Empire Industries Ltd.
TSX VENTURE : EIL

Empire Industries Ltd.

May 15, 2013 07:00 ET

Empire Industries Announces Private Placement and Creation of a 51% Controlled Chinese Joint Venture Company

WINNIPEG, MANITOBA--(Marketwired - May 15, 2013) - Empire Industries Ltd. ("Empire" or the "Company") (TSX VENTURE:EIL) today announced that it intends to complete a non-brokered private placement of units and a convertible debenture (the "Private Placement") to Canada Zhoufa Agricultural Holding Company Limited ("Canada Zhoufa"), a subsidiary of Zhejiang ZF Investment Co. Ltd. ("ZZG") of China, and enter into a joint venture with ZZG. The Company anticipates closing the Private Placement and joint venture capitalization identified below early in the second quarter, subject to usual closing conditions including obtaining required regulatory approvals. It is expected that the two Credit Facilities identified below will require more time to complete, and close later.

Unit Private Placement: The Company will issue up to 60,000,000 Units at a price of $0.05 per Unit for gross proceeds of up to $3,000,000 with each Unit consisting of one common share and one-half of one warrant. Each whole warrant will entitle the holder to purchase one additional common share at a price of $0.05 per share on or before the date that is one (1) year from the closing, and thereafter at an exercise price of $0.10 per share on or before the date that is five (5) years from the closing. Canada Zhoufa has subscribed for 50,400,000 Units for gross proceeds of up to $2,520,000. Insiders of the Company will also be subscribing for up to 9,600,000 Units for gross proceeds of up to $480,000 or approximately 16% of the private placement. All securities issued pursuant to the Private Placement will be subject to a four month hold pursuant to applicable securities legislation.

Convertible Debenture Private Placement - Canada Zhoufa has also subscribed for a $2.0 million convertible debenture from Empire. The convertible debenture will bear interest at the rate of 7% per annum, have a term of 4 years and be convertible at $0.10 per share any time until maturity.

Credit Facility for Empire - The parties intend that Empire will seek a $3MM loan on a secured, subordinate and postponed basis. If the loan is obtained from a certain Chinese financial institution, ZZG intends to provide a guarantee of Empire's obligations thereunder, subject to execution of definitive documents and completion of due diligence.

Joint Venture - Empire and ZZG have also agreed to enter into a joint venture agreement whereby a new company will be incorporated in China that will be owned 51% by Empire and 49% by ZZG. The jointly owned company, will be capitalized initially with $2.0 million from Empire and $1.9 million from ZZG. The joint venture's business will include the exclusive licensing of Empire's intellectual property in China, including the design and manufacturing of Empire's products, and oversight and licensing of manufacturing operations to produce and supply its proprietary entertainment attractions and the licensing of its industrial products to selected manufacturers in the Zhoushan Archipelego New Area, just south of Shanghai. Both Empire and ZZG executed a Framework for Cooperation Agreement with the City of Zhoushan on March 5th, 2013 that laid out a long term plan to significantly enhance the tourism industry by leveraging Empire's unique intellectual property and industrial manufacturing competency. The City of Zhoushan has been approved by China State Council as the fourth New Area economic zone after Shanghai Pudong District, Tianjin Binhai District, and Chongqing Liangjiang District and as a consequence is undertaking diversification initiatives such as the Framework for Cooperation Agreement just entered into with Empire and ZZG.

Credit Facility for the Joint Venture- ZZG intends to guarantee an operating loan facility to support the working capital requirements needed to fund the growth of the new joint venture on reasonable commercial terms. This credit facility is important to Empire because a significant portion of Empire's exports are to China and financing growing working capital requirements has been constrained. This guarantee and the conditions it will be subject to will need to be mutually agreed among the Joint Venture, it's senior creditors and ZZG.

A finder's fee of $350,000 cash will be paid to an arm's length third party for helping to identify and arrange the financing identified in this press release. It will be a condition of the convertible debenture and the exercise of the warrants that conversion or exercise by Canada Zhoufa can only take place to a cap of 19.9% of the issued and outstanding shares of Empire. Conversion or exercise to obtain more than 19.9% is subject to the prior approval of the TSX Venture Exchange and the shareholders of Empire.

"I am very pleased to announce this multi-faceted, strategic alliance with ZZG, establishing Empire's launching pad for Asia, in the City of Zhoushan, China," said Guy Nelson, CEO of Empire Industries. "We have invested heavily in expanding and enhancing our proprietary intellectual property and this strategic alliance validates how valuable and exciting a future its deployment in Asia can be. The guarantees will allow Empire to pursue senior credit facilities in Canada and China to help grow its business in these two markets. This in turn will strengthen Empire's balance sheet, allowing us to pursue our growth strategy with confidence, focus and aggressiveness."

Zhejiang ZF Investment Co., Ltd. (ZZG)

Mr. Junliang Xie is the founder and Chairman of ZZG, a personal holding company with private equity investments in over ten independently operated industrial and service companies, predominately in China. Mr. Xie was in the first class of the Private Equity Investment Program offered by Peking University. Mr. Xie holds an Executive MBA degree from Zhejiang University. Mr.Xie is a director of three private equity funds in China; Zhoushan Rongsheng Investment Co., Ltd., Zhoushan Marine Economy Venture Capital Co., Ltd. and Beijing Qianzhou Qingyuan Investment Fund Management Co., Ltd. He is also the Managing Director of a recently created, RMB ¥5 billion (USD $800 million) private equity fund called the Zhoushan Restructuring Private Equity Fund, whose purpose is to invest for financial returns and improve Zhoushan industries' global competitiveness.

About Empire Industries Ltd.

Empire Industries operates in two market segments: Specialized Engineered Product Manufacturing and Steel Fabrication. The Company's business operations are focused on globally exploiting its considerable intellectual property in the entertainment business through the design and supply of world class amusement rides. The joint venture contemplated by this press release will accelerate this activity because of the rapid growth in demand for these types of products in China and throughout Asia. Empire also actively fabricates steel for the infrastructure, commercial and industrial construction marketplace of western Canada and China. Empire differentiates its steel fabrication business in Western Canada with a strategic partnership in the industrial maintenance services sector through its 49% equity stake in ACE Industrial Services, based in Fort McMurray and its minority partnership and strategic alliance in Qiguang Dynamic Structures based in Guangdong Province, China. Empire's common shares are listed on the TSX Venture Exchange under the symbol EIL.

Reader Advisory

This news release contains forward-looking statements, within the meaning of applicable securities legislation, concerning Empire's business and affairs. In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Such forward-looking statements include those with respect to the Company's intention to complete a private placement of units and a convertible debenture and enter into a joint venture (the "Joint Venture"), the anticipated closing time of such transactions, the intention of ZZG to provide the Company with a $3 million loan (the "Loan") and to guarantee (the "Guarantee") an operating loan facility for the Joint Venture and the expectation that such Guarantee will allow the Company to pursue senior credit facilities in Canada and China and to pursue its growth strategy.

These forward-looking statements are based on current expectations, and are naturally subject to uncertainty and changes in circumstances that may cause actual results to differ materially. Although Empire believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that these expectations will prove to be correct. In particular, ZZG's intention to provide the Guarantee is not binding on ZZG.

Readers are cautioned not to place undue reliance on such forward-looking statements. Forward-looking information is provided as of the date of this press release, and Empire assumes no obligation to update or revise them to reflect new events or circumstances, except as may be required under applicable securities laws. Any such forward-looking statements are expressly qualified in their entirety by this cautionary statement.

Neither the 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.

Contact Information