American Tomahawk

Pacific Safety Products Inc Signs Letter of Intent for Proposed Reverse Take-Over Transaction With ArmorWorks Enterprises Canada, ULC

If you’ve followed Pacific Safety Products over the past few years, you know that they have had a couple of on-again, off-again arrangements with Revision, Sun Capital, and other unnamed companies to purchase all or part of their company.

Last week, PSP announced that it has entered into a Letter of Intent (“LOI”) dated April 17, 2012 with ArmorWorks Enterprises LLC (“AWE”) to acquire all of the issued and outstanding shares of ArmorWorks Enterprises Canada, ULC (“AW Canada”) in a reverse take-over transaction.

PSP has been working with ArmorWorks (AWE) since 2004. According to a PSP press release, “AW Canada was founded in 2009 as an indirectly owned subsidiary of AWE and is an unlimited liability company existing under the laws of British Columbia. AWE is a limited liability company existing under the laws of Arizona and is indirectly controlled by William J. Perciballi of Phoenix, Arizona. AWE is a leading provider of advanced survivability products to military and law enforcement agencies worldwide since 1996.”

The Canadian press estimates that the deal may well be worth $15 Million.

Ok, so PSP, who has had a rough time of it trying to get someone to buy them, is going to scrape together $15 Million (Canadian press estimate) to buyout AW Canada which posted a $2.1 Million loss last year. Ok, got that.

Now is the interesting part. In their own quarterly statement from earlier this year, PSP reported, “On January 23, 2012, the Company announced that it has entered into a letter of intent (“LOI”) to sell substantially all of its assets on a cash-free, debt-free basis (the “Sale Transaction”). During an exclusivity period, the potential purchaser is completing a due diligence review, and the parties are endeavoring to negotiate a mutually satisfactory definitive purchase agreement.

The completion of the proposed Sale Transaction is subject to a number of conditions, including completion of satisfactory due diligence, execution of the definitive purchase agreement, and TSX Venture Exchange and shareholder approval. There can be no assurance that the Sale Transaction will be completed as proposed or at all or, if completed, that the net proceeds of the Sale Transaction would represent a premium to the current trading price of the Company’s securities.

That was a completely different deal with Sun Capital Partners and it didn’t happen. Here are a couple of other tidbits.

In the proposed Revision deal of 2010, the stock was to be purchased at $.18 per share. Over the last year, the stock has seen a high of $.11 and a low of $.02 with it currently hovering around $.03 a share. Under this proposed deal, PSP is valuing their stock at a generous $.10 and plans to consolidate shares on a 10-to-1 basis, turning them into $1 shares.

Under the agreement, Perciballi who controls AWE and by extension AW Canada, is being bought out. Yet, he is getting a spot on the PSP board as well. Not shabby.

So you haven’t heard about all of this? It’s probably because the press release that outlines the deal was not supposed to be released to the United States. I guess they forgot that the Internet is global in nature.

All in all, it’s an interesting deal. Naturally, it’s all contingent on approval from the shareholders.

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