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Mergers and Acquisitions
EXRO reverse takeover of BioDE Ventures (July 26, 2017)
Exro Technologies became a merged entity of EXRO (a private company) and BioDE Ventures (a publicly traded company on the CSE)
Prior to amalgamation, BioDE transferred its existing technology assets to BioHEP for $450,000 which was paid as shares of BioHEP. Those shares were distributed as a dividend to BioDE shareholders prior to the EXRO merger
Pre-merger EXRO had 36,045,783 common shares outstanding
Cost of the reverse takeover of BioDE was deemed to be $1,327,304
Net assets of BioDE were determined to be $572,508
The difference of $754,796 was deemed to be the cost of BioDE’s existing market listing
Post Merger (Sept 30, 2017) EXRO Technologies had outstanding shares of 46,090,844 (6,818,903 in escrow), 4,035,000 options, and 1,235,290 Broker Warrants
Board of Directors: Mark Godsy: Director and CEO. Jill Bodkin: Director. Frank Borowicz: Director. Daniel McGahn: Director. Jonathan Ritchey: New Director. Eamonn Percy: New Director
CFO: Ann Fehr, CTO: Torsten Broeer, Investor contact: Lyle McLennan
Corporate Headquarters: Vancouver, Test and Development facility: Victoria
Stock traded as XRO on the CSE and EXROF on OTCBB at approximately .25/share ($CA)
Market Cap: CA$11.5 Million
Adaptive Generators (acquisition and eventual re-sale)
August 29, 2018 News Release: [EXRO Announces acquisition of Adaptive Generators (patent acquisition); Kent Thoresen (Adaptive CEO) added to EXRO Management]
September 25, 2018 News Release: [Exro completes acquisition of Adaptive Generators]
August 28, 2020 Interim MD&A (2Q2020) [Notes that Adaptive (EXRO Europe) was sold back to the original shareholders on June 12, 2020 due to non-commercialization]
SEA Merger with EXRO
January 15, 2024 Update to $200 million shelf prospectus [added subscription receipts as a funding option] This was the first indication that there was a likely merger/acquisition/buyout coming involving EXRO. It eventually was shown to be a merger(reverse takeover) of EXRO with/by SEA Electric
January 29, 2024 Filing: Agreement and plan of merger [Known as ‘Project Echo’]
* Key points summarized below
*** All the below statements regarding this document have been summarized in ‘layman’s terms’ as EXRO Infohub has interpreted them. EXRO Infohub makes no claims as to the legal accuracy of this summation. No person at EXRO Infohub is a lawyer or purports to provide legal advice or represents that they are capable of proper interpretation of legal documents. ***
eTruck VCU Acquisition Inc. Created by EXRO to be the subsidiary that will ‘own’ SEA Electric. [Note the emphasis on VCU Acquisition]
EXRO and SEA BoD ‘unanimously approves the agreement’ and determined that it is ‘in the best interests of stockholders’
SEA shareholders receive the equivalent of 65.9629 shares of EXRO for every share of SEA held
Agreement that EXRO will raise not less than CAN$30,020,000 in the concurrent financing [did this mean sub receipts and debt?]
All the property, rights, privileges, powers, and franchises of SEA shall vest in EXRO, and all debts, liabilities, and duties of SEA shall become the debts, liabilities, and duties of EXRO.
All necessary BoD directors and company officers will be removed or resign in order for the new board to consist of the agreed upon directors (until duly elected by shareholders) and officers of the merged company will be instituted as agreed upon
No change to any existing and outstanding EXRO shares from pre-merger
Each SEA option that Eight Capital had rights to was converted to an option to purchase EXRO shares (common and preferred) at the same terms and in the same proportions and reflective pricing
SEA Restricted share units convert to EXRO RSUs at the same terms and in the same proportions and terms
SEA outstanding warrants converted to EXRO warrants (CAN$0.81 exercise; Calculated by multiplying the CA$0.95 deemed share price of the EXRO shares in the merger by 85%) [Believe all of these are held by Vestcor]
SEA does not own any real property [all locations are leases]
None of EXRO or SEA’s current [top 10] suppliers has terminated the relationship, nor has there been any materially adverse change with its suppliers
None of EXRO or SEA’s current [top 10] customers has cancelled or informed SEA of intent to cancel (or breach of) any contract or agreement
170,021,819 EXRO common shares and no EXRO preferred shares outstanding as of Jan 26, 2024.
EXRO has received the opinion of National Bank Financial Inc., to the effect that the Merger Consideration is fair, from a financial point of view, to the Parent Shareholders, other than Vestcor, Inc.
