Pacific Safety Products Inc.

Pacific Safety Products Inc.

May 19, 2010 17:01 ET

Special Committee of Pacific Safety Products Inc. Unanimously Recommends That Shareholders Vote in Favour of Arrangement

KANATA, ONTARIO--(Marketwire - May 19, 2010) - Pacific Safety Products Inc. ("PSP" or the "Company") (TSX VENTURE:PSP) today announced that the Special Committee of its Board of Directors, a committee made up entirely of independent directors of the PSP Board, has reconfirmed its approval of the proposed statutory plan of arrangement (the "Arrangement") with Revision Eyewear Inc. ("Revision"). The Special Committee recommends that PSP shareholders vote in favour of the resolution approving the Arrangement at the special meeting to be held on June 17, 2010. As previously announced on May 13, 2010, PSP entered into an arrangement agreement with Revision (the "Arrangement Agreement") under which Revision agreed to acquire all of PSP's outstanding common shares (the "Common Shares") at a price of Cdn$0.18 per share in cash, subject to adjustment.

On May 14, 2010, PSP obtained an interim order from the British Columbia Supreme Court approving, among other things, the holding of a special meeting of PSP shareholders to consider the Arrangement. The special meeting will be held on Thursday, June 17, 2010 at 10:00AM (Eastern time) at The Brookstreet Hotel, 525 Legget Drive, Kanata, Ontario. The record date for determining shareholders entitled to receive notice of and vote at the meeting has been fixed at the close of business on May 10, 2010.

In connection with the Arrangement, Revision has entered into support agreements with all the directors and officers of PSP and certain other shareholders of PSP, including Boeckh Investments Inc. who currently hold approximately 8.94% of the Common Shares. Under the support agreements, the parties have agreed to vote in favour of the Arrangement at the Special Meeting. The parties to the support agreements currently hold approximately 12.1% of the Common Shares.

In reaching its decision to approve the Arrangement and to recommend to PSP shareholders that they vote in favour of the resolution to approve the Arrangement, the Board carefully considered advice from the financial and legal advisors to the Company and the recommendation of the Special Committee. The Board considered all aspects of the Arrangement Agreement and the Arrangement and considered a number of factors in concluding that the Arrangement is in the best interests of the Company and is fair to shareholders. These factors include:

  1. The price to be paid for each Common Share under the Arrangement is payable in cash and represents a premium of 50% over the weighted average trading price of the Common Shares on the TSX-V for the 30 trading days prior to March 4, 2010, the date on which the Company announced that it was discussing a possible transaction with a prospective purchaser and a 9% premium over the weighted average trading price for the 30 trading days prior to May 13, 2010, the date on which the Company announced that it has entered into the Arrangement Agreement.

  2. The Arrangement is a cash offer which provides liquidity for shareholders that is currently not available in the market.

  3. The Arrangement represents a multiple of approximately nine times PSP's EBITDA for the last twelve months of reported results.

  4. Grant Thornton LLP, as independent financial advisor to the Board, has provided its opinion that the consideration to be received by Shareholders pursuant to the Arrangement Agreement is fair, from a financial point of view, to the Shareholders.

  5. The Board has actively solicited interest for a financing sale or merger transaction over the last two years, including canvassing PSP's direct competitors in the U.S. and Canada, as well as other related businesses that the Board believed to be potential buyers. The Arrangement represents the most favourable alternative to Shareholders resulting from this process.

  6. Current market conditions in the Soft Body Armour market are unfavourable and are putting pressure on PSP's gross margins for its core products due to a combination of surplus capacity of the Company's US-based competitors and the weakened US dollar which is resulting in aggressive pricing from both US OEMs and Canadian distributors. The Company has cut over $1.0 million in annualized operating expense from its sales & marketing and general & administrative cost structure since October, 2009. This action has lessened but not eliminated operating losses. Two major suppliers in PSP's market, Protective Products of America and Point Blank, have filed for bankruptcy protection within the last five months and other major suppliers have significantly cut back operations.

  7. PSP is currently undercapitalized and is therefore unable to take advantage of growth opportunities such as those available as a result of its investment in Headborne Systems; management has explored the available financing alternatives extensively and has been unsuccessful in raising such additional capital under current financial market conditions.

