Merrco Payments targets U.S. payments sector with TSX-V listing, $30 million private placement

Montreal, Quebec, CANADA


  • Strategic partnership, $13 million anchor investment from global payments provider
  • Agreement to complete reverse takeover to obtain public listing on the TSX-V
  • Capital raise intended to fund strategic investment in U.S. online bank and launch of U.S. payments business

TORONTO, Oct. 25, 2018 (GLOBE NEWSWIRE) -- Merrco Payments Inc. (“Merrco” or the “Company”), a customized payments solution provider with expertise in cannabis and other regulated industries, and HAW Capital Corp. (“HAW”) today announced that the Company has launched a private placement financing for aggregate gross proceeds of up to $30 million. As part of the financing, Merrco has an anchor investment of up to $13 million and a strategic partnership with a global payments provider. The strategic partnership is expected to provide the Company with sales volume, revenue and access to leading edge technology. 

Merrco Private Placement

Canaccord Genuity Corp. and Eight Capital have been engaged to act as lead agents and joint bookrunners on a $17 million private placement of subscription receipts of Merrco on a best efforts basis alongside the anchor investment. The anchor investment will be for debenture units (comprised of convertible debentures and warrants convertible into Merrco common shares) and, together with the strategic partnership, is subject to the negotiation of definitive agreements.  Particulars of the private placement are described in more detail below.

Strategic Rationale

Merrco continues to bolster its market position in Canada as leading technology-driven payment specialists while establishing a U.S. footprint.

Merrco intends to use the proceeds from the private placement in part for an acquisition of a non-voting equity stake in a federally chartered U.S. bank (the “Bank”) recognized for its focus in payments and fintech partnerships, and to establish a secure U.S. merchant acquiring business. The transaction is subject to regulatory non-objection by U.S. banking authorities and to the negotiation of definitive agreements with the Bank.

“We intend to establish a footprint in the U.S. through our targeted investment in the Bank, focused on providing payment processing across broad industries,” said Fern Glowinsky, President and Chief Executive Officer at Merrco. “Longer term, we believe that this footprint could provide an important first-mover advantage should cannabis become legal at the federal level in that country. Our recent acquisition of Payfirma allows us to bring our depth of experience, technology and best practices from mainstream industries to the new world of legalized cannabis.”

Ms. Glowinsky concluded, “Coming together as Merrco Payfirma reflects the strength of our combined assets, including people, technology, partners and customers. We believe we have the platform to increase market share in the Canadian cannabis market and to build scale in the U.S. and other countries as legalization of cannabis continues to expand globally.”

Proposed Public Listing

This announcement follows a press release issued by HAW on October 22, 2018, that provided detail on a definitive amalgamation agreement (the “Amalgamation Agreement”) for a transaction involving HAW and Merrco that, if completed, will serve as the qualifying transaction for HAW and would result in Merrco obtaining a public listing on the TSX-V (the “Transaction”).  Per the announcement, the resulting issuer is expected to be known as Merrco Payfirma Corp.  Further details on the qualifying transaction are provided in HAW’s press release which is available under HAW’s profile on

Terms of the Private Placement

The proposed Merrco private placement is expected to consist of the sale of up to 1,133,333 subscription receipts (“SR”) at a price of $15.00 per SR (the “SR Price”) for aggregate gross proceeds of up to $17,000,000 (the “SR Placement”), and up to 13,000 senior unsecured debenture units (the “DUs”), each DU consisting of one $1,000 principal amount senior unsecured debenture (the “Debentures”) and 27 common share purchase warrants each exercisable for one common share at an exercise price equal to the SR Price at any time prior to the final maturity of the Debentures (the “DU Warrants”), at a price per DU of $1,000, for aggregate gross proceeds of up to $13,000,000 (the “DU Placement”, and together with the SR Placement, the “Private Placement”), for combined aggregate gross proceeds of up to $30,000,000.

