KCI signs LOI to merge with US Company, raise $14 Million and move to US Exchange.
Ed and gang, KCI continues to prove itself as a fundamentally strong investment. Don't know too many juniors with these kind of profits and announcements. Please find enclosed our latest update and copy of press release.
Good morning to you all. Please find enclosed the latest press release from King Communications and our analysis of the deal. As you all know, KCI was halted on Tuesday at .49, after moving up from the .35 range on heavy volume in preceding trading days.
This news, quite simply, is huge. KCI plans to merge with a private US company, SmartLink Development Limited Partnership, raise $US 10,000,000 ($CDN 14,000,000) roll the new company into a US shell and commence trading on a US exchange. You will recall that KCI recently announced significant profits, for a second consecutive month, totalling $400,000+ over that time. Pursuant to those earnings, AGORA valued KCI at anywhere between $1.08 and $1.30. This latest development can only serve to further enhance those valuations.
It is also important to note the two parties have not officially merged as of yet. At this stage, the parties have signed a Letter of Intent to combine their business. Having said that, parties who have signed Letters of Intent have passed all preliminary stages of negotiation and typically only require regulatory and shareholder approval, as well as, the completion of due dilligence to confirm each other's financial position. In this case, the merger is also conditional on successfully completing the $US 10,000,000 financing, which is anticipated to be successfully completed. Please refer to the press release below for specific details.
For your convenience, we have divided this update into sub-headings. We urge you to review our update thoroughly as these developments represent a fundamental and positive change in the future of King Communications.
FUNDAMENTAL BUSINESS VALUE
The merger, from a fundamental business point of view, is a natural. SmartlLink offers technology complimentary to KCI technology that will only serve to further enhance their business. SmartLink products are currently used on 5 continents. As you all know, King Communications has already accomplished the task of earning significant profits on it's own. The combination with complimentary technology should only serve to increase those profits. This is especially true with respect to the current U.S. Federal Government tender for APCO 25 products, for which King Communications has submitted a bid and anticipates achieving success.
ADDITION OF PROVEN AND SUCCESSFUL MANAGEMENT
Further to the fundamental business point of view, SmartLink brings proven success to the management of the new company in the form of two individuals. The first individual, Mr. Mark Hatten, founded Connecticut Telephone in 1984 and sold the company in 1998 to USN Communications. Connecticut Telephone, under Hattens management, grew to be the largest independent reseller of cellular services in Connecticut and the fourth largest in the United States.
Mr. Hatten will serve as Chairman of the Board of the proposed new company.
Secondly, Mr. Scott Bocklund served in various senior management positions of EF Johnson Company from 1989 to 1997. His most recent position at EF Johnson was as president and chief operating officer. EF Johnson develops and manufactures wireless communications products and systems for the land mobile radio (LMR) market. Mr. Bock will serve as Chief Executive Officer of the proposed new company.
FUNDAMENTAL SHAREHOLDER VALUE
The merger, from a shareholder value point of view, is a natural because it progressively moves the company forward. Specifically, as with any profitable technology company, KCI shareholders could expect to realize optimum value by trading on a U.S. exchange and specifically, the NASDAQ exchange. Though the VSE is a very good exchange for start-up companies, the NASDAQ is the quintessential exchange for profitable technology companies seeking to maximize value. In addition to the credibility advantages, issues such as financing, world-wide exposure and a broader shareholder base present further advantages that can not be found on any other exchange in the world.
HIGHLIGHTS OF THE PRESS RELEASE
"Our combined efforts will assure us a prominent position in the global marketplace. King and SmartLinks product lines address the two fastest growing segments of the global communications markets: mobile data and interconnecting multi-frequency radio systems."
"While SmartLink systems are already in place on five continents, the amalgamation of our two companies will enable us to offer enhanced products and services in the global arena."
These two excerpts support the fact that both KCI and SmartLink deal in products that are used globally and from which they are generating real revenues and earnings. The combination of complimentary businesses only serves to expand global participation in the communications field.
CONCLUSION
Standing on it's own, King Communications could have expected to generate profits of approximately $550,000 in it's upcoming quarter and $2,000,000 in it's upcoming fiscal year. These earnings translate into a valuation in the range of $1.08 to $1.30 per share. The proposed merger with SmartLink and roll over into a US company will serve to bring those profits to the attention of the global investment community. The addition of a complimentary technology and product line will make those products even more globally competitive, while the addition of proven and successful SmartLink management should convert those globally competitive products into global profits.
In summary, we are quite pleased with events unfolding at King Communications and believe even more strongly than ever that KCI will be a strong performer for years to come.
Regards,
Agora Internet Relations Corp.
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PRESS RELEASE
King Inks Letter of Intent for Business Combination to Occur Concurrently with up to $14,000,000 Financing
Friday, May 22, 1998
Vancouver, BC King Communications International Limited ("King") has entered into a letter of intent (the "LOI") with SmartLink Development Limited Partnership ("SmartLink") to combine the businesses of the two entities concurrent with a private financing raising up to C$14,000,000 (US$10,000,000).
The agreement with SmartLink establishes the foundation for combining and continuing the integration of King and SmartLinks complimentary technologies and businesses. Emphasis of the combined product lines will be placed on APCO Project 25, mobile data, and with two-way radio communications. Together King and SmartLink products provide seamless voice and data transmission for analog systems and will be capable of migrating to new APCO Project 25 digital systems. King provides the backbone radio infrastructure and mobile data systems and SmartLink provides the necessary networking technologies for both local and wide area systems.
