Pan Terra Industries Inc.
TSX VENTURE : PNT

Pan Terra Industries Inc.

November 20, 2006 16:48 ET

Pan Terra Industries Inc. to Sell All of Its Assets and List on NEX

CALGARY, ALBERTA--(CCNMatthews - Nov. 20, 2006) - Pan Terra Industries Inc. (TSX VENTURE:PNT) ("Pan Terra" or the "Company") announced today that it has entered into a binding letter of intent subject to the removal of specific conditions to sell all of Company's construction assets to Trotter & Morton Ltd. (the "Purchaser"), a private Alberta company (the "Vend-out Transaction"). Trading has been halted since November 2, 2006 pending dissemination of this news release. The Purchaser will purchase all assets owned by the Company's Bluebird Division and wholly owned subsidiary Bluebird Contracting Ltd, for $760,000 (CDN.) dollars plus the assumption of the Company's obligations under capital lease and long associated long term debt. In addition the Purchaser will pay an additional $980,000 (CDN.) for the Company's share of the net profits from its Joint Venture with Trotter & Morton Ltd. The Purchaser will settle all closing amounts accrued and owing to the Company under the existing net profits arrangement, currently estimated to be $590,000 as at September 30, 2006. The Purchaser will pay an agreed amount for future contracts that have been awarded but not started. The Purchaser will also provide an indemnity to the Company for potential claims, warranties, and deficiencies on jointly and all previously completed projects. The net profit portion from the Venture is subject to adjustment and further disclosure will be announced, if the adjustment is materially different. The Company shall repay loans payable in the amount of $560,000 currently owed to the Purchaser upon closing of the transaction. The purchase price will be paid by way of cash on the closing date. The Vend-out Transaction is arm's length. Trading will resume on November 21, 2006.

After several consecutive years of significant losses from continuing operations and an accumulated deficit of approximately $12,000,000 (CDN.) management and the board of directors have concluded this transaction is in the best interest of the Company and its shareholders.

After completion of the Vend-out Transaction, it is expected that the Company will have no core assets, the Company will cease to be a construction site preparation/excavating company and the Company's common shares will be transferred to the NEX Exchange. The Company will remain on the NEX Exchange until the Company acquires new assets or businesses, which would result in the Company once again meeting the TSX Venture Exchange minimum listing requirements. Also, upon the completion of the Vend-out Transaction the Company may change its name and will reconstitute its board of directors.

The completion of the Vend-out Transaction is subject to a number of conditions including the following:

1. The Company having received all required board of directors, shareholder and regulatory approval;

2. Completion of satisfactory due diligence by the Purchaser

3. Completion and execution of a definitive Asset Purchase and Sale Agreement; and

4. Execution of Employment Agreements with key employees of the Company's subsidiary.

Background to Vend-out Transaction

Since the Company's purchase of Bluebird Excavation and Demolition Ltd. and Bluebird Contracting Ltd. in 2004, the Company's cash flows from operations have not been at a level to sustain operations and the Company has been unable to access adequate funds at satisfactory levels through the public markets to fund its continuing losses. The Company's share price has lagged considerably behind what management feels is acceptable given its current revenue. Accordingly the board of directors then directed management to review alternatives for the Company including, but not limited to, the potential sale of some or all of the Company's assets, alternative financing options or potential strategic relationships. Management reported to the board that as a result of their review, management did not believe that the Company would, in the foreseeable future, be able to sustain operations as a public company from cash flows, nor would the Company be able to raise money at acceptable levels through the capital markets or by debt financing. During the past six months the Company has developed an increasing economic dependency on Trotter and Morton through its net profit interest in projects. The success of this partnership has made Trotter and Morton the logical company to purchase the construction related assets and operations of the Company. The completion of the Vend-out Transaction would allow the Company to seek alternative businesses in the hopes of enhancing shareholder value.

