DGM Minerals Corp.

April 07, 2014 16:37 ET

DGM Minerals Corp. Closes Subscription Receipt Financing

Company Also Provides Update on Proposed Acquisition of Self-Storage Properties in Poland and the Czech Republic

VANCOUVER, BRITISH COLUMBIA--(Marketwired - April 7, 2014) - DGM Minerals Corp. ("DGM" or the "Company") (TSX VENTURE:DGM) today announced that it has closed an equity offering (the "Equity Offering") of 7,000,000 subscription receipts (the "Subscription Receipts") for gross proceeds of $7,000,000. The Equity Offering was conducted in connection with the Company's proposed acquisition (the "Acquisition") of all of the issued and outstanding shares of five companies (the "Target Companies") which, collectively, own and operate five self-storage stores in Poland and the Czech Republic (the "Assets"), as previously announced in DGM's news release of January 10, 2014.

Subscription Receipt Equity Offering

The Company engaged Euro Pacific Canada Inc. (the "Agent") to act as agent to distribute the Subscription Receipts pursuant to an agency agreement between the Company and the Agent dated March 31, 2014. The gross proceeds of the Equity Offering (the "Escrowed Funds") have been deposited in escrow pursuant to the terms of a subscription receipt indenture between the Company, the Agent and Computershare Trust Company of Canada dated March 31, 2014. The Escrowed Funds will be released from escrow upon satisfaction of all conditions precedent to the Acquisition, receipt of all requisite shareholder and regulatory approvals to the Equity Offering and the Acquisition, and certain other conditions (the "Escrow Release Conditions"). Shareholder approval of the Acquisition and related matters was obtained from DGM shareholders on March 27, 2014. Upon satisfaction of the Escrow Release Conditions and in connection with the completion of the Acquisition, each Subscription Receipt will convert into one post-consolidation common share (each, a "Share") of DGM (which will be renamed "Less Mess Storage Inc." upon completion of the Acquisition) and one common share purchase warrant (a "Warrant"). Each Warrant may be exercised for an additional Share for two years from the date of issuance at an exercise price of $1.40.

The Agent and the members of the selling group received: (i) a cash commission equal to up to 7% of the gross proceeds of the Equity Offering; and (ii) an aggregate of 490,000 Agent's subscription receipts (each, an "Agent's Subscription Receipt"), being 7% of the number of Subscription Receipts issued under the Equity Offering. Upon satisfaction of the Escrow Release Conditions, each Agent's Subscription Receipt will convert into an Agent's compensation option (an "Agent's Compensation Option"). Each Agent's Compensation Option will be exercisable for one Share and one Warrant at an exercise price of $1.00 for a period of two years from the date of issuance. The Agent also received a $25,000 work fee.

In the event that the Escrow Release Conditions are not satisfied on or before April 30, 2014, the gross proceeds from the Equity Financing will be returned to the holders of the Subscription Receipts and the Subscription Receipts will be automatically cancelled.

The Equity Offering closed in two tranches: $6,484,000 under the first tranche and $516,000 under the second tranche. All securities issued pursuant to the first tranche of the Equity Offering are subject to four month hold period expiring on August 1, 2014. All securities issued pursuant to the second tranche of the Equity Offering are subject to four month hold period expiring on August 5, 2014. The Equity Offering remains subject to the receipt of all required regulatory approvals, including, without limitation, the approval of the TSX Venture Exchange.

Acquisition of the Target Companies

DGM is pleased to provide an update respecting the Acquisition. When consummated, the Acquisition will make DGM the largest self-storage chain in Central Europe, a region which management believes is poised for substantial short and long term growth in the self-storage sector.

DGM will purchase all of the issued and outstanding shares of the Target Companies and acquire the Assets under the definitive share sale and purchase agreement dated January 9, 2014 (the "Share Purchase Agreement"), for an aggregate purchase price of 14,000,000 Euros, 7,000,000 Euros of which is payable on closing, and 7,000,000 Euros of which will be vendor-financed, as described in further detail in DGM's January 10, 2014, news release.

The proposed transaction will be a "change of business" transaction ("COB") under the policies of the TSX Venture Exchange, and accordingly requires the approval of DGM's shareholders. In conjunction with the transaction, DGM will consolidate its current issued and outstanding shares on a 12:1 basis (the "Consolidation", increased from a previously-announced 10:1 consolidation ratio) and will change its name to "Less Mess Storage Inc." DGM shareholders approved the Acquisition, the COB, the Consolidation and the name change at the Company's annual general and special meeting of shareholders held on March 27, 2014 (the "Meeting"). The Shares to be issued upon conversion of the Subscription Receipts issued under the Equity Financing will be post-Consolidation Shares.