  8. The Company's customers have been slow to execute purchase contracts that PSP has won in recent years. With planned withdrawals from Afghanistan and Iraq, US and Canadian defence opportunities are limited in the near future.

  9. Management of PSP believes that there is a significant risk that the Company would not withstand another downturn in financial and market conditions. PSP is currently offside with one of its Minimum Tangible Net Worth covenants in its bank operating credit facility and management of the Company does not have a solution at this time to resolve this situation. There are no assurances that the bank will continue to provide waivers or extensions.

  10. The Plan of Arrangement will be approved by a Court and provides Shareholders with a dissent remedy.

Meeting materials have now been mailed to PSP shareholders of record. Copies of the meeting materials, including the management information circular and form of proxy, are available on the Canadian provincial securities authorities SEDAR website at

Subject to approval by the shareholders at the special meeting and all regulatory approvals and closing conditions being satisfied or waived, the Court hearing regarding the final order to approve the Arrangement is currently scheduled to take place on Friday, June 18, 2010, with closing on or around June 21, 2010.

David Scott, Chief Executive Officer of PSP said, "The Arrangement is in the best interest of PSP and our shareholders. We are currently experiencing operating losses and there are no assurances that PSP will be able to achieve acceptable profitability to meet its goals without a significant infusion of capital. In the event that the Arrangement does not close, and if an alternative Acquisition Proposal is not consummated, pressures on the Company's working capital situation will intensify since PSP will nonetheless have incurred significant costs with respect to the Arrangement, including the fees of its legal and financial advisors, the costs of printing and mailing the Circular, as well as various other transaction costs."

Pursuant to the terms of the Arrangement Agreement, the Board may support a "Superior Offer" but would be required to pay Revision a break-fee of $350,000.

About PSP

The mission statement of Pacific Safety Products Inc. is ...we bring everyday heroes home safely. PSP is an established industry leader in the production, distribution and sale of high-performance and high-quality safety products for the defence and security market. These products include body armour to protect against ballistic, stab and fragmentation threats, ballistic blankets to reduce blast effects, and protective products against chemical and biological hazards. PSP is the largest armour manufacturer in Canada, directly supplying the Canadian Department of Defence, Federal Government Agencies and major Canadian law enforcement organizations. The Company also provides specialized law enforcement and safety products through APS Distributors, a division of PSP that services law enforcement and public safety agencies across the country. The Company, through its U.S. subsidiary Sentry Armor Systems Inc., provides body armour products to U.S. based law enforcement and private security firms. The Company also produces tactical clothing and emergency medical kits. Pacific Safety Products is a reporting issuer in British Columbia, Alberta and Ontario, Canada and publicly trades under the symbol PSP on the TSX Venture Exchange.

About Revision

Revision Eyewear Inc. is a private company specializing in the development and delivery of purpose-built eye protection solutions for military and tactical clients worldwide. Revision's clients include the U.S. Department of Defence, the Canadian Department of National Defence, the Netherlands Defence Materiel Organization, the Swiss Federal Department of Defence and the UK Ministry of Defence, among others. Privately owned and ISO 9001:2008 certified, Revision's operational headquarters is located in Essex Junction, Vermont, USA, with additional offices in the UK, Germany and Canada. For more information, visit, write, or call +1 514-849-1874.

Forward-Looking Statements: This news release contains forward-looking statements based on management's expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the proposed transaction, its likelihood of completion on either the terms currently proposed or on revised terms, together with any statements about the Company's growth strategy, product development, market position, expected expenditures and financial results are forward-looking statements. Some of the forward-looking statements may be identified by words like "expects", "anticipates", "plans", "intends", "projects", "indicates", and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents which may be filed with the British Columbia Securities Commission, the Alberta Securities Commission, the Ontario Securities Commission, the TSX Venture Exchange, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to the possibility of not satisfying the closing conditions to complete the Arrangement; the possibility that PSP's shareholders do not approve the Arrangement at the special meeting of shareholders; as well as changes in laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates, of countries in which the Company does business; competitive pressures; successful integration of structural changes, including restructuring plans, acquisitions, divestitures and alliances; cost of raw material, research and development of new products, including regulatory approval and market acceptance; and seasonality of sales in some products.

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

Contact Information

  • Pacific Safety Products Inc.
    David Scott
    Chief Executive Officer
    (613) 254-9488 ext. 322