Not for distribution to United States newswire services or for release publication, distribution or dissemination directly, or indirectly, in whole or in part, in or into the United States.
TORONTO, July 26, 2019 (GLOBE NEWSWIRE) -- SAVANNA CAPITAL CORP. (“Savanna”) (TSX-V: SAC.P), a capital pool company as defined under Policy 2.4 – Capital Pool Companies (the “CPC Policy”) of the TSX Venture Exchange (the “Exchange”), provides an update to its press release dated June 5, 2019 (the “June Press Release”) whereby Savanna announced it had entered into a binding letter of intent dated May 30, 2019 (the “LOI”) with Varianz Corp. (“Varianz Corp”), that would constitute Savanna’s “Qualifying Transaction” (as the term is defined in TSX Venture Exchange (“TSXV”) Policy 2.4 – Capital Pool Companies) if completed (the “Transaction”). Savanna and Varianz Corp have entered into an amended and restated letter of intent dated July 25, 2019 (the “Amended LOI” and, together with the LOI, collectively the “Letter Agreement”). The amendments made pursuant to the Amended LOI are summarized below and the key terms of the Letter Agreement are more particularly described under the heading “The Transaction”. All capitalized terms used, but not defined herein, shall have the same meaning as ascribed to them in the June Press Release.
LOI AMENDMENTS
Pre-Transaction Offerings:
- There will be no Savanna Offering, and accordingly, the Savana Offering has been entirely removed from the Letter Agreement.
- The pricing of the Target Units has been amended to C$0.03 per Target Unit with each underlying Target Warrant being issuable at C$0.06 per Target Warrant. Accordingly, the Varianz Offering (as defined below) has been adjusted to consist of 26,666,667 Target Units for gross proceeds of approximately C$800,000.00.
- In addition to the Varianz Offering, Varianz Corp will complete a second non-brokered private placement (the “Second Varianz Offering” and together with the Varianz Offering, the “Varianz Offerings”) of up to 33,333,334 subscription receipts comprising Target Units at $0.03 (the “Varianz Subscription Receipts”), for gross proceeds of approximately C$1,000,000.00. The Second Varianz Offering shall be completed on the same terms and conditions as the Varianz Offering, save and except that the money raised in connection with the Second Varianz Offering shall be subject to certain escrow requirements to be agreed upon between Varianz Corp and Savanna, and the subscription receipts will not convert into Target Units, until completion of the Transaction.
- Varianz Corp is currently in discussions with an agent (the “Agent”) to complete a brokered offering (the “Brokered Offering”) of subscription receipts of Varianz Corp (the “Brokered Subscription Receipts”) for aggregate gross proceeds and at a price to be determined by Varianz Corp. and the Agent, both acting reasonably. Varianz Corp. anticipates that the Agent will be engaged for the Brokered Offering and that the Brokered Offering will be considered a “Majority Arm’s Length Private Placement” in accordance with Section 4.2(h) of TSXV Policy 5.4 – Escrow, Vendor Consideration and Resale Restrictions (“Policy 5.4’). Accordingly, Varianz Subscription Receipts may also be subject to escrow and resale restrictions required by Policy 5.4. More details of the Brokered Offering will be disclosed in a further news release when they become available.
Pre-Transaction Reorganization: - Savanna will not complete a Share Split, and accordingly, all references to the Share Split have been deleted from the Letter Agreement.
- The Consolidation has been revised such that, on or prior to the completion of the Transaction, but after the completion of the Varianz Offerings and the Brokered Offering, Varianz Corp will consolidate its shares on a 3.25 old for 1 new share basis (the “Varianz Consolidation”).
Definitive Agreement: - The parties have agreed that they shall have until August 15, 2019 to enter into the Definitive Agreement.
Post-Transaction Capital Structure - Varianz Corp. will have, as of the date of the execution of the Definitive Agreement, but prior to the Varianz Consolidation, 200,000,000 common shares (the “Varianz Shares”) issued and outstanding (which includes 60,000,000 Varianz Shares to be issued in the Varianz Offerings, but does not include the Varianz Shares to be issued in the Brokered Offering), which, upon completion of the Transaction, will be exchanged for common shares of Savanna (on a post-Varianz Consolidation basis) at a ratio of 1:1.
BACKGROUND ON VARIANZ CORP. AND ITS SUBSIDIARIES
Varianz Corp.