DGM acquired the exclusive right to purchase the Target Companies and acquire the Assets from Mr. Guy Pinsent pursuant to an asset purchase agreement dated January 9, 2014 (the "Asset Purchase Agreement"). DGM will also acquire other assets that Pinsent has obtained or developed with respect to the Assets, including certain intellectual property respecting the business to be conducted following the successful completion of the transaction (i.e. the "Less Mess" brand and intellectual property). The consideration payable by DGM under the Asset Purchase Agreement has been reduced. While the parties previously agreed that DGM would issue an aggregate of 2,300,000 post-Consolidation common shares, the Asset Purchase Agreement has now been amended to provide that 2,000,000 post-Consolidation common shares will be issued, as follows: Pinsent will receive 1,130,433 shares; Peter Smith (DGM's President and CEO) will receive 521,739 shares; Michael Raven (DGM's Corporate Secretary) will receive 173,914 shares; and two arm's length parties will receive 86,957 shares each. Each of Mr. Smith and Mr. Raven are receiving shares as compensation for services provided to Mr. Pinsent during his pursuit of the acquisition of the Assets, prior to DGM's involvement in the transaction.

DGM is partially financing the Acquisition through the Equity Financing. To further finance the Acquistion, DGM, through a Polish subsidiary, intends to issue a bond (the "Bond") to Credit Value Sp. z o.o., a Polish investment company based in Warsaw ("Credit Value"). The Bond will be denominated in Polish Zloties (PLN) and be the equivalent of $5,250,000. The Bond will pay a quarterly coupon based on an annual interest rate of 5%, and the total cost of the Bond will be 18% annualized, payable on redemption. There are no arrangement fees or commissions payable in connection with the Bond; however, DGM will also be obligated to pay the legal costs of Credit Value, to a maximum of 15,000 Euros (approximately $22,500). The Bond will be repayable on the date which is 24 months from the date of issuance, and DGM may repay the Bond early without penalty at any time after six months from the date of issuance.

DGM's President and CEO, Peter Smith, is delighted to be moving ahead with the proposed Acquisition: "We've spent a lot of time and resources assessing this opportunity for DGM and we feel that it has outstanding potential. Self-storage is an attractive sector to be in, and this particular opportunity gives us five established self-storage businesses, all purpose-built or renovated specifically for self-storage, and all in central, inner-city locations where real estate values are expected to grow. We also feel there is a significant growth opportunity for self-storage in Central and Eastern Europe, with the potential for us to grow many-fold in the near future, provided that only a fraction of the market penetration for self-storage already existing in places like the USA, Canada, the United Kingdom and Germany (bordering Poland and the Czech Republic) can be achieved. The rapid economic growth of Poland and the Czech Republic over the past decade indicates that many of the well-established 'drivers' for self-storage should now exist in these regions. However, there still remains a lot of work to be done before the transaction can be closed. Management will continue to update the market as we progress."

Further details regarding the Acquisition and related matters are provided in the Company's Management Information Circular which has been mailed to shareholders of DGM in connection with the Meeting. The Management Information Circular is also accessible under DGM's SEDAR profile at www.sedar.com.

Completion of the Acquisition and related matters is subject to a number of conditions, including TSX Venture Exchange acceptance. There can be no assurance that the Acquisition and related matters will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Management Information Circular prepared in connection with the Acquisition, any information released or received with respect to the COB may not be accurate or complete and should not be relied upon. Trading in the securities of DGM Minerals Corp. 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 press release.

About the Company

DGM Minerals Corp. is a Vancouver-based company and has its common shares listed on the TSX Venture Exchange. For further information, please refer to the Company's filings on SEDAR (www.sedar.com).


Peter Smith, President and CEO

This press release contains "forward-looking information" that is based on the Company's current expectations, estimates, forecasts and projections. This forward-looking information includes, among other things, the Company's business, plans, outlook and business strategy. The words "may", "would", "could", "should", "will", "likely", "expect," "anticipate," "intend", "estimate", "plan", "forecast", "project" and "believe" or other similar words and phrases are intended to identify forward-looking information.

Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the Company's actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information. Such factors include, but are not limited to: uncertainties related to the ability of the Company to complete the Acquisition and related matters; changes in economic conditions or financial markets; changes in prices for the Company's products or increases in costs; litigation; legislative, environmental and other judicial, regulatory, political and competitive developments; technological or operational difficulties; and labour relations matters.

This list is not exhaustive of the factors that may affect our forward-looking information. These and other factors should be considered carefully and readers should not place undue reliance on such forward- looking information. Except as required by law, the Company disclaims any intention or obligation to update or revise forward-looking information, whether as a result of new information, future events or otherwise.


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