Knowlton Capital provides update on proposed reverse take-over with Leni Gas Cuba Limited

MONTREAL, May 27, 2016 /CNW Telbec/ - Knowlton Capital Inc. ("Knowlton") (TSX-V: KWC-H.V) is pleased to provide an update on a proposed reverse take-over (the "Reverse Take-over") of Knowlton by Leni Gas Cuba Limited ("LGC") (www.lg-cuba.com).  As previously announced, Knowlton entered into a letter of intent dated April 28, 2016 with LGC with respect to the Reverse Take-over, which will constitute a "Reverse Takeover" for Knowlton under the policies of the TSX Venture Exchange ("TSXV").  LGC was incorporated under the laws of the British Virgin Islands ("BVI") on March 3, 2015 as an investment vehicle for the purpose of making investments and/or acquisitions in Cuba.  LGC has its corporate office in London, England and has been listed since November 2015 on the ISDX Growth Market under the stock symbol ISDX:CUBA.  LGC and Knowlton are at arm's-length.

Knowlton, which was incorporated under the laws of Canada, is listed on the NEX board of the TSXV.  Since 2013, Knowlton's main activity has been to identify and evaluate businesses or assets with the aim of completing a transaction to reactivate the company.

Proposed Reverse Take-Over

The Reverse Take-over will involve the acquisition by Knowlton of all of the issued and outstanding shares of LGC from its shareholders.  In order to effect the Reverse Take-over, Knowlton and LGC have entered into an Arrangement Agreement and LGC and its shareholders will effect a Scheme of Arrangement under the laws of the BVI, subject to court approval.  The Arrangement Agreement between LGC and Knowlton provides that the Reverse Take-over will be accomplished through, among other things:

• the consolidation by Knowlton of its 46,575,500 issued and outstanding common shares on the basis of one common share for every 1.27795529 common shares issued and outstanding (the "Knowlton Share Consolidation"), so that after the Knowlton Share Consolidation, 36,445,328 Knowlton shares will be issued and outstanding;
• the acquisition by Knowlton of 100% of the issued and outstanding shares of LGC through the issuance by Knowlton of an aggregate of 197,600,000 common shares to the shareholders of LGC in exchange for their shares of LGC, on the basis of one Knowlton share (post-consolidation), at a deemed price of $0.1277 per share, for every 2.5 shares of LGC;
• the change of the corporate name of Knowlton to LGC Capital Ltd. or other similar name ("LGC Capital"), so as to reflect the Reverse Take-over;
• the conversion of LGC's 95 million outstanding stock options and 4.94 million share purchase warrants into stock options and warrants of LGC Capital on the same basis as set out above (one for every 2.5), with appropriate adjustments in their respective exercise prices;
• the appointment to the Board of Directors of LGC Capital of two nominees of LGC (expected to be David Lenigas and Anthony Samaha), who will join three of the current directors of Knowlton (Mazen Haddad, Guy Charette and Rafi Hazan) and one nominee for election as a director of Knowlton (Sébastien Bellefleur) on the Board of Directors of LGC Capital; and
• the appointment of a new management team for LGC Capital, comprised of the LGC management team.

At the closing of the Reverse Take-over, there will be 234,045,328 common shares of LGC Capital issued and outstanding, of which the current shareholders of LGC will hold an aggregate of 197,600,000 shares, representing 84.43% of LGC Capital's outstanding shares, and the current shareholders of Knowlton will hold an aggregate of 36,445,328 shares, representing 15.57% of LGC Capital's outstanding shares.  LGC Capital will own 100% of the shares of LGC.

Upon completion of the Reverse Take-over, LGC Capital intends to be listed on the TSXV as a Tier-2 Investment Issuer and will carry on business as an investment company.

The Business

LGC's objective is to acquire stakes in one or more listed or unlisted projects, businesses, joint ventures, production agreements or companies (in whole or in part), creating a platform for possible further acquisitions in sectors where the opportunity exists to create value for LGC's shareholders.  It is intended that LGC will invest and acquire an appropriate percentage holding, possibly including management of a company or companies and businesses with part or whole connections or relationships to Cuba's oil and gas, agribusiness, manufacturing, industrial, transport and logistics, biotech, construction, utilities, business services, support services, retail and/or tourism sectors.

In line with its investment policy, LGC currently holds the four investments and has entered into the strategic alliance and joint ventures set out below:

(i) Petro Australis Limited

LGC owns approximately 15.14% of the outstanding shares of Petro Australis Limited ("Petro Australis"), an unlisted public company incorporated in Australia.  Petro Australis' principal activity is sourcing oil and gas opportunities in the Americas with a focus on Latin America (including Cuba).  Petro Australis holds a conditional 40% back-in option to the onshore oil block, Block 9 PSC in Cuba.