Varianz Corp is a Colombia-based privately held corporation existing under the laws of the Province of Ontario. Varianz Bio Lab S.A.S (“Varianz Bio Lab”), a wholly-owned subsidiary of Varianz Corp (Varianz Bio Lab and Varianz Corp. are collectively referred to hereinafter as “Varianz”), is a biotechnology company focused on the medicinal cannabis industry, with headquarters in Bogotá, Colombia. Varianz intends to establish a vertically integrated operation to control a broad-scope value chain process from planting to processing cannabis, and ultimately producing high-quality medical cannabis oil extracts and other derivative products with rich CBD content.
Varianz Bio Lab has obtained from the Colombian Ministry of Justice and the Colombian Agricultural Institute, as applicable, licenses that:
- recognize Varianz Bio Lab as a cannabis seed producer in Colombia;
- allow Varianz Bio Lab to trade cannabis seeds; and
- allow Varianz Bio Lab to harvest non-psychoactive cannabis for: (i) seed production for crops; (ii) production of non-psychoactive cannabis derivatives (including sowing, transformation and disposition); (iii) industrial sale of non-psychoactive cannabis derivatives (excluding third party disposition and storage); and (iv) scientific disposition of non-psychoactive cannabis derivatives (excluding third party disposition and storage).
Varianz Bio Lab has also applied, and is awaiting approval, for a transformation license, which will allow Varianz Bio Lab to manufacture, produce, commercialize and export psychoactive and non-psychoactive cannabis derivatives for national, international and research purposes (the “Transformation License”). The Transformation License is a pre-requisite to Varianz Bio Lab receiving its Psychoactive Crop License (as defined below).
As of the date hereof, Varianz Bio Lab has received conditional approval of a psychoactive crop license that will allow Varianz Bio Lab to harvest psychoactive cannabis for: (a) seed production for crops; (b) production of psychoactive cannabis derivatives (including sowing, production of clones, storage, trading, distribution, exportation and final sale to third parties); (c) industrial sale; and (d) scientific disposition (the “Psychoactive Crop License”). Varianz Bio Lab anticipates that it will receive the Psychoactive Crop License and the Transformation License in August of 2019.
Relevant unaudited financial information for Varianz Bio Lab is summarized below:
| AS AT DECEMBER 31, 2018* | ||||
| Assets | ||||
| Current | ||||
| Cash and cash equivalents | 1,632.03 | |||
| Trade debtors and other payables | 16,945.00 | |||
| Total current assets | 18,577.07 | |||
| Non-current | ||||
| Property, plant and equipment | 6,120.28 | |||
| Intangibles (Licences) | 44,358.94 | |||
| Total non-current assets | 50,468.41 | |||
| Total assets | 69,050.65 | |||
| Liabilities | ||||
| Trade and other payables | 80,716.05 | |||
| Total current liabilities | 80,716.05 | |||
| Total non-current liabilities | 0 | |||
| Total liabilities | 80,716.05 | |||
| Equity | ||||
| Share Capital | 1,631.72 | |||
| Income for the period | (13,306.30 | ) | ||
| Total equity | (11,674.42 | ) | ||
| Total liabilities and equity | 69,050.65 | |||
*Converted to Canadian Dollars from Colombian Pesos using exchange rate of COP 2456.81259 to CDN $1.00 effective on July 8, 2019.
THE TRANSACTION
Terms of the Transaction and Financing Matters
It is currently anticipated that the proposed Transaction will be effected by way of a plan of arrangement, triangular merger, share exchange or other mechanism deemed to be the most effective, as determined by the mutual agreement of Savanna and Varianz. The Transaction will be considered a “Qualifying Transaction” pursuant to the CPC Policy. Savanna and Varianz will enter into a definitive merger, amalgamation, arrangement or share exchange agreement (the “Definitive Agreement”) pursuant to which the combined entity of Savanna and Varianz (the “Resulting Issuer”) will continue to carry on the business of Varianz under its name and will list its securities on the Exchange.
The obligations of Savanna and Varianz pursuant to the Letter Agreement shall terminate in certain specified circumstances, including in the event that the Definitive Agreement is not entered into on or before August 15, 2019 (unless extended by mutual agreement of the parties). The proposed Transaction is subject to requisite regulatory approvals and standard closing conditions, including the approval of the directors of each of Savanna and Varianz Corp of the Definitive Agreement, as well as the conditions described below. Upon completion of the Transaction, it is the intention of the parties that the Resulting Issuer will continue to focus on the current business and affairs of Varianz, under the name “Varianz Group Corp.”
