PSP signs reverse takeover deal

OBJ Staff
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Troubled soft-armour maker Pacific Safety Products (TSX-V:PSP) is looking to embark on yet another restructuring attempt that would see a past CEO replace its current one.

Body armour sold by Pacific Safety Products.

The Arnprior-based company signed a letter of intent with ArmorWorks Enterprises Canada, ULC to acquire all of its issued and outstanding shares to perform a reverse takeover.

PSP plans to acquire all of the issued and outstanding shares of AW Canada. In exchange, PSP will consolidate its own shares on a 10-to-one basis and then issue AW Canada's parent firm, AWE, 17,143,121 PSP common shares and 34,566,280 PSP preferred shares. At a deemed value of 30 cents each, the aggregate value of PSP's shares will be $15,512,820.

“AW Canada will become a wholly-owned subsidiary of PSP and AWE will control approximately 75 per cent of the PSP common shares and 90 per cent of the total equity of the (combined companies),” PSP stated.

“The combined entity ... will look to be one of Canada's leading survivability companies, providing a full range of protective products for the military, law enforcement and security sectors,” PSP stated in a release.

The deal is subject to the approval of shareholders, who have turned down purchase offers in the past, as well as market and regulatory approvals.

Should the deal close, Brad Field, the previous CEO of PSP, would then take over the reins of the combined company. Doug Lucky is the current CEO. Additionally, two of PSP's six board members will be replaced by AWE's William J. Perciballi and Brad Field.

Subject to the approval of the TSX Venture index, AWE will also have the right to nominate two-thirds of the PSP management nominees for election that will be put forward to shareholders at the next PSP annual general meeting.

The proposal, if it is approved, will close June 30.

AW Canada, a startup unit of AWE, had a loss of $2.1 million in the year ending Dec. 31, 2011 and generated revenues of $4.1 million. The loss, PSP stated, is because of heavy investments in R&D, facilities and recruiting management.

In March, PSP terminated an asset sale to an affiliate of Sun Capital Partners, the latest in a string of attempts to bring the struggling company back into the black.

Organizations: PSP, ArmorWorks Enterprises Canada, Sun Capital Partners

Geographic location: Canada

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