4 November 2014

Rodeo Capital III announces qualifying transaction regarding Solegear BioPlastics

Upon definitive purchase agreement, the name of Rodeo to be changed to Solegear Bioplastics Inc.

Rodeo Capital III Corp. (“Rodeo”) (TSX VENTURE:ROP.P), a capital pool company pursuant to Policy 2.4 of the TSX Venture Exchange (the “TSX-V”), is pleased to announce that on October 21, 2014, it entered into an arm’s length non-binding letter agreement (the “Agreement”) with Solegear Bioplastics Inc., a corporation existing under the laws of British Columbia (“Solegear” or the “Company”), which contemplates that Rodeo will acquire all of the issued and outstanding common shares of Solegear (the “Solegear Shares”) from the holders of the Solegear Shares (the “Solegear Shareholders”) in exchange for the issuance of Rodeo common shares (each, a “Rodeo Share”) (the “Transaction”).

The exact number of Rodeo Shares to be issued to Solegear Shareholders is still to be determined, but excluding the effect of the private placement financing described below, following the closing (the “Closing”) of the Transaction, the Solegear Shareholders will legally and beneficially own approximately 90% of the total issued and outstanding Rodeo Shares, on a fully-diluted basis. It is expected that the Transaction will be completed by way of a plan of arrangement under the British Columbia Business Corporations Act.

 

Completion of the Transaction is subject to the settlement and execution of a definitive purchase agreement (the “Definitive Agreement”) to be negotiated and settled by Rodeo and Solegear by November 21, 2014, or such later date as may be agreed to by the parties. The parties have agreed that Closing of the Transaction will occur on or before January 30, 2015. In connection with the Closing of the Transaction, Solegear has agreed to purchase or to cause a third party to purchase within escrow a minimum of 880,000 Rodeo Shares (seed shares) held by the principals of Rodeo, up to a maximum of 1.24 million Rodeo shares, at a price of $0.07 per Rodeo Share.

It is currently contemplated that post Closing, the name of Rodeo will be changed to Solegear Bioplastics Inc.

Private Placement Financing

Immediately before the Closing of the Transaction, Solegear intends to complete a brokered private placement financing (the “Financing”) for gross proceeds of between $4.0 million and $6.0 million, inclusive of the conversion of approximately $1.8 million of convertible debt securities and accrued interest held by certain of Solegear’s existing securityholders. Under the Agreement, the Financing will be completed at an offering price acceptable to Solegear in its sole discretion, acting reasonably and in consultation with Rodeo. It is intended that the net proceeds from the Financing will be used to support working capital requirements and finance general corporate expenditures. All of the subscribers to the Financing will be advised of the Transaction.

Solegear has retained Euro Pacific Canada, Inc. (“Euro Pacific”) as its financial advisor and broker in connection with the Financing, and anticipates paying Euro Pacific a fee equal to $25,000, plus 8% of the gross proceeds of the Financing (excluding funds or conversion of debt by existing Solegear investors) and issuing warrants (“Broker Warrants”) to Euro Pacific to purchase a number of Solegear Shares equal to 8% of the securities sold in the Financing. Each Broker Warrant will be exercisable at any time and from time to time into one Solegear Share, for a period of 2 years from the Closing at a purchase price equivalent to the offering price under the Financing. The Broker Warrants will convert into warrants to purchase Rodeo Shares upon the Closing.

 

About Solegear

Solegear, based in Vancouver, British Columbia, is an innovator in the field of next-generation plastics. The Company is an advanced materials firm that engineers, produces and distributes high-performance bioplastics (bioplastics are a category of plastics that are bio-based, compostable, or both). Founded in 2006, Solegear has developed, and is commercializing, proprietary bioplastics technologies that utilize annually renewable plant-based ingredients formulated using Green Chemistry, to address the market opportunity in rigid packaging and engineered plastics applications.

