TORONTO Stock Exchange-listed Canadian exploration company Rock Tech Incorporated is on the verge of acquiring the entire stake of local private equity firm Brainworks Capital Management in a potential reverse takeover deal.After the acquisition by Rock Tech Inc, the Zimbabwean private equity company will then vigorously pursue its short- to medium-term objective of a separate listing on an a liquid international stock exchange before the end of this year.
The latest developments follow the signing in July this year of a letter of intent between the parties for Rock Tech to purchase the entire issued and outstanding shares of Brainworks Capital Management.
The acquisition is intended to take the form of a corporate combination whereby, subject to regulatory and shareholder approval, Rock Tech will acquire all of the issued and outstanding shares of Brainworks in exchange for common shares in the capital of Rock Tech.
Brainworks managing partner and founder Mr George Manyere confirmed the potential acquisition by Rock Tech and the plans to list the firm on the Toronto Stock Exchange, preceded by a US$30 million pre-Initial Public Offering private placement last year.
“Both those two issues are correct and we have been working on them since we launched a pre-Initial Public Offering in November last year and we are clear about our objective in the short to medium term to list the company on an international stock exchange.
“We have made progress on the growth strategy of the company to create the much needed liquidity and attract investment capital willing to invest in Brainworks but have been waiting for us to list,” he said.
Rock Tech is focused on developing its lithium and graphite projects located in Canada. In 2009, the company acquired the Georgia Lake lithium property located near Thunder Bay, Ontario. Since acquiring the property, Rock Tech has completed over 12 000 metres of drilling, conducted metallurgical testing and confirmed a significant portion of the historic resource estimate to National Instrument 43-101 standards, relating to all public disclosures an issuer makes regarding scientific and technical information concerning mineral properties or projects.
In 2012, the company entered into an option agreement to acquire 100 percent interest in the Lochaber graphite property near Gatineau, Quebec. Since acquiring the property, the firm, completed geophysical surveys, over 7 000 metres of drilling and began initial metallurgical testing.
In May, 2013, based on the results of exploration activities, the Canadian exploration company exercised its option to acquire 100 percent stake of the Lochaber graphite property.
Brainworks is Zimbabwe’s pre-eminent private equity investment and advisory company primarily focused on investing in financial services, mining, tourism, real estate and energy sectors in Zimbabwe.
Through the companies in its investment portfolio, Brainworks offers a range of banking and consumer finance products. In its energy portfolio, it is active in petroleum products logistics and bulk trading while in tourism and real estate portfolio it is active in hotel operating and real estate.
Brainworks Capital recently acquired a 32 percent shareholding in African Sun Limited through three vehicles previously controlled by ASL chief executive officer Dr Shingi Munyeza. He controlled the vehicles through his family trust, Nhaka Trust.
In the recent transaction, Nhaka got 17,02 percent shareholding in Brainworks Capital in exchange of shares it held in ASL. Brainworks became a significant shareholder in both African Sun and Dawn Properties. ASL now holds 16 percent in Dawn Properties after selling 12 percent of its 28 percent stake.
Brainworks is also involved in gold mining activities through properties in Zimbabwe which are undergoing exploration. As at June 30, 2013, it had total assets of about US$35,6 million, of which US$3,8 million was cash, while its total invested capital was US$26,7 million.
Brainworks has 456 924 869 shares issued and outstanding.
No other classes of shares or convertible securities have been issued. It has 30 shareholders none of whom hold controlling interest.
Rock Tech Inc has an issued and outstanding share capital of 99 845 108 common shares and prior to the closing of the acquisition transaction the outstanding share capital will be consolidated on the basis of 10 old shares for one new share, resulting in 9 984 511 common shares.
The aggregate consideration for the Brainworks Capital shares will be satisfied by the issuance of approximately 228 462 435 post-consolidation shares of Rock Tech at a deemed price of $0,20 Canadian dollars per share, for an aggregate purchase price of CAD$45,7 million on the basis of one Rock Tech Inc share for each two Brainworks Capital shares.
The transaction is subject to a number of conditions including due diligence, execution of definitive documentation, formal agreement and regulatory approval including Toronto Stock Exchange Venture Exchange acceptance and shareholder approval.