Subscription Receipts

Each SR shall be exchanged, without payment of any additional consideration and without further action on the part of the holder thereof, for one common share of Merrco (the “Merrco Common Shares”) upon, among other things, the satisfaction of certain customary conditions (the “Escrow Release Conditions”) within 120 days of the closing of the SR Placement. Once the Escrow Release Conditions have been satisfied, the gross proceeds raised from the sale of the SRs will be released from escrow.   

Holders of Merrco Common Shares issued in exchange for the SRs will be entitled to receive common shares of the Resulting Issuer (the “Resulting Issuer Shares”) on the same terms and conditions as the other holders of Merrco Common Shares in connection with the completion of the Transaction.

Debenture Units

Subject to the negotiation and entering into of definitive agreements with respect to the DU Placement, it is expected that the Debentures will bear interest at a rate of 7.5% per year (compounded semi-annually) and will accrue and be capitalized to the principal amount of the Debentures, with one third of the principal amount of the Debentures (plus accrued interest) to be repaid on the third, fourth and fifth year anniversaries of the issue date, as such dates may be extended in accordance with the terms of the Debenture.  The Debentures are also expected to have standard anti-dilution protections.

It is also expected that the debentures will be redeemable at the company’s option at par plus accrued interest upon notice to the holders, provided that if the Debentures are redeemed on or before the first anniversary of their issue, 50% of the DU Warrants will be automatically cancelled for no consideration provided that they have not already been exercised on the date on which the redemption notice is delivered. Holders of the Debentures will have the option to convert the Debentures into Merrco Common Shares at any time prior to the maturity date of the relevant Debenture or the date on which a redemption notice is delivered. The conversion price is expected to be the SR Price plus a conversion premium of approximately 25%, subject to adjustment in certain circumstances. The DUs will include customary change of control provisions upon the acquisition of voting control or direction of more than 50% of the common shares. 

Agents and Commissions

Canaccord Genuity and Eight Capital (together, the “Lead Agents”) have been engaged by Merrco as co-lead agents and joint bookrunners, together with potential additional investment dealers (collectively with the Lead Agents, the “Agents”) to complete the SR Placement on a best-efforts agency basis.  Canaccord Genuity has been engaged by Merrco as sole agent and bookrunner to complete the DU Placement on a best-efforts agency basis.

A commission of 6.0% of the aggregate gross proceeds under the SR Placement is payable to the Agents by Merrco and a commission of 6.0% of the aggregate gross proceeds under the DU Placement is payable to Canaccord by Merrco. In addition, Merrco will issue broker warrants to the Agents in respect of the SR Placement (the “SR Broker Warrants”) and to Canaccord Genuity in respect of the DU Placement (the “DU Broker Warrants”) that are exercisable to acquire, within 18 months from the satisfaction of the Escrow Release Conditions or the closing of the DU Placement (as the case may be), in the aggregate, Merrco Common Shares equal to 6% of the gross proceeds of the SR Placement and 6% of the gross proceeds of the DU Placement, respectively, in each case divided by the SR Price, at an exercise price per Merrco Common Share equal to the SR Price.

Use of Proceeds

As noted above, it is intended that part of the proceeds of the private placement will be used to fund the proposed transaction with the Bank (the “Bank Transaction”), with the balance expected to be used for working capital and general corporate purposes (including payment of costs relating to the Transaction).

About Merrco Payments Inc.

Merrco is a payment processing company that enables its merchant customers to accept credit, debit and alternative payments online and at the point of sale. Merrco markets its services directly to merchants and through a network of channel and integrated partners.

Merrco has developed specialized expertise in regulated industries and has exclusivity arrangements with its bank sponsor and payment gateway partner for cannabis and cannabis-related transactions. The legalization of recreational cannabis on October 17th, together with the growing medical cannabis market in Canada present a significant market opportunity for Merrco's services. 