Overview of the Business

Solegear’s business model is to work directly with global brands and channel partners to design and deliver high performance, environmentally efficient packaging and products. Solegear’s model flexes to allow for the manufacture and distribution of both finished packaging solutions as well as packaging and product components via the Company’s network of global supply chain partners. This level of supply chain customization contrasts sharply to captive manufacturing models that require substantial upfront investment. The Company’s technologies require no production equipment modifications or re-tooling at partner facilities; Solegear’s ‘drop in’ manufacturing capability provides a capital-efficient, flexible and highly scalable model.

Solegear has developed significant intellectual property and has filed international patents related to “composition of matter” intellectual property. Solegear also leverages relationships with Canadian science and technology research labs and universities to expand its IP footprint through research and development agreements. The Company’s technology partners include the National Research Council of Canada, École Polytechnique, UBC and Université Laval.

Solegear’s bioplastics products match and exceed the performance characteristics of incumbent polyethylene terephthalate (PET) and polypropylene (PP)-based plastic packaging, as well as acrylonitrile butadiene styrene (ABS) and ABS/Polycarbonate (ABS/PC) plastics for durable, engineered products.

Solegear has an active sales pipeline of global companies in retail, consumer electronics, IT hardware, personal care, and children’s toys. In the second half of 2014, the Company leveraged its channel sales model to ship its first international, multi-ton order for a Fortune 100 consumer electronics retailer. Later in the year, Solegear drove production through its direct sales model with North American production for a business-to-business wholesale manufacturer. In addition, Solegear signed a Joint Development Agreement with a global children’s toy company and is currently in advanced trials to complete the development of a bio-based replacement to their current engineered material.

Since its inception, Solegear has raised over $4.7 million. The Company’s first institutional financing was in 2012 and was led by Yaletown Venture Partners with participation by Best Buy Capital, the venture capital investment arm of Best Buy. In June 2014, Solegear was selected as the recipient of a $1.6 million Western Innovation Initiative award (funded in part by Western Economic Diversification Canada), while in September of 2014, the Company was granted a $250,000 award from the National Research Council’s Industrial Research Assistance Program, its seventh such engagement.

Solegear Ownership

Solegear was incorporated under the British Columbia Business Corporations Act on February 1, 2005 and significant investors include Toby Reid, CEO of the Company, Yaletown Ventures II Limited Partnership (B.C.) and Best Buy Co., Inc. (Minnesota).

Directors and Officers of Resulting Issuer

On Closing, the existing board of directors of Rodeo will be adjusted so that it is composed of five members, namely Salil Munjal, Toby Reid, Paul Antoniadis, Michael Thomson and Jim Zadra, all subject to the approval of the TSX-V.

The following individuals will be appointed as officers of Rodeo:

  • Toby Reid – Chief Executive Officer
  • Dan Holmes – Chief Financial Officer and Secretary
  • Michel Labonté – Chief Technical Officer
  • Noel Harvey – Vice President, Business Development

The following individuals are expected to be Insiders of the Resulting Issuer, as defined in Policy 1.1 of the TSX-V:

Salil Munjal. Non-executive Chairman and Director. Mr. Munjal is General Partner at Yaletown Venture Partners, a venture capital firm which invests in emerging-growth technology companies. Mr. Munjal is an experienced public company executive having served as a senior executive and board member of a number of technology companies, including COO of Leitch Technology (TSX/NASDAQ) that was acquired for $600 million.

Toby Reid. Chief Executive Officer and Director. Mr. Reid is an entrepreneur with a background in marketing, sustainability and technology commercialization. Prior to founding Solegear, Mr. Reid worked in both private and public companies in sales, marketing and finance positions, during which time he was part of several high growth new technology and product launches.

Paul Antoniadis. Director. Mr. Antoniadis was the former CEO of Best Buy Europe and has extensive international experience in new country business startups, joint ventures, company acquisitions, and in scaling large businesses.

Jim Zadra. Director. Mr. Zadra is a chartered accountant with significant public company CFO experience. He is currently CFO at Great Panther Silver Limited, a publicly traded mining and exploration company.

