Geo Minerals Ltd. announced today that it has entered into a definitive business combination agreement with New Gold Inc., under which New Gold will acquire 100% of the outstanding common shares of Geo by way of plan of arrangement.
Under the plan of arrangement, Geo shareholders will receive $0.16 per share, and 1/15th of a common share in a new exploration company ("SpinCo") for each Geo common share held. Excluding the SpinCo consideration, the cash consideration offered represents a premium of approximately 33% based on the closing price of the Geo shares on October 14, 2011.
New Gold will also subscribe for 9.9% of the outstanding SpinCo common shares for consideration of $250,000. On completion of the transaction, current Geo shareholders will hold approximately 90.1% of the outstanding SpinCo shares, and SpinCo will own all of Geo's assets and liabilities, except for cash retained by Geo and Geo's West Blackwater mineral interests, located in central British Columbia.
The board of directors of Geo unanimously approved the transaction and all directors and senior officers of Geo, as well as certain other Geo shareholders, collectively holding approximately 29% of the number of Geo securities anticipated to be entitled to vote at a meeting of the Geo securityholders (including holders of Geo shares, stock options, and share purchase warrants), have agreed to vote their securities in favour of the transaction.
"The proposed transaction is an exciting opportunity for Geo and its securityholders," said Michael England, Geo's President and Chief Executive Officer. "This transaction provides Geo shareholders with both an immediate meaningful premium reflecting the progress we have made with the Company and, participation in an exploration SpinCo with a portfolio of prospective assets located in British Columbia, Quebec and Arizona. We believe this unbundling of the West Blackwater project and Geo's other exploration assets will ultimately create the greatest value for our securityholders."
The transaction will be carried out by way of a court-approved plan of arrangement, and will require the approval of at least 2/3 of the votes cast by shareholders, optionholders and warrantholders voting as a single class at Geo's special meeting of shareholders, expected to take place in December 2011. The transaction is also subject to applicable regulatory approvals, including approval of the TSX Venture Exchange, and the satisfaction of certain closing conditions customary in transactions of this nature.
Geo has engaged PI Financial Corp. to deliver a fairness opinion in connection with the transaction.
If the transaction is completed, Geo shareholders will receive $0.16 for every Geo share, and one SpinCo share for every 15 Geo shares. Options and warrants not exercised prior to the completion of the arrangement will be deemed to have been exercised on a cashless basis for Geo shares, but the holders will receive that number of Geo shares obtained by dividing: (1) the amount, if any, by which (A) the product obtained by multiplying the number of underlying shares by $0.16 exceeds (B) the aggregate total exercise price payable under such option or warrant, by (2) $0.16.
Upon the recommendation of a special committee established to review the transaction, Geo directors have determined that the transaction is in the best interest of Geo and its securityholders, and have unanimously approved the transaction. The directors intend to recommend, in the information circular for the securityholder meeting, that Geo securityholders vote in favour of the transaction.
Subject to New Gold's right to match, the board of Geo may terminate the business combination agreement in favour of an unsolicited superior proposal upon payment of a $230,000 break fee to New Gold. The special meeting of securityholders of Geo and the closing of the transaction are targeted to occur in December 2011. The completion deadline is February 15, 2012.