The SmartLink management team has extensive and directly related experience in the United States and internationally which will benefit Kings marketing initiatives.
"I am very excited about the combined business," said Frank Eccles, Chairman of King Communications. "Kings expertise is in proprietary mobile data terminals and systems integration, while SmartLinks strengths lie in its proprietary networking products and ability to provide turn-key systems. Our combined efforts will assure us a prominent position in the global marketplace." King and SmartLinks product lines address the two fastest growing segments of the global communications markets: mobile data and interconnecting multi-frequency radio systems.
Terms of LOI
The LOI contemplates a corporate combination whereby King will sell its two wholly owned subsidiaries, King Communications U.S.A. Inc. and King Communications Australasia Pty. Limited, to a US reporting shell company ( the "US Company") in exchange for shares of that company.
SmartLink will also become a wholly-owned subsidiary of the US Company.
The US Company will carry out a private placement in the United States which is expected to raise up to C$14,000,000 (US$10,000,000).
Definitive agreements are expected to be signed within 45 days and the combination and offering are anticipated to be completed concurrently within 60 to 90 days thereafter.
Upon completion of the acquisitions and financing, King will receive 29% of the then issued shares of the US Company (26.7% on a fully diluted basis). Investors under the offering will receive 35.9% of the then issued shares (33% on a fully diluted basis) as consideration for their C$14 million cash investment.
Description of SmartLink
SmartLink owns and has developed several proprietary products for application in the mobile radio industry. These networking systems, trunking technologies, complimentary RF equipment and point-to-point digital products offer the mobile radio industry the ability to network independent sites, utilizing different protocols and frequencies, into seamless wide-area, cellular-like systems. They allow previously incompatible mobile radio sites to be networked together into an enhanced communications network with advanced hand-off features; real-time, simplex or full duplex voice communications; state of the art dispatch capability and group calling; and full public telephone interconnect capability.
One of the technologies, SiteLink has far greater applications outside the mobile radio market and potentially becomes a product for many point-to-point applications. SmartLink systems are equally adaptable for use in private radio systems for government projects, industrial and transportation applications and public safety-rapid response environments. In addition, SmartLink products are widely utilized in specialized mobile radio systems such as those found in wide area dispatch, fleet operations and service applications.
"While SmartLink systems are already in place on five continents, the amalgamation of our two companies will enable us to offer enhanced products and services in the global arena," said Mark Hatten, President of SmartLink Inc, the corporate general partner of SmartLink. "I am very pleased to be working with Kings management in this forward-thinking endeavor."
Board of US Company
The US Companys board of directors will be comprised of Mark Hatten, Chairman of the Board; Scott Bocklund, Chief Executive Officer; Frank Eccles and Bob Geaghan (existing directors of King); Craig Russey, Secretary; one person to be selected by a designee of the new investors; and one further member to be chosen by majority consent of the board at a later date.
Mark Hatten founded Connecticut Telephone in 1984 and sold the company in 1998 to USN Communications. During this fourteen year period, Connecticut Telephone grew from one retail store to a full-service telecommunications company with more than 65,000 subscribers who were provided with interactive paging, cellular and long-distance and local exchange services. Connecticut Telephone, under Hattens management, grew to be the largest independent reseller of cellular services in Connecticut and the fourth largest in the United States. Mr. Hatten founded SmartLink in 1992 and has been the president of its corporate general partner since the partnership was formed. He also founded Connecticut MobileCom, a statewide SMR operator selling wide area mobile radio services throughout Connecticut.
Scott Bocklund served in various senior management positions of EF Johnson Company from 1989 to 1997. His most recent position at EF Johnson was as president and chief operating officer. EF Johnson develops and manufactures wireless communications products and systems for the land mobile radio (LMR) market.
Frank Eccles is a co-founder of King Communications International Limited. From 1983 to 1988, Eccles served as the National Sales Manager of Heyden Spike Limited, a company that was formerly involved in the sales and distribution of mobile and portable radio and data equipment. >From 1976 to 1982 Mr. Eccles was employed by Motorola Communications Australasia where he advanced to the position of National Sales manager Radio Common Carrier Market.
Bob Geaghan is a co-founder of King Communications International Limited. From 1979 to 1983 he was General Manager of Siebe Gorman Australia responsible for all facets of the companys range of life support systems. From 1968 to 1978, he served with the Australian Army.
Craig Russey formerly served as president and chief executive of Impact Management Group, a real estate management company. In the mid-80s, Impact was comprised of one office in Connecticut and by 1993, Impact grew to a 15-office mini-conglomerate with 150 employees in nine states. Mr. Russey was instrumental in selling the company in 1993. Subsequently, he consulted to medium-sized business and joined SmartLink in 1996 to direct the strategic and long-term growth of SmartLink.
Conditions Precedent
The proposed transactions are subject to, among other conditions, corporate, King shareholder and regulatory approvals and a satisfactory legal, business and financial review. There is no assurance that this proposed major transaction will receive such acceptance or will be completed even if such acceptance is received. Furthermore, the business combination is subject to successfully completing the above-noted financing.
This press release is not a solicitation for the purchase of securities of King, SmartLink or the US Company.
"Signed"
Frank Eccles, Chairman
King Communications International Limited
The Vancouver Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
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