RDS Acquisition intends to complete a business combination structured as a ‘three-cornered’ amalgamation involving RDS, RRI and a wholly-owned subsidiary of RDS incorporated under the laws of the State of Minnesota, pursuant to which RDS will acquire all of the issued and outstanding shares of RRI.
RRI is a U.S.-based franchisor in the fast-growing ink-jet and laser toner cartridge refill industry. The company refills and sells low-cost, environmentally friendly cartridges for printers, fax machines, copiers and all-in-one machines for business and consumer customers. RRI sells franchises to operate stores that can process and refill ink or toner cartridges in addition to selling new compatible and OEM inkjet and laser toner cartridges.
There are currently 87 stores open in 26 states. Franchisees operate the stores under the trademark “Rapid Refill Ink”. RRI is a company incorporated under the laws of the State of Minnesota on March 5, 2005. Stephen Hockett is the President and Chief Operating Officer of RRI.
Following the proposed transaction, the business of RRI will be conducted by a wholly-owned Minnesota subsidiary of RDS. The proposed transaction will be structured as a reorganization under section 368 (a) of the U.S. Internal Revenue Code.
In advance of the proposed transaction, RDS intends to consolidate its common shares on a 10:1 basis, reducing to 1,010,000 the issued and outstanding common shares of RDS on a post-consolidated basis. RDS also proposes to create a class of special restricted voting shares to be issued to the two principal shareholders of RRI, which special shares will be similar to the RDS common shares in all respects other than the voting restrictions. The special shares will not be listed on the TSX Venture Exchange but will be convertible into common shares on a one for one basis subject to certain restrictions on exercise.
In conjunction with the proposed transaction, RRI intends to issue approximately 1,800,000 to 2,000,000 common shares at US$2.25 per share through a private placement led by Blackmont Capital Inc.
RDS will issue approximately 4,435,000 to 4,635,000 post-consolidation shares in completing the proposed transaction, plus 4,210,000 special shares, all at a deemed price of $US2.25 per share, representing an approximate valuation between $US19,451,250 and $US19,901,250 for RRI. Following completion of the proposed transaction, RDS will have approximately 9,655,000 to 9,855,000 shares issued and outstanding for an approximate total market capitalization between $US21,723,750 and $US22,173,750.
If completed, the proposed transaction is expected to constitute RDS’s Qualifying Transaction as defined in Policy 2.4 of the TSX Venture Exchange Inc. (“Exchange”) and is subject to a number of conditions, including compliance with all regulatory approvals. A comprehensive press release with further particulars relating to the Proposed Transaction will follow in accordance with the policies of the Exchange.
Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance. There can be no assurance that the transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the management information circula