Zuni Holdings Inc.

October 20, 2010 21:09 ET

Zuni Holdings and Pacific Safety Products Agree to Business Combination

TORONTO, ONTARIO--(Marketwire - Oct. 20, 2010) - Zuni Holdings Inc. (TSX VENTURE:ZNI.H) ("Zuni") and Pacific Safety Products Inc. (TSX VENTURE:PSP) ("PSP") are pleased to announce the signing of a letter of intent (the "LOI") to complete a business combination ("Merger") by way of a court approved plan of arrangement of Zuni. Under the LOI, PSP has agreed to acquire all of the outstanding common shares of Zuni in exchange for PSP common shares at an agreed exchange ratio of one PSP common share for each Zuni common share.

Under the terms of the LOI:

  • Zuni shareholders will receive one PSP common share for each Zuni common share.
  • Following completion of the Merger, PSP will be owned 45.8% by current PSP shareholders and 54.2% by current Zuni shareholders, based on the current shares issued and outstanding. On a partially diluted basis, assuming exercise or conversion of all outstanding warrants and debentures of PSP, PSP will be owned 55.7% by current PSP shareholders and 44.3% by current Zuni shareholders.
  • Upon completion of the Merger, PSP's board will be comprised of each of the present directors of Zuni and PSP. Daniel Marks will continue as Executive Chairman of PSP and Doug Lucky will continue as Chief Executive Officer of PSP.

Each of Zuni and PSP formed a special committee comprised of independent directors to negotiate the LOI and consider the Merger.

The LOI includes reciprocal commitments by Zuni and PSP not to solicit or initiate discussions concerning alternative transactions to the proposed Merger. If the Merger is terminated and within six months of such termination the terminating party enters into an agreement relating to the acquisition of a material portion of the shares of such party, or such party's assets or business in whole or in substantial part, and such alternative transaction is consummated, then upon closing of such transaction the terminating party will pay to the non-terminating party: (i) $150,000 if no definitive agreement in respect of the Merger has been executed; or (ii) $150,000 plus expenses incurred by the non-terminating party in relation to the Merger up to a maximum of $100,000 if a definitive agreement in respect of the Merger has been executed.

The board of directors of Zuni believes this transaction optimizes the value of the remaining assets of the company. The board of directors of PSP believes this transaction will solidify its capital position and allow it to take advantage of significant growth opportunities that are available to the company. Both boards anticipate that the Merger will create savings with the elimination of numerous redundant administrative, public company and other costs.

The Merger will be subject to a number of conditions, including the negotiation of a mutually satisfactory Merger agreement, completion of due diligence to the satisfaction of each of Zuni and PSP, and customary closing conditions including receipt of all necessary shareholder, court and regulatory approvals, including the approval of the NEX and the TSX-V. Full details of the Merger will be included in the management information circular to be filed with the regulatory authorities and mailed to shareholders in accordance with applicable securities laws. The Merger is currently expected to close in late December, 2010.

About Zuni

Zuni Holdings Inc. has recently completed a number of significant transactions including the sale of its core aerospace business to 3M Canada Holdings Ltd. and subsequent special cash distribution to shareholders by way of return of capital in the amount of $0.26 per common share. Zuni is a reporting issuer in Ontario and Alberta and publicly trades under the symbol ZNI.H on the NEX board of the TSX Venture Exchange.

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.

Forward-Looking Statements:

Certain statements in this press release relating to the proposed Merger and the companies' business are "forward-looking statements" within the meaning of securities legislation. These statements include statements regarding completion of the Merger, the anticipated closing date, the resulting share ownership, the board and management composition upon completion of the Merger and anticipated benefits of the Merger to each company. The companies do not intend, and do not assume any obligation, to update these forward-looking statements. These forward-looking statements represent management's best judgment based on current facts and assumptions that management considers reasonable, including that the parties will be able to negotiate a mutually satisfactory Merger agreement, completion of due diligence to the satisfaction of each company, that all necessary approvals will be obtained from the shareholders of Zuni and PSP, that all third party regulatory and governmental approvals to the Merger will be obtained and all other conditions to completion of the Merger will be satisfied or waived. The companies make no representation that reasonable business people in possession of the same information would reach the same conclusions. Forward-looking 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 applicable Canadian securities regulatory authorities and the TSX Venture Exchange could cause results to differ materially from those stated.

Contact Information

  • For Zuni:
    Dirk Schlimm, Chairman of Zuni Holdings Inc.
    c/o Nicholas Dobbek, Corporate Secretary of
    Zuni Holdings Inc.
    For PSP:
    Terry Vaudry, Director of Pacific Safety Products Inc.
    (613) 254-9488