Amicus' forward-looking information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Amicus has assumed a certain progression, which may not be realized. It has also assumed that the material factors referred to in the previous paragraph will not cause such forward-looking information to differ materially from actual results or events. However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS NEWS RELEASE REPRESENTS THE EXPECTATIONS OF AMICUS AS OF THE DATE OF THIS NEWS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE AMICUS MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Amicus Capital Corp.
    Thomas Lamb
    President and Chief Executive Officer
    (604) 762-8682
    (604) 682-5596 (FAX)
    Email: tdlamb@gmail.com
    or
    Amicus Capital Corp.
    John Sutherland
    Chief Financial Officer
    (604) 889-8111
    (604) 682-5596 (FAX)
    Email: jsutherland@uniserve.com