Given the fact that the proposed Vend-out Transaction will result in the sale of substantially all of the operating assets of the Company, the directors considered it to be in the best interests of the Company and its shareholders that a committee of directors ("Independent Committee") be formed to determine whether the proposed transaction was fair and reasonable to, and in the best interest of the Company and its shareholders. On November 2, 2006 the Independent Committee retained the services of CPA Industrial Auctioneers ("CPA"), Calgary, Alberta to provide an independent appraisal with respect to the fair market value of the Company's assets. The appraisal report dated November 3, 2006 stated that the fair market value of the assets of the Company was $641,740 dollars. This appraisal was consistent with the Company's internal valuation. As a result of management's review of operations and the CPA appraisal, the Independent Committee concluded that:

1. On a "go forward" basis the business prospects of the Company operating as a public company in the site redevelopment business are limited;

2. Access to capital by the Company through the public markets or by a debt financing is unlikely;

3. Cash flow from projects will not in the foreseeable future sustain operating costs and the Company's current working capital deficiency and accumulated deficits will continue;

4. No other suitable arms length purchaser for the assets or business operations of the Company has been identified other than the Purchaser.

Based on the foregoing, the Independent Committee further concluded that it would be in the best interests of the shareholders of the Company to proceed with the Vend-out Transaction and for the Company to seek alternative business opportunities in the hopes of enhancing shareholder value. Accordingly, the Independent Committee recommended that the Board of Directors instruct management to proceed with the Vend-out Transaction and that the transaction be submitted to the shareholders for their review and approval at a properly constituted shareholders meeting. Accordingly an Annual General and Special shareholders meeting has been scheduled for December 15, 2006 to consider, among other matters, and vote upon the Vend-out Transaction.

Don Sandford, CEO of the Company, has previous experience in the transitioning of the operating assets of public and private companies into different industries in an attempt to enhance shareholder value. It is intended that upon completion of the Vend-out Transaction the Company will be transferred to the NEX Exchange where the Company's common shares will trade until the Company acquires a new business or assets which would enable the Company to once again meet the minimum listing requirements of the TSX or the TSXV, as the case may be.

Subject to the completion of all conditions, the Vend-out Transaction is expected to close on or before December 22, 2006. The existing employees of the Company are expected to continue their employment with Trotter and Morton.

The existing Board of Directors with the exception of Don Sandford will not stand for re-election at the Company's Annual General and Special Meeting scheduled for December 15, 2006.

COMPLETION OF THE PROPOSED VEND-OUT TRANSACTION IS SUBJECT TO A NUMBER OF CONDITIONS, INCLUDING BUT NOT LIMITED TO TSX VENTURE EXCHANGE ACCEPTANCE AND SHAREHOLDER APPROVAL. THIS TRANSACTION CANNOT CLOSE UNTIL THE REQUIRED SHAREHOLDER APPROVAL IS OBTAINED. THERE CAN BE NO ASSURANCE THAT THIS TRANSACTION WILL BE COMPLETED AS PROPOSED OR AT ALL.

INVESTORS ARE CAUTIONED THAT, EXCEPT AS DISCLOSED IN THE MANAGEMENT INFORMATION CIRCULAR WHICH IS TO BE MAILED TO SHAREHOLDERS, ANY INFORMATION RELEASED OR RECEIVED WITH RESPECT TO THE PROPOSED VENDOUT TRANSACTION MAY NOT BE ACCURATE OR COMPLETE AND SHOULD NOT BE RELIED UPON. TRADING IN THE SECURITIES OF PAN TERRA INDUSTRIES INC. SHOULD BE CONSIDERED HIGHLY SPECULATIVE AND ONLY THOSE WHO CAN AFFORD SUBSTANTIAL LOSSES SHOULD TRADE THIS SECURITY.

The TSX Venture Exchange has in no way passed on the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Contact Information

  • Pan Terra Industries Inc.
    Don Sandford
    Chief Executive Officer
    (403) 251-9233
    (403) 251-9244 (FAX)