(ii) MEO Australia Limited

In February 2016, LGC made a strategic investment in Cuban oil explorer MEO Australia Limited ("MEO"), a company incorporated under the laws of Australia and listed on the Australian Securities Exchange (ASX), as a result of which LGC became the single largest shareholder of MEO, with a 15.8% interest.  MEO is pre-qualified as a foreign onshore and shallow water operator in Cuba and was awarded a 100% interest in the 2,380 km² onshore oil block, Block 9 PSC in Cuba, in September 2015.  As LGC also holds a 15.14% interest in Petro Australis, as noted above, which holds a conditional 40% back-in option to Block 9 PSC, the investment by LGC in MEO significantly increased LGC's underlying interest in Block 9 PSC.

Under the placement agreement, MEO issued 140,716,573 shares to LGC at an issue price of AUD$0.01 per share, payable in cash, totalling AUD$1.4 million (£730,000), to be used for Block 9 oil exploration and assessment.

(iii) Travelwelcome Ltd. and the InCloud9 Group

In September 2015, LGC acquired 40% of the issued share capital of Travelwelcome Ltd. ("Travelwelcome"), a private company incorporated in the United Kingdom.  Through its representative office in Havana, Travelwelcome provides the services of a specialist Cuban ground handler which works with other specialist travel companies around the world to assist with tailor-made trips to Cuba for their clients.  This includes booking local hotels, transport, local tours and guides as well as other specialist activities such as art tours, horse riding, deep sea fishing, fly fishing and scuba diving.  In addition, Travelwelcome has the capacity to assist with the organization of special events such as conferences, weddings and group activities around Cuban festivals such as the Cigar Festival and Film Festival.

In November 2015, LGC announced that it had finalized arrangements for Travelwelcome to combine with the Cuban music, TV and film industry specialist InCloud9 group of companies in Havana.  LGC's interest in the combined Travelwelcome and InCloud9 group remains at 40%.

(iv) Cuba Professional Inc.

In March 2016, LGC secured a 49% equity interest in Cuba Professionals Inc. ("Cuba Professionals") to be paid in staged instalments totalling EUR180,000 over a nine-month period.  Cuba Professionals is a company operating in Cuba that specializes in providing human resources, mainly in the field of culture, and also consulting services.  Established in 2009, Panama-registered Cuba Professionals has offices in Havana and Spain.

The funding provided by LGC will enable Cuba Professionals to grow significantly by assisting in establishing larger offices in Havana and employing more specialized management staff in the entertainment and consultancy sectors.

Cuba Professionals (www.cubaprofessionals.com) contracts Cuban artists in the field of music, dance, circus and fully-choreographed productions to clients around the world, and provides logistical support and production services for visiting companies and individuals, as well as consultancy services and business analysis to foreign entities exploring the possibility of investing and conducting business within Cuba.

(v) Strategic Alliance – Rushmans Limited

LGC has formed a strategic alliance with Rushmans Limited ("Rushmans"), a company incorporated in England, to provide in-country consultancy advice.  Rushmans will provide a wide range of services to assist LGC with identifying investment and acquisition opportunities in Cuba's fast-developing energy, agribusiness, manufacturing, commercial and tourism sectors.  Rushmans has significant experience in Cuba and will service the strategic alliance through senior personnel that have been based in Havana for more than 20 years.

In April 2016, LGC announced that it and Rushmans had formalized a 50/50 joint venture (the "Rushmans JV") to explore the opportunities available for international entities to participate in the development funding for Cuban sport.  Under the terms of the Joint Venture Agreement, Rushmans will grant the Rushmans JV an exclusive licence to use the Rushmans' brand and intellectual property in respect to Cuban sporting opportunities, in consideration for LGC paying £100,000.  LGC will fund the Rushmans JV projects accepted by LGC, as well as provide an initial £40,000 in working capital for the Rushmans JV, with the funding by LGC first deducted from the Rushmans JV revenue and repaid to LGC before any pro-rata distributions to the Rushmans JV parties.

(vi) Joint Venture with Groombridge Trading Corp.

In November 2015, LGC entered into an agreement with Cuban-centric trading company Groombridge Trading Corp. ("GTC") to form a 50/50 joint venture (the "GTCJV") designed to expand GTC's existing business of supplying products, machinery and equipment to the fast-growing Cuban tourism sector and exporting agricultural products from Cuba.

