Phoscan Chemical Corp. and Baltic Resources Inc. said Oct. 29 that they have agreed to combine their interests in the Martison Phosphate Project, in which they each currently hold an equal joint-venture interest. Upon completion of the merger, Phoscan will own a 100 percent interest in the project. The former Baltic shareholders will own common shares of Phoscan and common shares of a newly-formed company, Newco, which will own all property interests of Baltic other than its interest in the Martison project. After completion of the merger, current Phoscan shareholders will own approximately 60.33 percent of Phoscan, and current Baltic shareholders will own approximately 39.67 percent of Phoscan and 100 percent of Newco. It is expected that the transaction will close in January, 2008.
The combination is proposed to be effected by way of plan of arrangement, pursuant to which the assets and liabilities of Baltic would be reorganized such that all of its assets and liabilities other than the Martison project would be transferred to Newco in exchange for the receipt by Baltic of common shares of Newco on a one-for-one basis, which would then be distributed to the Baltic shareholders. Baltic would then merge with a newly created subsidiary of Phoscan, and each Baltic common share will be exchanged for 1.4 common shares of Phoscan. This attributes equal value to Phoscan’s and Baltic’s respective 50 percent interests in Martison.
“The merger of Phoscan and Baltic will create a company with 100 percent ownership of the Martison Phosphate Project and a strong combined board, management team and operational expertise,” said Stephen Case, Phoscan CEO. “We believe that this transaction will result in an improved platform for financing and executing the continued development of the Martison Project and an enhanced market presence that will create value for our shareholders.”
“This transaction provides the positive catalyst needed to accelerate the advancement of Martison,” said Donald McKinnon, Baltic CEO and president. “This merger is expected to provide excellent value for our shareholders.”
After completion of the arrangement, Case will be the president and CEO of Phoscan; the other directors of Phoscan will be Glen Magnuson, Henry (Hank) Giegerich, John Yokley, Donald McKinnon, Chris Hodgson, and Gordon McKinnon. In addition to Case, the senior management of Phoscan will be comprised of Janet Lowe, executive vice president, and Gary Pigg, project manager.
The Martison project, located near Hearst, Ont., entails the development of a phosphoric acid plant, utilizing the Martison phosphate deposit and sulfuric acid from Ontario based-metal smelters. The developers say the project is strategically positioned in proximity to target markets with access to excellent infrastructure including rail, power, labor, and an abundant supply of sulfuric acid. The phosphoric acid produced will be used as feedstock for the production of higher valued products in the fertilizer and industrial markets.
The merger has been approved by the boards of directors of Phoscan and Baltic and will be subject to, among other things, the vote of shareholders of both. Westwind Partners Inc. has provided an opinion to the board of Baltic that the Phoscan share exchange ratio is fair, from a financial point of view, to the holders of the common shares of Baltic. Phoscan’s financial advisor is Wellington West Capital Markets Inc.