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Australis Capital Inc
Symbol AUSA
Shares Issued 113,143,755
Close 2020-06-26 C$ 0.23
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Australis to acquire Passport Technology

2020-06-29 12:28 ET - News Release

Mr. Cleve Tzung reports

AUSTRALIS CAPITAL PROVIDES UPDATE ON COMPELLING ACQUISITION OF PASSPORT TECHNOLOGY

Australis Capital Inc. has entered into an agreement to acquire Passport Technology Inc. on June 25, 2020. Pending requisite approvals, the Passport acquisition will provide immediate revenue and profitability to Australis:

  • With the acquisition of Passport Technology and anticipated growth in Australis's Cocoon Technology and Paytron Merchant Services ("Paytron") business lines, the Company expects to be EBITDA positive in 2021 with exciting growth prospects beyond;
  • Passport Technology ("Passport") holds privileged gaming licenses and provides custom payment technologies through unattended kiosks and related solutions and has expanded revenue and EBITDA by double-digits annually since inception in 2016;
  • Like Cocoon Technology, Passport operates in highly regulated, compliance centric environments providing a high barrier to entry to new market participants; and
  • The Passport Acquisition will be immediately accretive, resulting in virtually no employee and infrastructure overlap.

The combined business positions Australis in three complementary verticals within fintech leveraging purpose-built technology for highly regulated industries with a growing need for unattended kiosk solutions - a global market expected to surpass $46 billion by 2026.

For more information regarding the strategic and financial attributes of the proposed Passport Acquisition, shareholders should review the investor presentation which accompanied the June 26, 2020, investor call.

Governance Process

Prior to the Company's annual meeting, Australis will provide a proxy circular that will include a fulsome summary of the background to the Passport Acquisition. The key highlights of the robust governance transaction process are as follows:

  • Since the inception of Australis, and as an investment company, the board and management have continuously sought to identify, through rigorous review, high-quality investment opportunities that fit within the Company's investment criteria with a goal of providing asymmetric return to shareholders;
  • On Dec. 11, 2019, the Company announced that it adopted a resolution to take advantage of a safe harbor under the U.S. Investment Company Act of 1940 and this safe harbor allowed the Company time to take the necessary steps to ensure it complied with the Investment Act. This acquisition will ensure the Company's total investment assets stay below the required threshold of the Asset test.
  • Following the February 18, 2020 announcement terminating the Folium Bioscience Merger Agreement, the Company's Board of Directors met in Las Vegas on March 2, 2020 to continue its review of a range of earlier identified potential opportunities (within a safe harbor under the U.S. Investment Company Act of 1940), including an acquisition of Passport (Scott Dowty was not present during that portion of the meeting);
  • Consistent with governance best practices, a committee comprised of independent Directors of the Board (the "Independent Committee") was formed to evaluate a potential acquisition of Passport Technology by the Company;
  • The first Independent Committee meeting took place on March 6, 2020, during which it was determined negotiations of a potential transaction would be handled primarily between Cleve Tzung of Australis and Kurt Sullivan of Passport Technology;
  • The Independent Committee held twelve meetings over the following 111 days to receive updates from the Company's Officers and to provide direction with respect to any requests for additional information, analysis or evaluations;
  • The Independent Committee engaged a reputable third-party valuation firm, Sycamore, to perform an independent valuation of Passport (Sycamore is compensated by a flat-fee structure not contingent on the outcome of the transaction). Sycamore presented its initial presentation based on a preliminary letter of intent in April, and will issue a fairness opinion in short order.

"With the assistance of our external legal and financial advisors, the Independent Committee has at all times been solely focused on what is in the best interests of the Company and all of its shareholders," said Roger Swainson, Chairman of the Independent Committee. "While we welcome constructive input and critique from the shareholders whose interests we steadfastly represent, the transaction process we have employed is beyond reproach. Any suggestion otherwise is baseless."

Closing of the Passport Acquisition is subject to shareholder approval at the Company's upcoming annual general meeting, the closing of the Private Placement of Units announced by Australis on June 25, 2020, and customary regulatory approvals.

"The Passport Acquisition enhances the Company's ability to drive growing and sustainable value creation for all shareholders," said Cleve Tzung, Chief Executive Officer of Australis. "We're pleased with the early, overwhelmingly supportive inbound comments we have received from shareholders since we announced the Passport Acquisition and look forward to its successful completion."

Advisors

Australis has retained McMillan LLP as its legal advisor, Gryphon Advisors Inc. as its strategic shareholder advisor and Longview Communications & Public Affairs. as its strategic communications advisor.

About Australis Capital Inc.

Australis invests in, operates and builds transformative, differentiated companies operating in highly regulated industries. Initially focused on investments in the cannabis industry, Australis has expended to offer proprietary unattended hardware and software technology to industries with the highest regulatory compliance standards along with supporting payment and fulfillment services. The globally available kiosk platforms are purpose-built in the cloud to deliver custom solutions in complex environments while emboldening customer confidence with features including data analytics, privacy, security, and regulatory compliance. The Platform-as-a-Service (PaaS) technology delivers recurring revenue through long-term exclusive agreements focused on regulated retail environments and casino gaming while portable and scalable to profitably support organic growth and complementary acquisition opportunities.

We seek Safe Harbor.

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