In February 2018, Merrco acquired Payfirma Corporation, which operates as a wholly-owned subsidiary of Merrco. Payfirma offers payment processing services and financial technology that assists businesses to accept and process payments. Merrco and Payfirma are registered Independent Sales Organizations with Visa® and registered Member Service Providers with Mastercard®. Together, they offer merchants specialized payments expertise across retail, ecommerce and mobile, and regulated industry.

For further information, please contact:

Merrco Payments Inc.
Fern Glowinsky, President & Chief Executive Officer    

HAW Capital Corp.
David Hyman, CFO

Forward-Looking Information

This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws.  The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. More particularly and without limitation, this press release contains forward looking statements and information concerning the Transaction, the Private Placement and the Bank Transaction and the timing and ability of the parties to satisfy the conditions to the completion of the Transaction, the Private Placement, and the Bank Transaction, including details regarding the Transaction, the timelines for completion and other particulars thereof (including the anticipated exchange and conversion ratios, the treatment of options, warrants and other convertible securities (including the Debenture Units and the Broker Warrants) under the Transaction, the conditions to closing of the Transaction and the satisfaction thereof, details regarding the Private Placement, the timelines, terms (including offer price), structure and gross proceeds of the Private Placement and other related matters), the Escrow Release Conditions and the satisfaction thereof, the treatment of the Subscription Receipt, Debenture Units and Broker Warrants under or in connection with the Transaction, the use of proceeds from the Private Placement, Merrco’s market position in Canada as a leading technology-driven payment specialist, the expansion of Merrco’s U.S. footprint and first-mover advantage, the federal legalization of cannabis in the United States, the existence of a significant market opportunity for Merrco’s business resulting from the legalization of recreational cannabis in Canada and the positioning of Merrco’s products and services to address this opportunity, the existence of other potential growth opportunities for Merrco and its subsidiaries and other matters.

By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Merrco’s control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, environmental risks, operational risks, competition from other industry participants, stock market volatility, the negotiation and entering into of definitive agreements in connection with the Private Placement, the risks that the parties will not proceed with the Transaction, the Private Placement or the Bank Transaction or that the conditions to closing (including receipt of applicable shareholder and other approvals or consents) or the Escrow Release Conditions are not satisfied in the manner or on the timelines anticipated or at all and that the ultimate terms of the Transaction, the Private Placement or the Bank Transaction will differ from those currently contemplated.

Although Merrco believes that the expectations in its forward-looking statements are reasonable, its forward-looking statements have been based on factors and assumptions concerning future events which may prove to be inaccurate. Those factors and assumptions are based upon currently available information. Such statements are subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on the forward-looking statements, as no assurance can be provided as to future results, levels of activity or achievements. Risks, uncertainties, material assumptions and other factors that could affect actual results include that the assumptions regarding the forward-looking statements are not accurate and the other risks, uncertainties and material assumptions that are discussed in HAW’s public disclosure documents available at Furthermore, the forward-looking statements contained in this document are made as of the date of this document and, except as required by applicable law, Merrco does not undertake any obligation to publicly update or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.

Completion of the Transaction and the Private Placement is subject to a number of conditions, including but not limited to, TSX-V acceptance and applicable shareholder approval. The Transaction cannot close until applicable shareholder approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at all and, as a result, there can be no assurance that the Private Placement will be completed as proposed or as described herein, if 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 on. Trading in the securities of HAW Capital Corp. should be considered highly speculative.

All information contained in this press release with respect to HAW and Merrco was supplied by HAW and Merrco, respectively, for inclusion herein.

This news release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States or to or for the account or benefit of U.S. persons (as such terms are defined in Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”)), absent registration or an exemption from registration. The securities offered have not been and will not be registered under the U.S. Securities Act or any state securities laws and, therefore, may not be offered for sale in the United States, except in transactions exempt from registration under the U.S. Securities Act and applicable state securities laws.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) has in any way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of the press release, nor accepts responsibility for the adequacy or accuracy of this release.