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Share Name | Share Symbol | Market | Type |
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Pgnx Capital Corporation | TSXV:PGN | TSX Venture | Common Stock |
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Paragon Pharmacies Limited ("Paragon") (TSX VENTURE:PGN) today announced that it has entered into a definitive asset purchase agreement (the "Agreement") with Shoppers Drug Mart Corporation ("Shoppers"). Shoppers has agreed to purchase substantially all of the assets of Paragon (the "Paragon Assets") for a cash purchase price of approximately $75 million, subject to certain adjustments and escrow provisions contained in the Agreement (the "Transaction"). The Paragon Assets are comprised of those assets currently used in Paragon's pharmacy business, which consists of 19 retail pharmacies and three central fill pharmacies located in British Columbia, Alberta and Manitoba. The completion of the Transaction is subject to the approval of Paragon's shareholders, acceptance by the TSX Venture Exchange and certain other customary closing conditions. The parties anticipate that the Transaction will close in the third quarter of 2012. Highlights of the Transaction Paragon's management and board of directors have continuously reviewed options available to Paragon to ensure that shareholder value is being maximized. Notwithstanding significant provincial regulatory reform that has impacted the pharmacy industry over recent years, Paragon has made significant progress in improving its operations while retaining and continuing to attract new customers to its community based pharmacies. In the future, Paragon's ability to grow the business of Paragon will be challenged by the ongoing regulatory reform, significant competition from larger pharmacy chains and access to capital. As negotiations with Shoppers developed, Paragon determined that the disposition of the Paragon Assets would create an opportunity to maximize shareholder value with the ability to offer Paragon shareholders potential near-term liquidity. Based on these and other factors, the board of directors of Paragon has unanimously approved the Transaction and recommend that the shareholders of Paragon vote in favour of the sale of the Paragon Assets on the terms and conditions set forth in the Agreement. Martin Weinberg, Chairman of the Board of Directors of Paragon, said "this transaction with Shoppers represents a significant premium to the stock's trading price over recent years and recognizes the underlying strength of Paragon and its people in these challenging times. The terms of the Transaction clearly affirm the changes that were initiated by the board of directors and implemented by management team over the last several years". Summary of the Transaction On May 22, 2012, Shoppers and Paragon entered into the Agreement setting out the terms and conditions pursuant to which Shoppers has agreed to purchase the Paragon Assets from Paragon, which are substantially all of the assets of Paragon currently used in its business, consisting of 19 retail pharmacies and three central fill pharmacies located in British Columbia, Alberta and Manitoba. Shoppers has agreed to purchase the Paragon Assets for a purchase price of approximately $75 million, subject to certain adjustments. Among other things, Paragon has agreed to provide Shoppers with a period of 20 business days to allow Shoppers to conduct confirmatory due diligence, which includes a review of store operating income. The maximum purchase price reduction arising from this review is $7.0 million. In addition, from the date of the Agreement until closing of the Transaction, Paragon has agreed not to solicit or initiate discussions regarding any other business combination or sale of material assets and has granted Shoppers the right to match any superior proposals. The Agreement provides for a $3 million non-completion fee payable to Shoppers in certain circumstances if the Transaction is not completed. Shareholder Approval The Paragon Assets comprise substantially all of the property of Paragon and accordingly the sale of the Paragon Assets requires a special resolution of shareholders of Paragon in order to give effect to the Transaction. The Transaction must be approved by at least 66 2/3% of the votes cast by the shareholders of Paragon in person or by proxy at a special meeting of Paragon shareholders expected to take place in July, 2012. The Agreement has been unanimously approved by both companies' boards of directors and the Transaction is expected to be completed in the third quarter of 2012. Expected Use of Proceeds The cash proceeds from the Transaction are expected to be used to repay Paragon's liabilities and obligations as they exist at closing. The remaining proceeds are expected to be distributed to Paragon shareholders at a future date. The exact amount of the cash distribution and the date for determining the Paragon shareholders of record will be confirmed at a later date. Shareholder Support Concurrent with entering into the Agreement, Shoppers entered into a voting support agreement with Canterbury Park Capital L.P. and Canterbury Park Capital (U.S.) L.P. (together, "Canterbury"), pursuant to which Canterbury has irrevocably agreed to support the Transaction and vote all of the common shares of