Michael Thomson. Director. Mr. Thomson has over 30 years of experience in the securities industry, as a lawyer, regulator, investment banker and entrepreneur. Mr. Thomson has been the President and principal of Independent Capital Partners Inc., a corporate finance consulting and advisory company since May 1998. He currently acts as the President and a Director of Rodeo.

Dan Holmes. Chief Financial Officer and Secretary. Mr. Holmes is Chief Financial Officer of Solegear and has over 20 years of finance experience in Fortune 500 (Disney, Oracle), mid-market and early stage companies. Mr. Holmes holds an MBA from UCLA.

Michel Labonté, PhD. Chief Technical Officer. Mr. Labonté has over 30 years of plastics technology experience in formulation, product design, processing, and manufacturing. Mr. Labonté obtained his PhD in bioplastics from École Polytechnique de Montréal.

Noel Harvey. Vice President, Business Development. Mr. Harvey is a sales and management executive with over 25 years of business development experience in raw materials and bioplastics sales. Most recently, Mr. Harvey was director of business development in the biopolymers unit of Ingredion, a publicly traded ingredients manufacturer.

It is anticipated that one shareholder of the resulting issuer, Yaletown Ventures II Limited Partnership (“Yaletown”), will hold greater than 10% of the issued and outstanding Rodeo Shares following Closing. Yaletown is an investment fund with offices in Seattle, Vancouver and Calgary.

Subsequent News Release

The following information will be disclosed in a subsequent news release: the number and deemed price of Rodeo Shares issuable pursuant to the Transaction; the offering price and conversion price of converted debt in the Financing (the conversion price of the debt will be equal to the offering price); and selected financial information concerning Solegear.

Other Details of the Transaction

It is intended that the Transaction will constitute Rodeo’s “Qualifying Transaction”, as such term is defined in Policy 2.4 of the TSX-V, and that on completion of the Transaction, Rodeo will be listed as a Tier 2 company on the TSX-V.

The Transaction is subject to a number of closing conditions in favour of both Rodeo and Solegear, including execution of the Definitive Agreement between Rodeo and Solegear, acceptance of the Transaction by the TSX-V, shareholder approval of Solegear and, if required by the TSX-V, completion of the Financing.

No non-arm’s length party to Rodeo has any direct or indirect beneficial interest in the assets of Solegear, nor is any non-arm’s length party to Rodeo an insider of Solegear. There exists no relationship between or among the non-arm’s length parties to Rodeo and the non-arm’s length parties to Solegear. The Transaction does not constitute a Non-Arm’s Length Qualifying Transaction as defined in Policy 2.4 of the TSX-V. Pursuant to the rules of the TSX-V, including Policy 2.4, and in compliance with the Alberta Business Corporations Act and the constating documents of Rodeo, the Transaction will not be subject to shareholder approval, but remains subject to TSX-V acceptance. Rodeo will prepare a TSX-V compliant filing statement in conjunction with the Transaction, in consultation with Solegear.

Rodeo will be applying for an exemption pursuant to Section 3.4 of TSX-V Policy 2.2 from having an application for listing in connection with a Qualifying Transaction sponsored by a member of the TSX-V. There can be no assurance that Rodeo will be granted a sponsorship exemption.

All information provided in this press release relating to Solegear has been provided by management of Solegear and has not been independently verified by management of Rodeo.

Trading Halt

Trading in the Rodeo Shares was voluntarily halted on October 22, 2014 and will remain halted until the documentation required by the TSX-V in connection with the Transaction has been reviewed and accepted by the TSX-V. Subject to compliance with the policies of the TSX-V, Rodeo may also request that trading in the Rodeo Shares remain halted pending the Closing or abandonment of the Transaction.

On behalf of the Board of Directors,

Michael Thomson, President, Chief Executive Officer and Director

 

About Rodeo Capital III Corp.

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

 

Contact

Rodeo Capital III Corp.
Michael Thomson
phone: (604) 312-4777
email: tsxthomson@gmail.com

Source: Rodeo Capital, press release, 2014-10-23.

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