Pre-Transaction Offerings
Prior to the completion of the Transaction, it is anticipated that Varianz Corp will complete the following offerings:
- a non-brokered offering (the “Varianz Offering”) of up to 26,666,667 Target units (each a “Target Unit” and collectively, the “Target Units”) at a price of $0.03 per Target Unit for gross proceeds of C$800,000.00. Each Target Unit shall be comprised of one Varianz Share and one common share purchase warrant (a “Target Warrant”) exercisable for 24 months from the date of the Closing Date (defined below) at a price of $0.06 per Target Warrant;
- the Second Varianz Offering (as described in the section “LOI Amendments” above); and
- the Brokered Offering (as described in the section “LOI Amendments” above.
Upon completion of the Varianz Offerings (and not including Varianz Shares issued in connection with the Brokered Offering), Varianz Corp. will have approximately 200,000,000 common shares and 60,000,000 Target Warrants issued and outstanding. On Wednesday July 24, 2019, Varianz Corp completed the Varianz Offering.
Varianz Pre-Transaction Reorganization
On or prior to the completion of the Transaction, but after the completion of the Varianz Offerings and the Brokered Offering, Varianz will complete the Varianz Consolidation. The intention of the Varianz Consolidation is to achieve pre-Brokered Offering ownership percentages of the Resulting Issuer of approximately 6.96% for shareholders of Savanna and approximately 93.04% for shareholders of Varianz. Accordingly, the exchange ratio (3.25:1) used for the Varianz Consolidation may be subject to change in order to arrive at such intended ownership percentages.
Post-Transaction Capital Structure
Upon completion of the Transaction, all issued and outstanding common shares of Varianz Corp will be exchanged for common shares of Savanna on a one-for-one basis pursuant to and in accordance with the terms and conditions of the Definitive Agreement and the combined entity of the Issuer and Varianz will continue to conduct the business of Varianz under the name “Varianz Group Corp.” Following the completion of the Transaction, common shares of the Resulting Issuer shall be derived as follows*:
| Shareholder | # of Shares | % Ownership |
| Pre-Varianz Consolidation | ||
| Existing Shareholders of Savanna | 4,600,000 | 2.25% |
| Existing Shareholders of Varianz | 140,000,000 | 68.43% |
| Subscribers to the Varianz Offering | 26,666,667 | 13.03% |
| Subscribers to the Second Varianz Offering | 33,333,334 | 16.29% |
| Total | 204,600,001 | 100% |
| Post-Varianz Consolidation | ||
| Existing Shareholders to Savanna | 4,600,000 | 6.96% |
| Existing Shareholders to Varianz | 43,076,923 | 65.13% |
| Subscribers of the Varianz Offering | 8,205,128 | 12.41% |
| Subscribers of the Second Varianz Offering | 10,256,410 | 15.51% |
| Total | 66,138,462 | 100% |
*The above table does not include securities issued to subscribers in the Brokered Offering. Pursuant to and in accordance with Policy 5.4, the minimum number of securities that will be issued pursuant to the Brokered Offering will represent at least 20% of the issued and outstanding shares of the Resulting Issued upon completion of the Transaction. Once the details of the Brokered Offering are finalized, Savanna will disclose such details in a further news release.
Additionally, there will be approximately 18,461,539 Resulting Issuer warrants (from the Varianz Offerings (on a post-Varianz Consolidation basis and excluding any warrants issued pursuant to the Brokered Offering, if any)) exercisable at C$0.195 and approximately 443,200 Savanna Options (as hereinafter defined) exercisable at C$0.10 issued and outstanding. Subject to expenses incurred with regard to the Transaction and the establishment of Varianz’s business in Colombia, upon closing of the Transaction, the Resulting Issuer will have cash of approximately $1,950,000.
Sponsorship
The Transaction is subject to the sponsorship requirements of the TSXV, unless an exemption from the sponsorship requirement is available or a waiver is granted. Savanna will be seeking sponsorship from the Agent who is anticipated to be engaged in connection with the Brokered Offering.
THE RESULTING ISSUER
Insiders, Officers and Board of Directors of the Resulting Issuer
Insiders
Two principal shareholders of Varianz, Ribagorza Investment S.A. and Landsons Investments Corporation (both Panamanian companies) are each expected to own approximately 27% of the common shares of the Resulting Issuer after giving effect to the Transaction, but before the Brokered Offering or any subsequent financings, and therefore each is expected to become an insider of the Resulting Issuer by virtue of its shareholdings.
Management of the Resulting Issuer
At closing of the Transaction, all of the existing directors and officers of Savanna will resign and the board of directors of the Resulting Issuer shall be composed of a minimum five (5) and a maximum of ten (10) directors.
