RICHMOND, British Columbia, April 5, 2007 (PRIME NEWSWIRE) -- CON-SPACE Communications Ltd. (TSX-V:CCB), (http://www.con-space.com), a world leader in specialized voice communication products, today announced that it has concluded negotiations to acquire all of the outstanding shares of Search Systems, Inc. ("Search Systems") of Bakersfield, CA, a leading manufacturer and supplier of enhanced search and inspection systems using video, sound and vibration technology.
CON-SPACE expects the combination of the two companies to increase both sales and earnings to the benefit of its shareholders. The combined 2008 annual sales are expected to exceed $17M with annual earnings in excess of $2.5M.
"We are very pleased with this transaction," said CON-SPACE Chairman, James L. Swanson. "The owners and management of Search Systems are to be commended for having built such a fine company. Their products are second-to-none and we look forward to carrying on their legacy with pride."
The acquisition of Search Systems is for a purchase price of US$9.9 million plus adjustments for working capital and certain recent product development expenses. The purchase price is payable in cash on closing, subject to vendor take-back financing to the owners of US$1.5 million payable with interest at 6% per annum over a 7-year term. The vendor financing is to be secured by a charge on the assets of Search Systems, subject to senior debt.
Financing for the acquisition includes a proposed loan from an international company (the "Lender") of Cdn$6 million with a five year term and interest at the rate of 18% per annum payable quarterly. Principal on the loan is due at maturity and is subject to certain rights of prepayment. The Lender is to receive warrants for 300,000 shares of CON-SPACE exercisable over five years at a price of $1.00 per share during the first three years, $1.10 per share during the fourth year and $1.22 per share during the fifth year. The loan is to be secured by all of the assets of CON-SPACE and its subsidiaries subject to security with respect to bank credit facilities with the Bank of Montreal.
As further financing for the acquisition, CON-SPACE is to complete a private placement of 4,000,000 units totaling Cdn$4 million, including 1,500,000 units to the Lender. Each unit is priced at Cdn$1.00 per unit and consists of one common share of CON-SPACE and one-quarter of one common share purchase warrant, with each whole warrant exercisable into one common share on payment of $1.00 per share if exercised during the first three years, $1.10 per share if exercised during the fourth year and $1.22 per share if exercised in the fifth year.
The acquisition of Search Systems and the financings, which are to close concurrently, are anticipated to be completed next week and are subject to finalization of documentation and to regulatory approval.
About Search Systems
Search Systems is a world leader in the design and manufacture of technical search, surveillance and inspection systems. Its video/audio systems, including the Searchcam 2000, Searchcam Patrol System, Under Vehicle Inspection System, the Searchcam EntryLink plus the DELSAR Life Detector are used around the world by search and rescue teams, law enforcement, the military, customs inspection tactical teams and industrial inspection personnel.
About CON-SPACE
CON-SPACE is recognized worldwide as the leading designer and manufacturer of specialized voice communication equipment used by police, fire, rescue teams, government agencies, militaries, municipalities and general industry. CON-SPACE has distribution throughout North America, Great Britain, Australia, parts of Asia, South America, and Europe. CON-SPACE also supplies many other manufacturers with private labeled products.
Strategic Fit
As a combined organization, economies of scale can be achieved in the design and engineering of new products, the sales efforts to foreign countries and the use of both manufacturing facilities in the future development of CON-SPACE's overall development and penetration into more market areas. "We are both in the same industry, serving the same customers with similar but different equipment and both companies are well known and respected for their product lines. This acquisition just makes good sense," said Swanson, adding, "We intend to retain the current management and use their knowledge and technical abilities to continue the development of many new products."
This press release is available on CON-SPACE's official on-line investor relations site for investor commentary, feedback and questions. Investors are asked to visit http://www.agoracom.com and view the CON-SPACE Investor Contact & Information Centre. Alternatively, investors are asked to e-mail all questions and correspondence to CCB@Agoracom.com
"Forward-looking" statements in this release involve risks and uncertainties associated with, among others, economic, industry conditions, technological development, and competition and should not be relied upon as actual results may differ materially from those projected.
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