Mr. Stephen Dattels reports
LSC LITHIUM ENTERS INTO DEFINITIVE ARRANGEMENT AGREEMENT TO BE ACQUIRED BY PLUSPETROL
LSC Lithium Corp. has entered into an arrangement agreement with Pluspetrol Resources Corp. BV, pursuant to which Pluspetrol will acquire all of the outstanding common shares of LSC by way of a plan of arrangement under the Business Corporations Act (British Columbia).
Under the arrangement, Pluspetrol would acquire 100 per cent of the issued and outstanding common shares of LSC for cash consideration of 66.12 cents per LSC share. The transaction was unanimously approved at the meeting of the LSC board of directors and the LSC board of directors recommends that LSC shareholders vote in favour of the transaction. The transaction provides total consideration of approximately $111-million.
The transaction is the result of the previously announced strategic review process conducted by BMO Capital Markets as lead banker and Haitong Securities of Hong Kong, which was focused on Asia.
- The strategic review process, while in place since August, 2017, was accelerated upon the release of LSC's updated resource estimate on its Pozuelos project in November, 2018, and its robust preliminary economic assessment on its Pozuelos-Pastos Grandes project in December, 2018, and recently Pluspetrol was granted exclusivity and has completed extensive due diligence.
- The 66.12-cent cash consideration offered for each LSC share represents a 30-per-cent premium to LSC's 30-day volume-weighted average share price on the TSX Venture Exchange for the period ending Jan. 14, 2019.
- The consideration is all cash and is not subject to a financing condition.
- The consideration secures immediate value for LSC shareholders, eliminating technical and financing risks involved in advancing LSC's development projects.
- Shareholders who collectively own approximately 52 per cent of LSC's outstanding shares have entered into support agreements pursuant to which they have agreed to vote their shares in favour of the transaction.
- LSC is entitled to terminate the arrangement agreement in order to enter into a definitive agreement with respect to a superior proposal, in which case Pluspetrol is entitled to a termination fee of $4,486,000.
- Shareholders subject to the support agreements are released from the support agreements in the event LSC terminates the arrangement agreement to enter into a definitive agreement with respect to a superior proposal and such superior proposal provides for consideration of 80 cents or higher.
- LSC, under the terms of the arrangement, is not entitled to solicit third parties or provide access to data under non-disclosure agreements or otherwise.
Stephen Dattels, chairman of the board of LSC, commented: "LSC has been able to produce a large lithium carbonate resource at its Pozuelos-Pastos Grandes project as well as a robust preliminary economic assessment. It also has an extensive portfolio of high-quality lithium exploration assets, most notably at Rio Grande and Salinas Grandes. However, since February of 2018, capital markets have been difficult for junior lithium explorers in Argentina and elsewhere, resulting in a correction in market valuations across the board. Notwithstanding this market correction, and due to our progress in advancing our top-tier assets, we have achieved an opportunity for shareholders to realize a liquidity event at normal market premiums. LSC's team of technical and corporate professionals led by Ian Stalker are deserving of substantial credit for delivering this result and in recognition thereof, Ian Stalker has been granted a share award by LSC's board of directors of one million shares."
BMO Capital Markets is acting as financial adviser to LSC. BMO Capital Markets has provided an opinion to LSC's board of directors that, as of the date of the opinion, and subject to the assumptions, limitations and qualifications on which such opinion is based, the consideration to be received by LSC shareholders is fair, from a financial point of view, to LSC shareholders.
The transaction is subject to approval by LSC shareholders, court approval and customary closing conditions. Full details of the transaction will be set out in LSC's management information circular that LSC will prepare in respect of the meeting of shareholders to approve the transaction. LSC intends to mail the management information circular in mid-February, 2019. The transaction is expected to close by the end of March, 2019.
The arrangement agreement includes customary provisions, including non-solicitation of alternative transactions, a right to match superior proposals in favour of Pluspetrol and fiduciary-out provisions. LSC has agreed to pay a termination fee of approximately $4,486,000 to Pluspetrol upon the occurrence of certain termination events.
Directors and officers of LSC, along with certain other shareholders of LSC, have entered into support agreements with Pluspetrol pursuant to which they have agreed, among other things, to support the transaction and vote their LSC securities in favour of the transaction. In total, shareholders owning approximately 52 per cent of the outstanding shares of LSC have entered into such support agreements.
Pursuant to the transaction, the board of directors of LSC has approved the issuance of one million bonus shares to Mr. Stalker, issued at a deemed value of 66.12 cents per share.
LSC and Rincon Ltd. (formerly Enirgi Group Corp.) have entered into a termination agreement dated Jan. 14, 2019, terminating the following agreements between the parties: (i) relationship agreement dated Dec. 22, 2016, as amended Feb. 14, 2017; (ii) head office management support agreement dated Dec. 22, 2016, as amended Feb. 14, 2017; (iii) mining management support agreement dated Dec. 22, 2016, as amended Feb. 14, 2017; and (iv) memorandum of understanding dated Dec. 22, 2016.
About LSC Lithium Corp.
LSC Lithium has amassed a large portfolio of prospective lithium-rich salars and is focused on developing its material projects: Pozuelos and Pastos Grandes project, Rio Grande project and Salinas Grandes project. All LSC tenements are located in the Lithium Triangle, an area at the intersection of Argentina, Bolivia and Chile where the world's most abundant lithium brine deposits are found. LSC Lithium has a land package portfolio totalling approximately 300,000 hectares, which represents extensive lithium prospective salar holdings in Argentina.
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