Toronto, Ontario – Deveron Corp. (TSX-V: FARM) (“Deveron” or the “Company”), announced today that, further to its press release on May 2, 2022 wherein it announced that it had entered into a share purchase agreement (the “Purchase Agreement”) with certain vendor shareholders to acquire (the “Acquisition”) a 67% equity interest in A&L Canada Laboratories East, Inc. (“A&L”), it has entered into an amendment to the Purchase Agreement (the “Purchase Agreement Amendment”) dated May 10, 2022. Pursuant to the amended terms in the Purchase Agreement Amendment, the aggregate consideration payable by the Company to the vendor shareholders for the 67% equity interest in A&L shall remain $50.3 million but the cash consideration payable on the closing of the Acquisition shall be reduced by $8 million and, instead, the Company shall issue $8 million in promissory notes of the Company (the “Promissory Notes”) to certain vendors.
In light of the Purchase Agreement Amendment, the Company intends to complete a nonbrokered private placement of a minimum of $5 million and maximum of $10 million in unsecured convertible debentures (each, a “Debenture”) at a price of $1,000 per Debenture (the “Offering”), as further detailed below. The Company intends to use the net proceeds from the Offering to fund the Acquisition. Due to current market conditions, the Company has decided to withdraw its previously announced public offering of subscription receipts as set forth in the preliminary prospectus dated May 2, 2022.
Under the amended terms of the Acquisition, the aggregate consideration shall comprise of (a) $34.8 million in cash; (b) $8 million in Promissory Notes; and (c) $7.5 million in the Company’s common shares. The cash component of the purchase price is expected to be financed through a $28 million credit facility to be provided by Toronto-Dominion Bank and a combination of funds raised through the Offering and up to $5 million from the Company’s treasury cash. The Promissory Notes shall be unsecured, bear an interest of seven percent (7%) (payable on maturity) and mature on the three (3) year anniversary of issuance. The Acquisition increases Deveron’s 2021 pro forma revenue to $35.3 million with EBITDA of $8.3 million, confirming Deveron as one of North America’s fastest growing and most profitable agriculture data companies. For additional details in respect of the Acquisition, please refer to the Company’s press release dated May 2, 2022.
“Given the Company’s treasury cash position and evolving market conditions, we believe the Offering provides the most accretive means to fund the acquisition of A&L for our current shareholders,” stated Deveron’s President and CEO, David MacMillan. “The Debenture offering coupled with our current balance sheet, allows usthe flexibility to fulfill the funding requirements for the acquisition of A&L as well as execute on our growth plans. The demand for high quality soil data continues to increase as we see more growers look to manage their input costs, improve soil health, and participate in carbon sequestration initiatives. A&L is expected to be a transformational acquisition for Deveron that will be an integral piece in helping us achieve our goals.”