GTC, established in 2013, is a Canadian corporation that is approved to trade in Cuba by the Cuban Ministry of Foreign Trade and Investment and the Ministry of Agriculture and is further authorized to trade with other Cuban Government entities.

The GTC JV assists GTC with its existing order book of imports for the hotel and tourism sector and will become a financial partner in new business moving forward.  The GTC JV has an exclusive, first right of refusal to participate on a deal-by-deal 50/50 basis in any current and new transactions originated and operated by GTC.  In addition to growing GTC's current trading activities, the GTC JV also works with GTC to develop a number of agricultural projects and initiatives currently under negotiation in Cuba and assist with new export orders of agricultural products to Europe and Canada.

(vii) Joint Venture with Commercial Funded Solar Limited

In May 2016, LGC entered into an agreement with Commercial Funded Solar Ltd. ("CFS"), a United Kingdom solar power and storage specialist, designed to assess the potential for installing and operating renewable energy and hybrid power solutions (solar power, energy storage and integrated power management systems) in Cuba.

CFS is a multi-national company with operations in the United Kingdom, Africa and South America specializing in the installation of medium-sized, commercially-funded renewable power and storage systems of between 30kw and 1MW each.

CFS is currently focused on delivering a large number of investor-funded commercial systems to academy and school groups in the United Kingdom public and private education sector as well as providing a commercially-funded model for investors wanting a higher return, short-term investment (1-3 years) in countries with supportive governments with immediate requirements to replace diesel generation, such as Cuba.

CFS and LGC intend to lead the development and construction of each project with the funding coming from external investors.  Under the terms of the agreement, CFS and LGC will share on a 50/50 basis the development, funding and construction revenues for each renewable power plant built, and share on a 75/25 basis the 10-20 year operational contracts for all the systems.

Financial Information

The following financial information is based on LGC's audited financial statements as at and for the period ended September 30, 2015:

On May 17, 2016, the Bank of Canada noon exchange rate was £1.00 = CAD$1.8661.

Directors and Officers of LGC Capital

If the Reverse Take-over is successfully completed, it is expected that the Board of Directors of LGC Capital will be comprised of David Lenigas and Anthony Samaha, each of whom is currently a director of LGC, Mazen Haddad, Guy Charette and Rafi Hazan, each of whom is currently a director of Knowlton, and Sébastien Bellefleur, a nominee for election as a director of Knowlton.  It is expected that the executive management of LGC Capital will be comprised of LGC's executive management team, and that the officers of LGC Capital will be David Lenigas (Co-Chairman), Mazen Haddad (Co-Chairman), Anthony Samaha (Chief Financial Officer) and Rafi Hazan (Secretary).

The following are brief résumés of the proposed directors and executive officers of LGC Capital:

David Lenigas, Co-Chairman and Director

David Lenigas has extensive experience operating in global public markets having served in a senior executive capacity on many public company boards.  He served as the executive chairman of Rare Earth Minerals Plc until December 2015, and was responsible for the company's significant involvement in the discovery of the Sonora Lithium Project in Northern Mexico with its joint venture partner Bacanora Minerals Limited.  Mr. Lenigas also served as executive chairman of London main board listed Lonrho plc for six years until September 2012 and was responsible for its expansion into more than 17 countries in Africa in sectors covering agriculture, infrastructure, hotels, IT and aviation.  In addition, he served as the executive chairman of LGO Energy plc, leading the company from its creation as an investment company through a series of acquisitions (including a reverse take-over) acquiring projects in the Gulf of Mexico, Malta, Spain and Trinidad.  Mr. Lenigas identified the investment opportunity in Trinidad for LGO Energy Plc and then built a management team to assist him in negotiating the terms of the investment with the local Trinidadian partners.

Mr. Lenigas holds a Bachelor of Applied Science (Mining Engineering) with Distinction from Curtin University's Western Australian Kalgoorlie School of Mines and also holds an unrestricted first class mine manager's certificate from the Western Australian Government.

Mazen Haddad – Co-Chairman and Director

Mazen Haddad is a private investor and is currently the Chairman, President and Chief Executive Officer of Knowlton.  Mr. Haddad holds a B.A. degree in economics from Emory University of Atlanta, Georgia.  Mr. Haddad is Interim President and Chief Executive Officer and a director of Argex Titanium Inc., a company listed on the Toronto Stock Exchange.  Mr. Haddad was President of Township Capital Inc., a private company whose primary role was to act as a consultant for Palos Capital Pool, L.P., from 2006 until 2010.  Prior to that, he served as Chairman of SGI Properties Canada Fund L.P., a private real estate investment trust (REIT) focused on residential real estate in Montreal, Québec, and as Vice-President of SGI Capital Corp., a private investment company.

