W 7 Acquisition Corp.
TSX VENTURE : WSV.P

May 22, 2013 14:22 ET

W 7 Acquisition Corp. has Entered Into an Amalgamation Agreement With ViXS Systems Inc.

TORONTO, ONTARIO--(Marketwired - May 22, 2013) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW.

Windsor Private Capital and W 7 Acquisition Corp. ("W7") (TSX VENTURE:WSV.P) are pleased to announce that W7 has entered into an amalgamation agreement dated May 22, 2013 (the "Amalgamation Agreement") with ViXS Systems Inc. ("ViXS"), a corporation continued under the Canada Business Corporations Act ("CBCA"), and ViXS Subco Inc. ("ViXS Subco"), a subsidiary of ViXS, pursuant to which, among other things, ViXS Subco and W7 agreed to amalgamate under the CBCA (the "Amalgamation"). Under the terms of the Amalgamation Agreement, holders of common shares of W7 ("W7 Common Shares") will exchange, for every 38.8889 W7 Common Shares, one common share in the capital of ViXS ("ViXS Common Share"). If the Amalgamation is implemented, it will constitute the "Qualifying Transaction" of W7 under the applicable policies of the TSX Venture Exchange (the "TSXV").

About ViXS

ViXS is a leading fabless developer of smart network multimedia processor solutions enabling the "Anytime-Anywhere" revolution in video entertainment. ViXS combines its software, algorithm and semiconductor technologies into highly integrated, low power system-on-chip ("SoC") solutions that deliver best-in-class conversion of multimedia between formats and seamless connectivity between devices while maintaining end-to-end content security. Since its founding in 2001, ViXS has shipped over 26 million SoCs, mostly into the multimedia home networking market and more recently the emerging cloud video infrastructure market. ViXS sells its solutions directly to leading original equipment manufacturers ("OEMs"), and indirectly to top-tier service providers via leading original design manufacturers ("ODMs") worldwide and distributors in Japan. OEMs produce, brand, and market their own multimedia equipment, while equipment produced by ODMs is white-labelled by service providers and distributed to their subscribers. ViXS' SoCs can be found in products from blue-chip customers, such as Comcast, Cisco, DirecTV, Vodafone, SFR, Echostar / Sling Media, Funai, LG, Sharp, Sony, Hitachi, Pioneer, NEC, and Toshiba. ViXS is headquartered in Toronto, Canada with global operations and offices in Europe, Asia and North America.

Summary Financial Information for ViXS

The following table sets out the summary consolidated financial information of ViXS as at January 31, 2013 and 2012 and for the financial years ended January 31, 2013, 2012 and 2011, which has been derived from ViXS' audited consolidated financial statements, prepared in accordance with International Financial Reporting Standards (IFRS).

Year ended January 31,
2011 2012 2013
(US$ in thousands, except per share data)
Consolidated Statements of Comprehensive Income Data
Revenue $91,730 $71,344 $35,697
Cost of sales 44,448 35,409 18,957
Gross profit 47,282 35,935 16,740
Operating expenses(1)
Research and development 23,174 22,849 26,917
Selling, general and administrative 16,448 16,895 13,449
Total operating expenses 39,622 39,744 40,366
Income (loss) from operations 7,660 (3,809) (23,626)
Other income (expense):
Finance costs (1,148) (1,364) (981)
Share offering costs - (1,722) -
Finance income 82 32 51
Convertible preference share revaluation adjustment (56,552) 96,918 29,584
Total other income (expense) (57,618) 93,864 28,654
Income (loss) for before income taxes $(49,958) $90,055 $5,028
Income tax expense (44) (313) (118)
Net income (loss) for the year (50,002) 89,742 4,910
Exchange difference on translating foreign operations - 115 27
Total comprehensive income (loss) for the year $(50,002) $89,857 $4,937
Earnings (loss) per share:
Basic $(11.28) $18.67 $1.00
Diluted $(11.28) $(0.27) $(0.91)
Shares used in computing earnings (loss) per share:
Basic 4,432 4,806 4,917
Diluted 4,432 26,605 27,152
(1) Includes share-based transaction expense of:
Research and development $1,502 $1,317 $1,390
Selling, general and administrative 816 969 1,058
$2,318 $2,286 $2,448
Selected Balance Sheet Data
Total Assets $35,907 $35,069 $21,520
Total Long-Term Financial Liabilities $205,828 $104,800 $85,954
Cash Dividends Declared - - -