EXRO and SEA both agree not to seek, solicit, or encourage any other acquisition proposal [How is that in line with its fiduciary duties?]
If an ‘unsolicited, bona fide, acquisition proposal’ is received by EXRO, they can provide confidential information and set up a data room, but cannot change their recommendation in favor of the SEA merger unless not changing it would ‘would be inconsistent with its fiduciary obligations under applicable law’ and only if SEA did not counter with a similarly valued offer,
SEA and EXRO agree to halt any ongoing M&A activity discussions with any other entities.
EXRO required to provide evidence satisfactory to SEA that EXRO has, cash and cash equivalents of at least CAN$50,000,000 as at immediately prior to the Closing, which will be released to EXRO automatically immediately following the Effective Time.
Termination Fee for either side under the agreement would be CA$11,429,000 and would be the sole remedy for termination
Termination of merger can be done by mutual consent prior to closing
Termination allowed if EXRO shareholder approval is not received. [So long as EXRO didn’t take action that resulted in the non-approval] Article VII, 7.1(b)(iii)
Termination fee would be payable if shareholder approval was not obtained due to a competing offer or if, within 12 months, after termination under this clause EXRO was to enter a different merger agreement. [See disclaimer above regarding us not being lawyers]
Shares issued to SEA shareholders will be subject to a 180 day hold period
March 6, 2024 News Release: Corporate update with Letter to Shareholders
March 6, 2024 Notice of Special Meeting and information Circular
Resolutions to approve merger and issue by EXRO:
a. up to an aggregate of 398,549,647 common shares in the capital of Exro (the “Common Shares”) made issuable pursuant to and in accordance with the terms of the agreement and plan of merger dated as of January 29, 2024, as amended on March 1, 2024 and March 6, 2024 (the “Merger Agreement”) by and among Exro, eTruck VCU Acquisition Inc., an indirect wholly-owned subsidiary of Exro, and SEA Electric Inc. (“SEA”), comprising of: (A) (i) 307,055,837 Common Shares (including 160,596,348 Common Shares issuable on conversion of the 160,596,348 Series 1 preferred shares in the capital of Exro (“Preferred Shares”)); (ii) up to an aggregate of 4,085,873 Common Shares (including 2,136,993 Common Shares issuable on conversion of 2,136,993 Preferred Shares) issuable on exercise of options to purchase Common Shares and Preferred Shares issued to certain stockholders of SEA (“SEA Stockholders”); (iii) up to an aggregate of 15,457,743 Common Shares (including 8,084,710 Common Shares issuable on conversion of 8,084,710 Preferred Shares) issuable in the form of restricted share units granted to certain SEA Stockholders; (iv) up to an aggregate of 13,192,843 Common Shares issuable on exercise of warrants granted to certain SEA Stockholders; (B) an additional 58,757,351 Common Shares issued upon the optional conversion of the up to US$52.0 of the convertible promissory notes issued pursuant to the terms of the restructuring agreement dated January 18, 2024 between Exro, SEA and the lenders thereto (all such shares being the “Consideration Shares”);
b. up to an additional 10,000,000 Common Shares that may be issuable to accommodate for the effects of rounding, changes in foreign exchange rates or other issuances in connection with the transactions proposed under the Merger Agreement (the “Additional Common Shares”); and
c. 31,600,000 Common Shares (the “Underlying Shares”, and together with the Consideration Shares and the Additional Common Shares, the “Issued Shares”) issuable on conversion of 31,600,000 subscription receipts of Exro (the “Subscription Receipts”) in accordance with the terms of the subscription receipt agreement dated February 16, 2024 between Exro, Canaccord Genuity Corp. and Odyssey Trust Company entered into pursuant to a bought deal private placement of Subscription Receipts,
All in connection with the indirect acquisition of all of the issued and outstanding shares of common stock and shares of preferred stock of SEA by Exro, as more fully described in the information circular of Exro dated March 6, 2024, is hereby authorized and approved.
EXRO enters into restructuring agreement for debt
US$52.0 million of Convertible Promissory Notes
May be converted into 58,757,351 Exro Common Shares
Select information from the circular:
Exro’s relationship with SEA dates back to late 2019, when Sue Ozdemir was introduced to Tony Fairweather while on an investor marketing trip.
In 2021, the companies signed a master sales agreement for future deliveries of up to 3,500 Coil Driver inverters over a three (3) year period to be integrated into SEA customer applications.