The relevant professional experience of the proposed directors and officers of the Resulting Issuer is set out below:
Alejandro Jiménez Ramírez
Director
Alejandro Jiménez Ramírez has over 15 years of experience in corporate affairs providing advice to various companies relating to corporate law, environmental regulation, social responsibility, government engagement, communications, and sustainability matters. Mr. Ramirez is currently a Partner and Director at Aventtus, a consulting firm engaged in the Cannabis and Renewable Energy sectors. He concurrently serves as a Partner at Qvartz Capital Partners, an entity offering financial solutions and business development services for businesses in the resource, cannabis and renewable energy industries. Mr. Ramírez holds a law degree (J.D) and LL.M from the Universidad de los Andes (Colombia) and a Master of Business Administration (MBA) from Georgetown University – McDonough School of Business.
Alfredo Morales
Director
Alfredo Morales has 30 years of experience working in the “Fast Consumer Goods Sector” in Latin America serving companies such as Indega, Colgate Palmolive and the Energizer Battery Company. He currently serves as the President of Henkel KGAA (“Henkel”) for the Andean Region and as Vice President of the Henkel’s Beauty Retail business for Latin America. Working with Henkel, Mr. Morales has led the acquisition of several brands in Latin America. He is also the founder and owner of Iverpack, a company that designs packaging for flowers destined for export. Mr. Morales is currently a board member of a leading Colombian insurance company, Seguros Colmena, and the German-Colombian Chamber of Commerce. Mr. Morales has professional experience in sales development, marketing, trade marketing, general management supply chain management throughout Latin America, including areas of R&D, purchasing, and pack development. He holds a chemical engineering degree from Universidad Del Valle in Cali Colombia and an MBA and Master of Management from Tulane University in New Orleans, USA.
Juan José Martinez
Director
Juan José Martinez is an industrial engineer and holds a Master of Finance degree from the Universidad de los Andes (Colombia). He is currently acting as a Vice President in the “Fuels” sector for Primax Colombia. Mr. Martinez developed oil and gas industry experience over the past 20 years while working for ExxonMobil in the areas of downstream global marketing, retail and commercial businesses and strategic planning. During his time at ExxonMobil, Mr. Martinez worked on assignments in Argentina, Brazil, the United States and Colombia. He also has 5 years of experience in the flower industry, growing and exporting Colombian flowers for Magna Flowers where he assisted in the exportation of roses from Colombia to markets in the United States, Canada, Russia and Argentina.
Varianz and Savanna are currently seeking additional candidates for directors. More details of the number and identity of such directors will be disclosed in a further news release as it becomes available.
Inter-Company Relationships
Officers, directors and principal shareholders of Savanna may own common shares of Varianz Corp and may subscribe for Target Units in the Varianz Offerings and the Brokered Offering.
Filing Statement
In connection with the Transaction and pursuant to the requirements of the Exchange, Savanna anticipates filing a filing statement (the “Filing Statement”) on its issuer profile on SEDAR (www.sedar.com), which will contain details regarding the Transaction, the Varianz Offerings, the Brokered Offering and the Resulting Issuer.
About Savanna
Savanna is a Capital Pool Company (as defined in the policies of the TSX Venture Exchange) listed on the Exchange. Savanna has no material liabilities, approximately $150,000 in cash, 4,600,000 common shares and 443,200 options (the “Savanna Options”) issued and outstanding.
Further Information
For further information regarding the proposed Transaction, please contact:
Savanna Capital Corp.
Kenny Choi
Tel: (416) 861-2262
E-mail: Kenny.choi@fmresources.ca
Varianz Corp.
Alejandro Jimenez
Tel: (+57) 314 220-5410
Email: IR@varianz.co
All information contained in this news release with respect to Savanna and Varianz was supplied by the parties respectively for inclusion herein, and each party and its directors and officers have relied on the other party for any information concerning the other party.
Completion of the Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance. 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 release 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 news release
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION:
This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements relate, among other things, to: the terms and conditions of the proposed Transaction; the terms and conditions of the proposed Varianz Offerings and the Brokered Offering; receipt of all regulatory licenses required for the cultivation, production, domestic distribution and international export cannabis and cannabis related products; use of proceeds raised in the Varianz Offerings and the Brokered Offering, the proposed officers and directors of the Resulting Issuer; and the business and operations of the Resulting Issuer after the proposed Transaction. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties; and the delay or failure to receive board, shareholder or regulatory approvals. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release.
Readers should not place undue reliance on the forward-looking statements and information contained in this news release. Savanna and Varianz assume no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law.
The securities to be offered in the Varianz Offerings and the Brokered Offering have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) or any U.S. state securities laws, and may not be offered or sold in the United States or to, or for the account or benefit of, United States persons absent registration or any applicable exemption from the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. This news release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.