Anthony Samaha, Chief Financial Officer and Director

Anthony Samaha is a Chartered Accountant (Australia) with more than 20 years' experience in accounting and corporate finance.  Mr. Samaha worked for more than ten years with international accounting firms, including Ernst & Young, principally in corporate finance, gaining significant experience in valuations, IPOs, independent expert reports, and mergers and acquisitions.  Mr. Samaha's experience includes more than ten years as Finance Director for several companies listed on AIM; he also served as Chief Financial Officer of a TSXV-listed resource company.

Guy Charette – Director

Guy Charette has been Interim Chief Executive Officer of Carpathian Gold Inc., an exploration and development company listed on the Toronto Stock Exchange, since January 2014.  Prior thereto, Mr. Charette was Executive Vice-President, Corporate, of Carpathian Gold Inc., from September 2010.  Mr. Charette has been a director of Carpathian Gold Inc. since 2003.  Mr. Charette has more than 25 years' experience in securities law with an emphasis on structuring resource industry transactions as well as exploration and development finance in North America, Europe and in developing nations.  Before joining Carpathian Gold Inc., Mr. Charette worked as a lawyer and independent consultant.

Rafi Hazan – Director and Corporate Secretary

Rafi Hazan is the Chief Financial Officer of Knowlton.  Prior thereto, he co-founded Buzz Telecommunications Services Inc., a company listed on the TSX Venture Exchange, and served as its Chairman, President and Chief Executive Officer from 2006 until its privatization in 2012.  Prior to that position, he co-founded and was the Chief Operating Officer of Cartel International Inc., a company specialized in the distribution of prepaid calling cards and other services via electronic terminals (POS).  He also co-developed one of the first prepaid switching platforms for the telephone calling card industry in Canada.  For more than 15 years, Mr. Hazan held various positions in both engineering and management in the telecom industry at companies such as SR Telecom, NHC Communications Inc. and Israel Aircraft Industry.  Mr. Hazan holds a Bachelor of Science degree from the Technion, Israel Institute of Technology in Aerospace and Telecommunications, an MBA from Paris-Dauphine University in France and an MBA from Université du Québec à Montréal (UQAM).  Mr. Hazan is a member of the Ordre des Ingénieurs du Québec.

Sébastien Bellefleur – Director

Sébastien Bellefleur is a business lawyer in the Montreal office of Fasken Martineau DuMoulin LLP.  Mr. Bellefleur specializes in business law, more specifically in securities, mergers, acquisitions, corporate governance and mining law.  He also helps set up funding, whether in the form of loans or equity financings.  He has implemented a number of complex transactions on behalf of public and private corporations, such as the purchase, sale, funding and restructuring of businesses throughout Canada and abroad.  He has represented issuers and brokers in connection with initial public offerings and other distributions of equity securities and debt instruments, as well as securities investments such as prospectus offerings and private placements.  He has played a role in several corporate reorganizations, restructurings, takeover bids and proxy solicitations for shareholders' meetings.  A major portion of his practice consists of advising public corporations of the obligations imposed on them by regulatory authorities, such as corporate governance, and assisting them in their interactions with the market and securities authorities.  Over the course of his practice, he has also acquired specific expertise on legal issues relating to the mining industry.  Mr. Bellefleur is regularly called upon to represent mining exploration companies, and advises them through the process of discovering deposits in Canada and elsewhere, as well as selling mines or bringing them into production.  He is a specialist in the legal issues with which mining exploration companies are often faced.  Before joining Fasken Martineau in February 2014, Mr. Bellefleur practiced with another national and international law firm, where he worked on many major financial transactions.

Principal Shareholders of LGC

As noted above, LGC has been listed since November 2015 on the ISDX Growth Market under the stock symbol ISDX: CUBA.  Knowlton has been advised by LGC that, to its knowledge, the only persons who hold more than 10% of LGC's outstanding shares are: David Lenigas, resident in Monaco, who holds 143,000,001 shares (28.94%), Donald Strang, resident in the United Kingdom, who holds 71,000,000 shares (14.4%), and JIM Nominees Ltd., which holds 62,575,000 shares (12.7%).  David Lenigas and Donald Strang are directors of LGC and Mr. Lenigas is its Executive Chairman.  To the knowledge of LGC, JIM Nominees Ltd. is a nominee company incorporated under the laws of England and Wales, whose shares are indirectly owned by Jarvis Securities Plc, as reported in that company's financial statements for the year ended 2015.