SEA focused on customer relationships and meeting the needs of major OEM truck manufacturers such as Mack and Hino, looking to electrify medium duty vehicles.
SEA’s electrification technology was adopted by these OEMs and SEA was awarded multi-year series production contracts to supply the SEA-Drive system beginning in Q1 2024.
In August 2023, members of the Exro Board and Exro executives investigated several M&A opportunities, including SEA Electric.
Exro and SEA signed a non-binding letter of intent in November 2023 with the view of conducting a period of due diligence to assess the merits of a business combination.
Exro retained NBF as its exclusive financial advisor and formed the Special Committee to assess and negotiate the potential transaction.
Members of the Special Committee included Aleksandra Miziolek and Frank Simpkins, each of whom was determined to be independent of SEA, the Transaction, and related matters
On March 1, 2024, Exro, Merger Sub, and SEA entered into the first amendment to the Merger Agreement pursuant to which the parties confirmed that, immediately prior to Closing, Exro must have, or be the sole beneficiary of an escrow holding, cash and cash equivalents of at least C$30,000,000 [Original Agreement stated C$50,000,000]
The Combined Company Board will initially consist of six (6) members, including Sue Ozdemir, Aleksandra Miziolek, Frank Simpkins, and Rodney Copes (remaining as Chair) from the current Exro Board, and Tony Fairweather and John MacLeod from the current SEA Board. John Bell-Allen from the current SEA Board is contemplated to be an observer of the Combined Company Board.
Sue Ozdemir will remain as Chief Executive Officer, Tony Fairweather (founder and current Chief Executive of SEA) will join Exro as the Chief Product Officer, Darrell Bishop (current Chief Investment Officer of Exro) will become Chief Financial Officer, and John Meekison (current Chief Financial Officer) will become Chief Corporate Development Officer.
The Merger will combine Exro’s Coil Driver with SEA’s SEA-Drive technology to deliver unparalleled performance, efficiency, and total cost of ownership advantages embedded in a complete package electric propulsion system for the commercial vehicle space.
Post Closing of the Merger, Exro is preparing to deliver over 1,000 propulsion systems in 2024 to blue-chip OEMs such as Hino (a Toyota group company) and Mack, targeting Combined Company revenues of over $200 million
Revenue forecast of $200 million is underpinned by near-term projected sales volumes backed by current purchase orders and forecasted volumes. The orderbook is populated based on a twelve-month forecast, with purchase orders to be issued against the forecast every fifteen weeks.
** National Bank Financial was not asked to prepare and did not prepare a formal valuation of Exro, SEA, or any of their securities or assets
The Transaction will be accounted for as a business combination applying the acquisition method of accounting
SEA has a fiscal year end of June 30, which differs from Exro’s fiscal year end of December 31
In connection with the Restructuring Agreement, among other things, SEA issued to the Lenders new senior secured promissory notes (collectively, the “New SEA Notes”) replacing its previously issued promissory notes (the “Existing SEA Notes”).
The outstanding principal and all accrued but unpaid interest under the Convertible Promissory Note shall be due and payable on the later of the third anniversary of (i) the Closing or (ii) the issue date of the Convertible Promissory Note unless otherwise earlier fully converted into Exro Common Shares or prepaid by Exro.
Interest shall accrue on the outstanding principal of the Convertible Promissory Notes at the annual rate of 12% per annum, compounded semi-annually on June 30 and December 31 of each year, beginning on June 30, 2024.
Beginning on the first anniversary of Closing, a holder of a Convertible Promissory Note, at any time or from time to time following thirty (30) days prior written notice delivered to Exro, may elect to convert up to ten percent (10%) of the then outstanding principal amount of the Convertible Promissory Note (the “Per Occurrence Conversion Cap”) into Exro Common Shares at a conversion price equal to 125% of the Offering Price of $0.95. Upon mutual written agreement, the holder and Exro may agree to waive or increase the Per Occurrence Conversion Cap.
In addition, for so long as the Exro Common Shares are listed on the TSX, unless shareholder approval from the disinterested Exro Shareholders has been obtained in accordance with the policies of the TSX, at no time shall a holder be permitted to convert any portion of the principal amount of the Convertible Promissory Notes into Exro Common Shares, if following such conversion, such holder and its associates and affiliates will own, directly or indirectly, more than 19.99% of the outstanding Exro Common Shares.
Results: 421,598,018 Common Shares + 160,589,446 Preferred shares = 508,764,464 Total outstanding shares Post merger
More details can be found on the SEA Electric page under the heading Merger and Post-Merger
