Integrated Production Services Ltd -
Integrated Production Services enters purchase agreements
Integrated Production Services Ltd IPL
Shares issued 11,988,581 2000-06-13 close $2.75
Tuesday Jun 13 2000
Mr. Doug Robinson reports
Integrated Production Services has entered into an agreement to purchase from the former owners of Premier Sea & Land Pte. Ltd. of Singapore and Premier Sea & Land Limited of Hong Kong, the vendors' share of profits (earnout) from Premier for the fiscal years 2000 to 2002.
Premier was acquired from the vendors by a predecessor company of IPS effective Jan. 1, 1998, for a total consideration of 411,103 shares of IPS and an earnout from Premier paid to the vendors for five years commencing Jan. 1, 1998, and ending Dec. 31, 2002. The earnout for each of the five years was fixed at 60 per cent, 55 per cent, 50 per cent, 45 per cent and 40 per cent respectively. Premier's profits before earnout for the fiscal years 1998 and 1999 exceeded $4-million.
Because IPS has expanded into several new service lines not anticipated when this arrangement was negotiated, and IPS desires that its Premier subsidiary expand these new service lines in the Southeast Asia markets, IPS and the Vendors have concluded the company will be better served if the earnout is capped by IPS purchasing the vendors' share of profits remaining under this agreement.
The future value of the earnout was estimated using the three-year average profits for Premier for the fiscal years 1997 to 1999 and the earnout formula of 50 per cent for fiscal 2000, 45 per cent for fiscal 2001, and 40 per cent for 2002. Converted to current Canadian dollars, the estimated value of this transaction is approximately $2.5-million.
The first payment of $1.04-million will come in the form of 400,000 common shares of IPS from treasury at a deemed value of $2.60 per share, the closing price of IPS stock on the Canadian Venture Exchange on June 12, 2000. The payment terms for the remainder will be negotiated among IPS and the vendors.
This transaction is pending upon the approval of the Canadian Venture Exchange, the board of directors of IPS, and the completion of certain documentation including a formal agreement, employment contracts, and non-competition agreements.
Doug Robinson, chairman and chief executive officer of IPS, offered the following comments on this transaction. "While the purchase of Premier has been very beneficial to IPS and gives the company excellent access to international markets and earnings, the earnout has been complicated to explain to the financial community. In addition, calculating the future value of the earnout as we expand other IPS product and service lines in Southeast Asia through Premier makes it even more complicated. We believe this is a fair deal for the vendors in that their share of profits is fixed, and it is good for IPS because the total payout may be reduced as the international oil industry recovers and if business expands in Southeast Asia as we hope in the next few years." |
