PSP shareholders approve merger; court approval pending

Elizabeth
Elizabeth Howell
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The merger between Ottawa's Pacific Safety Products (TSX-V:PSP) and Zuni Holdings Inc. cleared a major hurdle on Wednesday when shareholders from both firms overwhelmingly approved the transaction.

Pacific Safety Products makes body armour similar to what this soldier, working in Afghanistan, is wearing. (Photo courtesy DND)

Of the votes cast, 99.49 per cent of Zuni shareholders favoured the deal, as did 91.08 per cent of PSP shareholders.

The deal is now subject to court approval, with PSP expecting the transaction to go through at the end of the month.

PSP, a soft-armour maker, has been struggling with large debts and deficits for several quarters.

In its last quarter, up to Sept. 30, sales were $4.3 million compared with $7.6 million in the first quarter of 2010. Adjusted earnings before interest, taxes, depreciation and amortization fell to a $400,000 loss over a $300,000 loss in 2009.

California's Zuni would have a 54.2 per cent ownership under the proposed merger, which was approved by both boards of directors last month.

Meanwhile, PSP is operating under a forbearance from its bank, which has pledged not to terminate the agreement before Feb. 28, 2011.

"The company is renewing its momentum. The PSP-Zuni merger squarely addresses the path to achieve financial stability," PSP chief executive Doug Lucky stated last month.

"Combine that with the launch of our new NIJ.06-certified body armour product lines and customer wins – including the recent order worth over US$2 million for tactical body armour – and you can see evidence the company is asserting itself in the market in order to create shareholder value."

The proposed Zuni merger comes about seven months after PSP shareholders rejected a $4.6-million offer from Revision Eyewear Inc. to buy the entire company.

Revision then offered $1.275 million for PSP's headborne system, which was also turned down.

However, during its last quarter PSP sold a portion of its headborne system to Revision for $275,000 and a four-per-cent royalty on gross sales, with Revision picking up the rest of the system for $100,000 shortly afterwards.

PSP also raised cash through a $1-million private placement.

The Kanata-based firm's chief financial officer and five board members left the company in August.

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