About the Qualifying Transaction and the ViXS Private Placement

In connection with the Amalgamation, on May 22, 2013, ViXS (indirectly through ViXS Subco) completed a private placement of 16,387,999 subscription receipts of ViXS Subco (each, a "Subscription Receipt") at an offering price of $3.50 per receipt for gross proceeds of $57,357,996.50 (the "ViXS Private Placement"). The offering was conducted through a syndicate of agents co-led by GMP Securities L.P. and Stifel Nicolaus Canada Inc. and including BMO Capital Markets, Cormark Securities Inc. and Byron Capital Markets Ltd. (the "Agents"). Upon the satisfaction of certain release and notice conditions, each Subscription Receipt will be automatically exchanged (without any further action on the part of the holder thereof and without payment of additional consideration) immediately prior to the completion of the Amalgamation for one common share of ViXS Subco ("ViXS Subco Common Share"). Each such ViXS Subco Common Share will be exchanged for one ViXS Common Share in accordance with the terms of the Amalgamation Agreement.

The net proceeds of the ViXS Private Placement will be used to pay in full the US$5.5 million aggregate principal amounts outstanding under ViXS' loan agreement with Comerica Bank and loan arrangements with two of ViXS' shareholders, and for working capital purposes. While ViXS currently anticipates that it will use the net proceeds of the ViXS Private Placement as described above, it may re-allocate the net proceeds from time to time depending upon changes in business conditions prevalent at the time. ViXS does not anticipate paying cash dividends on the ViXS Common Shares in the near future.

For their services in connection with the ViXS Private Placement, the Agents will receive from ViXS Subco a commission equal to 6% of the gross proceeds of the offering.

Pursuant to the terms of the Amalgamation Agreement, upon the Amalgamation becoming effective:

  • each 38.8889 outstanding W7 Common Shares shall be exchanged for one fully-paid and non-assessable ViXS Common Share;

  • each outstanding ViXS Subco Common Share shall be exchanged for one fully-paid and non-assessable ViXS Common Share;

  • each outstanding ViXS Subco Class B share will be exchanged for one common share of the amalgamated corporation; and

  • each 38.8889 outstanding options to purchase W7 Common Shares will be exchanged for one option to purchase one ViXS Common Share, with economically equivalent terms to the outstanding options to purchase W7 Common Shares.

The corporation resulting from the amalgamation of W7 and ViXS Subco will: (i) be a wholly-owned subsidiary of ViXS; (ii) own or control all of ViXS Subco's assets and be subject to all of ViXS Subco's obligations and liabilities; and (iii) own or control all of W7's assets and be subject to all of W7's obligations and liabilities. It is intended that it will be wound-up into ViXS immediately following the completion of the Amalgamation (the "Resulting Issuer").

Pursuant to the Amalgamation Agreement, (i) approximately 16,387,999 ViXS Common Shares will be issued in exchange for ViXS Subco Common Shares, (ii) 321,429 ViXS Common Shares will be issued in exchange for W7 Common Shares, and (iii) options to purchase an aggregate of 38,571 ViXS Common Shares will be issued in exchange for options to purchase W7 Common Shares. It is expected that current shareholders of ViXS, holders of Subscription Receipts who will ultimately receive ViXS Common Shares upon the Amalgamation becoming effective, and former shareholders of W7 will own approximately 67%, 33% and less than 1%, respectively, of the issued and outstanding ViXS Common Shares post-Amalgamation.

A copy of the Amalgamation Agreement is available electronically on the SEDAR website at www.sedar.com under W7's profile.

Arm's Length Qualifying Transaction

The Amalgamation will be an arm's length transaction.

