MJardin Group Signs Reverse Takeover Agreement to Go Public
September 12th, 2018
Sumtra Diversified Inc. (“Sumtra” or the “Company”) (TSX-V: SDV.H) is pleased to announce that it, along with its direct wholly owned subsidiary, Sumtra Diversified (USA) Inc. (“Subco”), has entered into a definitive arm’s length transaction agreement (the “Agreement”) dated September 10, 2018 with MJAR Holdings Corp., a private company incorporated under the general corporation law of the state of Delaware (“Holdings”) whereby Holdings will merge with Subco to become a direct, wholly-owned subsidiary of Sumtra and will undertake a reverse takeover of Sumtra (the “RTO Transaction”).
In connection with the RTO Transaction, Sumtra will change its name (the “Name Change”) to “MJardin Group, Inc.” (the “MJardin Group”) and have its common shares delisted from the TSX Venture Exchange (“TSX-V”). MJardin Group has applied to have its common shares listed and posted for trading on the Canadian Securities Exchange (the “CSE”) upon completion of the RTO.
Completion of the RTO Transaction is subject to certain conditions including the approval of shareholders of Holdings (“Holdings Shareholders”) of the RTO Transaction and the approval of shareholders of Sumtra (“Sumtra Shareholders”) of certain matters related to the RTO Transaction as detailed below, and is expected to close no later than November 30, 2018. Matters to be approved by Sumtra Shareholders will be described in further detail in a management information circular (the “Circular”) of Sumtra relating to an annual and special meeting of Sumtra Shareholders expected to be held in October.
In connection with the RTO Transaction and subsequent listing of the common shares of the MJardin Group, Holdings has entered into an engagement letter with Canaccord Genuity Corp. pursuant to which it is anticipated that, prior to the completion of the RTO Transaction, Holdings will complete an equity private placement of subscription receipts (the “Private Placement”) for aggregate gross proceeds of up to $20 million. Each subscription receipt issued under the Private Placement will entitle the holder to receive one common share of Holdings which, upon completion of the RTO Transaction, will be exchanged, for no additional consideration, for one common share in the capital of MJardin Group.
About the Parties
Holdings is the direct or indirect parent of all companies belonging to the MJardin Group (“MJardin”), a highly specialized professional operating company that operates licensed cultivation, processing and retail cannabis facilities throughout North America. MJardin provides turnkey cannabis cultivation, processing and distribution solutions including licensure support, facility design, systems implementation, facility ramp‐up and the day‐to‐day operational management required in a large‐scale, professionally managed cannabis facility. MJardin is headquartered in Denver, Colorado with an additional office in Toronto, Ontario. For more information, please visit MJardin.com.
Sumtra was incorporated on August 30, 1978 and operated as an investment holding company, with investments in real estate and publicly traded securities. In 2001, Sumtra’s shares were listed on the TSX-V under the symbol “SDV” and then began trading on the NEX, a separate board of the TSX-V, when it failed to meet the ongoing listing standards of the TSX-V. Sumtra ceased active business operations in 2014 and on October 11, 2016, a trading halt was imposed on Sumtra’s shares, which continues to remain in effect.
The RTO Transaction
As of the date hereof, Sumtra has 6,237,400 common shares (“Sumtra Shares”) issued and outstanding. Prior to the closing of the RTO Transaction, Sumtra Shares will undergo a consolidation on the basis of one post-consolidation Sumra Share for every 31.5 Sumtra Shares outstanding immediately before the consolidation (the “Consolidation”). Additionally, and prior to the closing of the RTO Transaction, Sumtra shall make an offer to each Holdings Shareholder who is either a resident in Canada for the purposes of the Income Tax Act (Canada) (“ITA”), or a partnership with at least one partner who is a resident in Canada for the purposes of the ITA, to purchase all of their Holdings Shares in consideration for the number of Sumtra Shares that is equal to the number of Holdings Shares held by such Holdings Shareholder at the effective time of the RTO Transaction multiplied by the Exchange Ratio (as defined below).
