Spectral Diagnostics Inc. and Medwell Capital Corp., have jointly announced that they have entered into an arrangement agreement whereby, pursuant to a plan of arrangement, Medwell will acquire a further 33,333,333 Spectral common shares for $10 million, at a subscription price of $0.30 per share, the gross proceeds of which will be used primarily to advance Spectral's Toraymyxin, a treatment for severe sepsis, through to the end of its U.S. Phase III EUPHRATES trial and data release.
Pursuant to the Arrangement, Medwell will also distribute 54,282,834 Spectral Shares to its shareholders, representing approximately $16.3 million in value based on the $0.30 Spectral Share subscription price.
In general, such Spectral Shares are expected to be received by Canadian resident shareholders on a tax-deferred basis, provided that the tax cost of their Medwell Shares for Canadian tax purposes is not less than the value of the Spectral Shares which they receive.
"This transaction, which has the full support of Spectral management, will provide sufficient funds for any expansion or contingencies related to our pivotal EUPHRATES trial in the U.S. and for new market development activities in Canada and Europe," said Dr. Paul Walker, President and CEO of Spectral.
Dr. Walker continued, "In addition, our shareholder base will be significantly broadened to over 7,000 retail and institutional shareholders, with no large controlling shareholder, will increase Spectral's float and has the potential to increase long term stock liquidity."
"We are very pleased to be making this further investment in Spectral, as this is an impressive late-stage technology with a large market opportunity and minimal competition," said Kevin Giese, President and CEO of Medwell Capital.
Giese continued, "In distributing the Spectral Shares under the Arrangement, each Medwell shareholder will directly benefit by receiving approximately six-tenths (6/10ths) of a Spectral share for each Medwell share owned (or approximately $0.18 of value for each Medwell share owned, based on the $0.30 Spectral Share subscription price). Medwell will retain significant assets after the completion of the Arrangement, including a residual 13.4% ownership stake in Spectral, other investments and cash."
In connection with the Arrangement, Mr. Kevin Giese will be appointed as Chairman of the Board of Directors of Spectral after closing of the transaction.
Subject to compliance with applicable laws and the constating documents of Spectral, from closing of the Arrangement and for so long as Medwell owns in aggregate not less than 10% of the issued and outstanding Spectral Shares (calculated on a non-diluted basis), Medwell will be entitled to specify two of the board nominees in any management proxy circular of Spectral prepared and sent to the Spectral shareholders in respect of meetings at which directors are to be elected.
Following the completion of the Arrangement, Medwell will hold approximately 15,200,000 Spectral Shares, representing approximately 13.4% of the issued and outstanding Spectral Shares (calculated on a non-diluted basis), and will also hold 15,200,000 Spectral warrants, which are exercisable at $0.60 and expire on March 2, 2014.
The closing of the Arrangement is subject to court approval, the approval of the Toronto Stock Exchange and the TSX Venture Exchange and other customary closing conditions. The Arrangement is also subject to approval of the Medwell shareholders and approval of the disinterested Spectral shareholders at special meetings which have been called for Friday, August 26, 2011.
The record date for the purposes of determining shareholders of both Medwell and Spectral shareholders entitled to vote at their respective meetings has been set as the close of business on July 20th, 2011. The Arrangement is currently expected to close at the end of August, 2011.
Both Medwell and Spectral have received fairness opinions in respect of the Arrangement. The special committees and the boards of directors of both Medwell and Spectral have considered the Arrangement, unanimously support it and recommend that their shareholders vote in favour of it.