Shareholder Approval

Shareholders of W7 will be asked to approve the Amalgamation at an annual and special meeting of W7 shareholders. Details of the meeting will be announced as soon as they are available.

Pursuant to a voting support agreement dated May 22, 2013 among ViXS, ViXS Subco and Ronald D. Schmeichel, President, CEO, CFO, Secretary and a director of W7, Mr. Schmeichel has agreed, among other things and subject to certain exceptions, to vote the W7 Common Shares that he owns and controls in favour of the Amalgamation. Mr. Schmeichel currently owns or controls 9,800,000 W7 Common Shares, or 78.4% of the issued and outstanding W7 Common Shares, and options to purchase 625,000 W7 Common Shares as at the date hereof.

Proposed Management and Board of Directors and Insiders of the Resulting Issuer

W7 and ViXS anticipate that, following completion of the Amalgamation, the board of directors of the Resulting Issuer will consist of the current directors of ViXS, with the exception of Mr. Francois Laflamme, who is anticipated to resign from the board of directors of ViXS prior to the completion of the Amalgamation. ViXS is expected to add additional independent board members prior to the completion of the Amalgamation but currently the board of directors is comprised of six individuals including Sally J. Daub, Brian Antonen, Chris Bowick, Peter Currie, and Ravi Viswanathan.

The following persons will constitute Insiders (as defined under Policy 1.1 of the TSXV Corporate Finance Manual) of the Resulting Issuer:

  • Sally J. Daub has served as President and Chief Executive Officer since co-founding ViXS in 2001. Prior to founding ViXS, Ms. Daub was Vice-President & General Counsel at ATI Technologies Inc., a graphics chip supplier. Prior to joining ATI, Ms. Daub held positions at Nortel and the law firm of Smart & Biggar, where she specialized in IP licensing, strategy, development and management. Ms. Daub is a director of Morega Systems Inc. Ms. Daub holds a Bachelor of Applied Science degree with honors in Chemical Engineering from the University of Ottawa and a LLB from Dalhousie University, and is a registered patent agent in both the United States and Canada.

  • Donna Wong has served as Vice President, Finance since March 2009. Prior to then, she served as Director, Finance since joining ViXS in 2001. Prior to joining ViXS, Ms. Wong held senior finance positions with 724 Solutions Inc., ATI Technologies Inc. and SHL Systemhouse Inc. from 1993 to 2000, where she specialized in strategic planning, financial reporting and mergers and acquisitions. Prior to 1993, Ms. Wong spent five years as an internal auditor and public accountant for various retail and manufacturing industries. Ms. Wong is a Chartered Accountant and Certified Management Accountant and holds a Master of Accounting and Honours Bachelor of Arts degrees from the University of Waterloo.

  • Hugh Chow co-founded ViXS in 2001 and currently serves as Chief Operating Officer. Prior to founding ViXS, Mr. Chow was director of IC Technology at Cogency Semiconductor and held various managerial positions at ATI Technologies Inc. Mr. Chow holds a number of U.S. patents, a Bachelor of Science degree with honors in Electrical Engineering from the University of Hong Kong, and a Master of Science degree in Electrical Engineering from the University of Colorado.

  • Perry Chappell has served as Vice President, Worldwide Sales since joining ViXS in 2005. Prior to joining ViXS, Mr. Chappell was Vice President and General Manager at Genesis Microchip Inc. from 1996 until 2004. Prior to Genesis, Mr. Chappell held numerous executive, sales and technical positions with IBM Canada. Mr. Chappell holds a Bachelor of Science degree in Computer Science and Biology from the University of Guelph.

  • Indra Laksono co-founded ViXS in 2001 and currently serves as Chief Technology Officer. Mr. Laksono has held various positions within ViXS, including overseeing Software Engineering, research and development, ASIC architecture and Application Development. Prior to founding ViXS, Mr. Laksono held a number of senior positions at ATI Technologies Inc. Mr. Laksono has filed over 60 patents, primarily in video processing and codecs. Mr. Laksono holds a Bachelor of Science degree in Computer Science and Math, and a Master of Science degree in Computer Science from University of Toronto.