The RTO Transaction, pursuant to the terms of the Agreement, will involve the merger of Subco with Holdings and the merged corporation (“Mergeco”), which will be a direct wholly-owned subsidiary of MJardin Group. All of the property and assets of each of Subco and Holdings will become the property and assets of Mergeco and Mergeco will be liable for all of the liabilities and obligations of each of Subco and Holdings.
Following the foregoing, the issued and outstanding common shares of Holdings (the “Holdings Shares”) will automatically be converted into common shares of the MJardin Group (the “MJardin Group Shares”) on a one for one basis (the “Exchange Ratio”), unless a Holdings Shareholder makes an election to have their Holdings Shares converted into Class A Shares of the MJardin Group (the “Class A Shares”), in which case each such electing Holdings Shareholder will receive 1 Class A Share for every 1,000 Holdings Shares converted pursuant to the election. The Class A Shares will be convertible into MJardin Group Common Shares on a 1:1000 basis, subject to certain restrictions, and prior to conversion shall be entitled the vote on the same basis. In addition, each outstanding warrant of Holdings will be cancelled and exchanged for warrants of the MJardin Group in accordance with the Exchange Ratio.
Each issued and outstanding Holdings Share owned by Sumtra is to be converted into one common share of Mergeco. All of the common shares of Subco prior to the consummation of the RTO Transaction are to be converted into a single common share of Mergeco.
Following the completion of the RTO Transaction, it is expected that there will be approximately 31,226,701 MJardin Group Shares and 15,705 Class A Shares outstanding (calculated on a non-diluted basis and assuming the completion of the Private Placement).
Conditions of Completion:
Completion of the RTO Transaction is subject to a number of conditions. There can be no assurance that the RTO Transaction will be completed as proposed, or at all.
Conditions to the completion of the RTO Transaction include, but are not limited to:
Further details about the RTO Transaction and the MJardin Group will be provided in the Circular.
Investors are cautioned that, except as disclosed in the Circular or filing statement to be prepared in connection with the RTO Transaction, any information released or received with respect to the RTO Transaction may not be accurate or complete and should not be relied upon.
Neither of the TSX-V nor the CSE has passed upon the merits of the RTO Transaction or approved or disapproved the contents of this press release.
Certain statements contained in this press release constitute forward-looking information. These statements relate to future events or future performance. The use of any of the words “could”, “intend”, “expect”, “believe”, “will”, “projected”, “estimated” and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on the Company’s current belief or assumptions as to the outcome and timing of such future events. Actual future results may differ materially. In particular, this release contains forward-looking information relating to, among other things, the completion of the RTO Transaction and the Private Placement, the number of securities of Sumtra that may be issued in connection with the RTO Transaction, the ownership of Sumtra following the RTO Transaction, shareholder approval and the parties’ ability to satisfy closing conditions and receive necessary approvals. Various assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. Those assumptions and factors are based on information currently available to the Company. Although such statements are based on management’s reasonable assumptions, there can be no assurance that the RTO Transaction will occur, or that if the RTO Transaction does occur, it will be completed on the terms described above.
The forward-looking information contained in this release is made as of the date hereof and neither the Company, Subco nor Holdings is obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.
Because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on forward-looking information. The foregoing statements expressly qualify any forward-looking information contained herein.
This announcement does not constitute an offer, invitation or recommendation to subscribe for or purchase any securities and neither this announcement nor anything contained in it shall form the basis of any contract or commitment. In particular, this announcement does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States, or in any other jurisdiction in which such an offer would be illegal.
The securities referred to herein have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), or under the securities laws of any state or other jurisdiction of the United States and may not be offered or sold, directly or indirectly, within the United States, unless the securities have been registered under the Securities Act or an exemption from the registration requirements of the Securities Act is available.
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