Non-Arm's Length Parties

Jeremy Edelman, who holds 9,756,495 common shares of Knowlton, representing 20.95% of its issued and outstanding shares, is a director of LGC and holds 40,500,000 common shares of LGC, representing approximately 8.2% of LGC's issued and outstanding shares.  Mr. Edelman is therefore a non-arm's length party as regards the Reverse Take-over.

Mazen Haddad, Chairman, President and Chief Executive Officer of Knowlton, owns, directly or indirectly, an aggregate of 4,700,000 common shares of LGC, representing approximately 0.95% of LGC's issued and outstanding shares.  Mr. Haddad is therefore a non-arm's length party as regards the Reverse Take-over.

Change of Corporate Name

Knowlton's Board of Directors has approved a change of corporate name to LGC Capital Ltd. or other similar corporate name to reflect the Reverse Take-over and Knowlton's new business direction (the "Change of Name").

Sponsorship

Knowlton will apply to the TSXV for a waiver from the requirement to engage a sponsor with respect to the Reverse Take-over; however, there is no assurance that a waiver will be granted.  Knowlton intends to include any additional information regarding sponsorship in a subsequent press release.

Financing

Completion of the Reverse Take-over is not subject to any financing by Knowlton, LGC or LGC Capital.

Shareholder Approval

Under the Canada Business Corporations Act, the Knowlton Share Consolidation and Change of Name must be approved by at least two-thirds of the votes cast by shareholders either present in person or represented by proxy at a meeting of Knowlton shareholders.

Pursuant to the policies of the TSXV, the Reverse Take-over must be approved by a simple majority of the votes cast by Knowlton's disinterested shareholders either present in person or represented by proxy at a meeting of Knowlton shareholders.  Knowlton's disinterested shareholders will be all shareholders other than Jeremy Edelman, Mazen Haddad and their respective associates and affiliates.

The Board of Directors of Knowlton has called an annual and special meeting of shareholders, to be held in Montreal on July 6, 2016.  Knowlton will mail a detailed management information circular to shareholders in connection with the meeting and will file the circular on SEDAR at www.sedar.com.

Conditions to Complete the Reverse-Take-over

In addition to approval by Knowlton's shareholders as referred to above, completion of the Reverse Take-over will be subject to a number of conditions, including, but not limited to: completion of satisfactory due diligence by both Knowlton and LGC; execution of definitive agreements in respect of the Reverse Take-over; receipt of regulatory approvals; acceptance of the Knowlton Share Consolidation and Reverse Take-over by the TSXV; receipt of customary legal opinions; approval by the shareholders of LGC of the Reverse Take-over; and approval by the BVI courts of the Scheme of Arrangement under the laws of the BVI.

Trading Halt

Trading in Knowlton's common shares on the TSXV is currently halted.  Knowlton has applied to the TSXV for reinstatement of trading.

Loan to Mogul Ventures Corp.

As previously announced, Knowlton has terminated its Amended and Restated Arrangement Agreement with Mogul Ventures Corp., a mining exploration company with properties in Mongolia.  In December 2014, Knowlton loaned $50,000 to Mogul Ventures, which amount (plus accrued interest) is now due.  Knowlton intends to pursue repayment from Mogul Ventures.

Information Relating to LGC

All information contained in this news release relating to LGC, including information on LGC's directors and officers and its various investments, has been provided to Knowlton by LGC.  Knowlton has relied upon this information without having made independent inquiries as to its accuracy or completeness.  Knowlton assumes no responsibility for the inaccuracy or incompleteness of any information provided by LGC, or for any failure of LGC to disclose events that may have occurred or that may affect the significance or accuracy of any such information or for any failure of LGC to update or amend such information, whether as a result of new information, future events or otherwise.

Notice on Forward-looking Statements

This release includes forward-looking statements regarding Knowlton, LGC 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 Knowlton Share Consolidation, Change of Name and Reverse Take-over, may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting the companies, including risks regarding investments in Cuba, market conditions, economic factors, LGC's management's ability to manage and to operate the business, and the equity markets generally.  No forward-looking statement can be guaranteed.  Forward-looking statements speak only as of the date on which they are made and Knowlton undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

Completion of the transaction described in this news release is subject to a number of conditions, including TSX Venture Exchange acceptance and disinterested shareholder approval.  The transaction cannot close until the required shareholder approval is obtained.  There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Management Information Circular to be prepared in connection with the transaction, any information released or received with respect to the Knowlton Share Consolidation, Change of Name orReverse Take-over may not be accurate or complete and should not be relied upon.  Trading in the securities of Knowlton should be considered highly speculative.

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

SOURCE Knowlton Capital