  • John Pomeroy has served as Vice President, Sales, Infrastructure and Networking since September 2011. Prior to then, he served as Senior Director, Sales since joining ViXS in June 2005. Before joining ViXS, Mr. Pomeroy held several sales and business development positions with Genesis Microchip from 1997 to 2005. Prior to Genesis, Mr. Pomeroy spent a decade working various technical sales positions in the electronic image capture and processing industry. While at ViXS, Mr. Pomeroy has filed 6 patents, primarily in video transcoding. He graduated from Humber College in Toronto with a diploma in Creative Photography.

  • David Jones has served as Vice President, Marketing and Business Development since September 2009. Prior to then, he served as Vice President, Business Development since joining ViXS in January 2008. Before joining ViXS, Mr. Jones worked at Conexant Systems in a number of senior positions from 1999 to 2008. Prior to Conexant, Mr. Jones worked for Motorola Semiconductors and LSI Logic where he held a number of engineering functions. Mr. Jones is an IET member and holds a Bachelors of Science degree with honors from the University of Herriot-Watt in Scotland in Electrical and Electronic Engineering.

  • Kris Socha joined ViXS in 2003 as Manager/Director Field Application Engineering. He served as Senior Director, Software until 2007 and as Vice President, Software from 2007 until present. Before joining ViXS, Mr. Socha held technical management positions at SilCom Technology, Tinwald Networking, Wandel & Goltermann and Acterna. He holds a Master of Science degree in Electrical Engineering from the Technical University of Gdansk.

  • Brian Antonen is the Chairman of ViXS and is a partner with Celtic House Venture Partners. Mr. Antonen opened the Toronto office of Celtic House in 2000. Originally an electrical engineer, Mr. Antonen has over 24 years of technical, business operational and capital markets experience. Mr. Antonen has held directorships on 17 private boards, and currently serves as a board member of seven Celtic House portfolio companies. Mr. Antonen holds a Bachelor of Applied Science degree in Electrical Engineering from the University of Waterloo and a Master of Business Administration degree from the Richard Ivey School at the University of Western Ontario. Mr. Antonen is also a member of the Association of Professional Engineers of Ontario and the Certified Management Accountants Association of Ontario.

  • Chris Bowick is a director of ViXS and is the President of The Bowick Group, LLC, where he provides strategic counsel to clients in the cable television and telecommunications industry. From 2000 to 2009, Mr. Bowick served as Cox Communications Senior Vice President of Engineering & Chief Technical Officer. Prior to his tenure at Cox, Mr. Bowick served as Group Vice President, Technology & Chief Technical Officer for Jones Intercable, Inc., as well as President of Jones Futurex, a designer and manufacturer of triple DES, PC-based hardware encryption devices. Mr. Bowick earned an M.B.A. from the University of Colorado, and also holds a bachelor's degree in electrical engineering from the Georgia Institute of Technology. Mr. Bowick is a member and past board member of the Society of Cable Telecommunications Engineers and was a member and past Chairman of CableLabs' Technical Advisory Committee. He previously served on the Board of Directors for Inlet Technologies, LiquidxStream Systems, Liberate Technologies, and Bend Broadband.

  • Peter Currie joined the board in December 2009. Mr. Currie was previously Executive Vice-President and Chief Financial Officer, Nortel Networks Corporation, Vice Chairman and Chief Financial Officer, Royal Bank of Canada, Senior Vice-President and Chief Financial Officer, Nortel Networks Corporation (Northern Telecom Limited) and Executive Vice-President and Chief Financial Officer, North American Life Assurance Company. Mr. Currie is a member of the Board of Directors and Chairman of the Audit Committee of Intelius Inc. He is also a member of the Board of Directors and Chairman of the Board of Atomic Energy of Canada, Limited. Mr. Currie holds a Bachelor of Economics degree and an MBA from York University.

