Genovation to acquire Valens, along with MKHS
Ticker Symbol: C:GEC
Genovation to acquire Valens, along with MKHS
Genovation Capital Corp (C:GEC)
Shares Issued 18,219,636
Last Close 11/5/2015 $0.04
Monday December 14 2015 - News Release
Mr. Robert van Santen reports
GENOVATION CAPITAL ENTERS INTO LETTER OF INTENT WITH VALENS AGRITECH
Genovation Capital Corp. has entered into a non-binding letter of intent with Valens Agritech Ltd. outlining the general terms and conditions of a proposed transaction whereby Genovation Capital acquires all of the issued and outstanding securities of Valens in exchange for securities of Genovation Capital. The LOI was negotiated at arm's length and is effective as of December 11, 2015.
The Transaction, if completed, will form part of the "Fundamental Change" first announced by Genovation Capital in its November 2, 2015 news release. Genovation intends to acquire Valens concurrently with MKHS LLC, the subject of a binding Commitment Letter announced November 25, 2015.
The addition of Valens to the proposed group opens up the opportunity for considerable synergies between the Canadian and U.S.-based operations. Today's announcement is a significant step towards our goal to become a global, vertically integrated medical cannabis company that spans the entire medical cannabis value chain from "Farm to Pharma", encompassing the spectrum of cultivation through to production of pharmaceuticals derived from marijuana, and all the steps in between: extracts, testing, clinical trials, clinical development, proprietary therapeutics, licensing, marketing and delivery.
Valens is a British Columbia-based applicant to become a licensed producer under the Marijuana for Medical Purposes Regulations ("MMPR"), and an applicant under the Controlled Drugs and Substance Act and its Regulations to cultivate and process marijuana for scientific purposes, including the manufacturing of derivatives, and transporting and exporting product to locations worldwide.
Valens is headquartered at a secured site in the Okanagan Valley of British Columbia, with a production and lab site and facility designed to meet or exceed Health Canada's Directive on Physical Security Requirements' Level 11 standards, the maximum security level awarded to licensed dealers, research scientists and analysis laboratories.
As part of Valens' strategic focus on research and development, it has also negotiated the acquisition of a commercial scale plant biology company operating on a nearby 12 acres of Agricultural Land Reserve (ALR), with an existing 12,000 sf greenhouse operation. The operation carries out commercial scale tissue culture and genetic replication and various research projects, including initiatives under Provincial and Federal research grants. Valens intends to expand the operations and upon receipt of its licensing begin production and extraction of cannabis and related products under the MMPR, as well as production for existing and proposed clinical trials under discussion under its R&D initiatives. Valens has a longer term objective of acquiring a Health Canada Drug Identification Number (DIN) to market and export specific genetically targeted and proprietary cannabis as an authorized drug product.
The transaction terms outlined in the LOI are non-binding on the parties and the LOI is expected to be superseded by a definitive agreement (the "Definitive Agreement") to be signed between the parties. The Transaction is subject to regulatory approval, including the approval of the CSE and standard closing conditions, including the approval of the Definitive Agreement by the directors and shareholders of each of Genovation Capital and Valens and completion of due diligence investigations to the satisfaction of each of Genovation Capital and Valens, as well as the conditions described below. The legal structure for the Transaction will be determined after the parties have considered all applicable tax, securities law, and accounting efficiencies.
Trading in the common shares of Genovation Capital was halted prior to and as a result of the November 25, 2015 announcement of its binding agreement to acquire MKHS, and will remain halted until such time as all required documentation has been filed with and accepted by the CSE and permission to resume trading has been obtained from the CSE.
Highlights of the Proposed Transaction
As detailed in our November 25, 2015 news release, Genovation Capital will have approximately 11,014,879 common shares outstanding, issued options to acquire an aggregate of 150,000 common shares at an exercise price of $3.00 per common share and 291,667 common shares at an exercise price of $1.00, and 944,444 warrants to acquire 944,444 common shares at an exercise price of $0.75.
The Transaction is proposed to take place by way of a share exchange or other similar form of transaction. Genovation Capital, Valens and the shareholders of Valens would exchange all of the issued and outstanding shares of Valens for 36,475,000 common shares of Genovation Capital, to be issued to the shareholders of Valens and held under three-year voluntary and Exchange imposed escrow agreements. This proposed share exchange and its terms are effectively identical to the structure of the Company's definitive agreement to acquire MKHS announced November 25, 2015.
As a result of the proposed Transaction, Genovation Capital expects to have approximately 83,964,879 issued and outstanding common shares on an undiluted basis. Approximately 13.12 per cent of those shares will be held by shareholders of Genovation Capital, 43.44 per cent will be held by the former shareholders of MKHS, and 43.44 per cent will be held by the former shareholders of Valens.
Conditions to Transaction
Completion of the Transaction is subject to a number of conditions, including but not limited to acceptance by the CSE and, if applicable pursuant to CSE requirements, majority of the minority shareholder approval. Where applicable, 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.
Other conditions to completion of the Transaction include:Negotiation and execution of a Definitive Agreement in respect of the Valens Transaction.Completion of a private placement in at least such minimum amount as may be required to meet CSE minimum listing requirements, if any.Preparation and filing of a filing statement outlining the definitive terms of the Transaction in accordance with the rules of the CSE.Receipt of all director, shareholder and requisite regulatory approvals relating to the Transaction, including, without limitation, CSE approval.
Further Information
Further details about the proposed Valens transaction and the combined entity will be provided in a comprehensive press release when the parties enter into a Definitive Agreement and in the filing statement to be prepared and filed in respect of the Transaction.
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