Paragon that it owns in favour of the Transaction. Canterbury beneficially owns and controls 68,271,783 common shares of Paragon representing approximately 77% of the issued and outstanding common shares of Paragon. Fairness Opinion Altacorp Capital Inc. has provided an opinion to the Paragon board of directors to the effect that the consideration to be paid by Shoppers under the Transaction is fair, from a financial point of view, to Paragon. Paragon obtained legal advice from Burnet, Duckworth & Palmer LLP in connection with the Transaction. Transaction Services Pavilion Financial Corporation, the manager for Canterbury, has agreed to terms with Paragon to provide consulting services related to the transactions contemplated by the Agreement and consulting services to be performed for the benefit of Paragon during a four month period following the closing of the transaction. The fees for these services for the ten and a half months of the engagement are as approved by the independent directors of Paragon and are expected to be approximately $637,500. Further Information Further information regarding the Transaction will be contained in an information circular that Paragon will prepare, file and mail in due course to its shareholders in connection with the special meeting of Paragon shareholders. The asset purchase agreement entered into between Shoppers and Paragon is available on SEDAR at www.sedar.com. Paragon Pharmacies Limited built a pharmacy with our customers in mind. Headquartered in Kelowna, BC and employing over 400 staff, Paragon currently owns and operates 19 retail pharmacies and three central fill pharmacies throughout British Columbia, Alberta and Manitoba. Paragon is a leading mid-market pharmacy, providing premier pharmacy services in a friendly, community-focused environment. For more information, visit www.helloparagon.com. Cautionary Statement on Forward-Looking Information This news release contains forward-looking information and statements which constitute "forward-looking information" under Canadian securities law and which may be material regarding, among other things, Paragon's beliefs, plans, objectives, strategies, estimates, intentions and expectations. These include, but are not limited to, statements with respect to the completion of the Transaction, the timing of holding a special meeting of Paragon shareholders to consider the Transaction, to and the expected use of the cash proceeds from the Transaction by Paragon of distribution cash to shareholders of Paragon and the amount, mechanism and timing of such cash distribution. Forward-looking information and statements are typically identified by words such as "anticipate", "believe", "expect", "estimate", "forecast", "goal", "intend", "plan", "will", "may", "should", "could" and similar expressions. The forward-looking information and statements contained herein are based on certain factors and assumptions, certain of which appear proximate to the applicable forward-looking information and statements contained herein, including assumptions as to the time required to prepare meeting materials for the Paragon shareholder meeting, the timing of receipt of the necessary regulatory approvals and the satisfaction of and time necessary to satisfy the conditions to the closing of the Transaction. Such timing may change for a number of reasons, including unforeseen delays in preparing meeting materials, inability to secure necessary regulatory approvals in the time assumed or the need for additional time to satisfy the conditions to the completion of the Transaction. In addition, there are no assurances the Transaction will be completed. In the event the Transaction is not completed, there will be no cash distribution to Paragon shareholders. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Readers are cautioned that the foregoing list is not exhaustive. Inherent in the forward-looking information and statements are known and unknown risks, uncertainties and other factors beyond Paragon's ability to control or predict, which give rise to the possibility that Paragon's predictions, forecasts, expectations or conclusions will not prove to be accurate, that its assumptions may not be correct and that its plans, objectives and statements will not be achieved. Actual results or developments may differ materially from those contemplated by the forward-looking information and statements. Certain of these risks, factors, estimates and assumptions are described in more detail in the "Risks and Risk Management" section of Paragon's most recently filed annual and interim Management's Discussion and Analysis for the year-ended August 31, 2011 and the six month period ended February 29, 2012 to which readers are referred and which are incorporated by reference in this news release. In addition, all forward-looking statements made in this news release are qualified by the full caution regarding Forward-Looking Information and Statements in such Management's Discussion and Analysis. These risks, factors, estimates and assumptions are not exhaustive. Paragon disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, or to explain any material difference between subsequent actual events and such forward-looking statements, except to the extent required by applicable law.
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