  • Ravi Viswanathan, PhD is a director of ViXS and is a general partner of New Enterprise Associates, Inc. (NEA). Prior to joining NEA, he worked at Goldman, Sachs & Co., where he was co-head of the technology practice in their private equity group within the firm's asset management division. Before Goldman, Sachs & Co., he worked for McKinsey & Company and advised clients in the software, communications, and pharmaceutical sectors on strategy, acquisitions and new business building. Dr. Viswanathan previously worked for Raychem Corporation in the Corporate Technology Division where he focused on research and product development in semiconductors, liquid crystals, and other materials systems. Dr. Viswanathan also serves on the Board of Directors of Avalink, Inc., CFCL Technologies Limited, Deeya Energy, Inc., Jentro Technologies GmbH, Skyline Solar, Inc. and Suniva, Inc., among others. He holds a Bachelor of Science in Bioengineering from the University of Pennsylvania, an MBA from the Wharton School at the University of Pennsylvania and a PhD in Chemical Engineering from the University of California at Santa Barbara.

  • Celtic House Venture Partners ("Celtic House") is anticipated to own, or exercise control or direction over, more than 10% of the ViXS Common Shares upon the completion of the Amalgamation. Celtic House is an independent Canadian investment firm. Since 1994, Celtic House has been one of Canada's most active investors in technology and innovation. From offices in Toronto, Montréal and Ottawa, Celtic House manages in excess of $425 million across three funds. Celtic House is currently making new investments out of Celtic House Venture Partners Fund IV, which it closed in 2012 at $105 million.

  • New Enterprise Associates II, Limited Partnership and its affiliates are anticipated to own, or exercise control or direction over, more than 10% of the ViXS Common Shares upon the completion of the Amalgamation. New Enterprise Associates Inc., together with its affiliated entities ("NEA"), is a leading venture capital firm focused on helping entrepreneurs build transformational businesses across multiple stages, sectors and geographies. With approximately $13 billion in committed capital, NEA invests in technology and healthcare companies at all stages in a company's lifecycle, from seed stage through IPO. In the U.S., NEA has two offices in the Washington, D.C. metropolitan area and one in Menlo Park, California. In addition, New Enterprise Associates (India) Pvt. Ltd. has offices in Bangalore and Mumbai, India and New Enterprise Associates (Beijing), Ltd. has offices in Beijing and Shanghai, China.

Completion of the Amalgamation is subject to a number of conditions including, but not limited to, regulatory approvals, TSXV acceptance, receipt of approval for the listing of ViXS Common Shares on the TSX, shareholders of W7 approving, among other things, the Amalgamation and, if applicable pursuant to TSXV requirements, majority of the minority shareholder approval. The Amalgamation cannot close until the required W7 shareholder approval is obtained. There can be no assurance that the Amalgamation 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 Amalgamation, any information released or received with respect to the Amalgamation may not be accurate or complete and should not be relied upon. Trading in securities of a capital pool company should be considered highly speculative.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction.

ANY SECURITIES REFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE "1933 ACT") AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO A U.S. PERSON IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.

Notice on forward-looking statements:

This release includes forward-looking statements regarding W7, ViXS, ViXS Subco, and their respective businesses. Such statements are based on the current expectations and views of future events of the management of each entity, and are based on assumptions and subject to risks and uncertainties. Although the management of each entity believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect. The forward-looking events and circumstances discussed in this release, including completion of the Amalgamation, may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting the companies, including failure to satisfy conditions of closing contemplated by the Amalgamation Agreement, risks regarding the semiconductor industry, market conditions, economic factors, ViXS' management's ability to manage and to operate the business, and the equity markets generally. No forward-looking statement can be guaranteed. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and W7 and ViXS undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

W7 is a capital pool company governed by the policies of the TSXV. W7's principal business is the identification and evaluation of assets or businesses with a view to completing a Qualifying Transaction.

The TSXV has in no way passed upon the merits of the Amalgamation and has neither approved nor disapproved the contents of this press release. Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this press release.

Contact Information

  • W7 Acquisition Corp.
    Ronald D. Schmeichel
    CEO
    416-972-6294

    ViXS Systems Inc.
    Donna Wong
    Vice President, Finance
    416-646-2000 ext. 247