Mr. Steve Levely reports
ACKROO ANNOUNCES SALE TO PAYSTONE
Ackroo Inc. has signed a definitive arrangement agreement, dated Dec. 12, 2024, with Paystone Inc. Pursuant to the arrangement agreement, Paystone will acquire all of the issued and outstanding shares of Ackroo at a price of 15 cents per Ackroo share, and will assume all assets and liabilities of the company, including the company's existing debt to BDC Capital Inc. The purchase represents approximately a 25-per-cent premium over yesterday's closing price and approximately a 36-per-cent premium over the 90-day volume-weighted average price. With 115,304,952 Ackroo shares currently issued and outstanding, approximately nine million options that are in the money and close to $3-million of debt owed to BDC, which will be repaid by the purchaser on the closing of the transaction, the enterprise value of the transaction is approximately $21-million.
"I am very happy for our shareholders, employees and clients," said Steve Levely, chief executive officer of Ackroo. "The goal at Ackroo since I took over in May, 2014, was to accrue value through market consolidation until we were consolidated ourselves. Ten years later, here we are with a business that has scaled by combining smaller adjacent software and payment organizations into one combined entity which has delivered both financial and functional success. While I am proud of what we have done to get to this point, I am equally excited for what is next for our staff and valued clients. Paystone has been consolidating the industry as well, acquiring direct competitors of ours, like Datacandy, and integrating payment and value-added software solutions. Bringing all of these assets and tools together under one organization to further optimize and scale is an exciting next step for all involved. I am also happy for our shareholders. Speaking on behalf of the board, we believed, at this stage of the business, and given the current state of the capital markets, it was in the best interest of the company to pursue this transaction, which creates a liquidity event for shareholders while positioning Ackroo's product, team and clients to be able to benefit from a much-larger private organization."
Transaction terms
Pursuant to the terms and conditions of the arrangement agreement, the holders of the issued and outstanding Ackroo shares will receive 15 cents cash for each Ackroo share held immediately prior to the closing of the transaction. In connection with the transaction, Ackroo has agreed to accelerate vesting of all of outstanding incentive stock options, and Paystone has agreed to complete a cash payment to holders of all outstanding in-the-money options upon closing in an amount equivalent to the difference between the exercise price of the options and the offer price. Upon closing, all outstanding incentive stock options will be cancelled. The transaction will be carried out by way of a court-approved plan of arrangement under the Canada Business Corporations Act.
Mr. Levely and another arm's-length shareholder have agreed to defer payment of the offer price, for any Ackroo shares they hold, for a minimum 12 months following closing. The deferring shareholders will receive, in lieu of the cash consideration, the equivalent principal amount unsecured subordinated promissory note of Paystone. Upon closing, Mr. Levely has also agreed to assume the role of chief operating officer of Paystone.
The arrangement agreement contains customary deal-protection provisions, including a non-solicitation covenant in respect of Ackroo and a right of Paystone to match any superior proposal, as defined and described in the arrangement agreement. Under certain circumstances, if the arrangement agreement is terminated, Paystone would be entitled to a termination fee of $750,000. Full details of the transaction will be included in a management information circular to be mailed to Ackroo shareholders and will be available on SEDAR+ in the coming weeks. In addition, a copy of the arrangement agreement will be filed under Ackroo's profile on SEDAR+.
Conditions to completion
The completion of the transaction is subject to a number of terms and conditions, including, without limitation, the following: (a) approval of the Ackroo shareholders, as described herein; (b) approval of the TSX Venture Exchange; (c) issuance of a final order by the Ontario Superior Court of Justice; (d) Paystone obtaining debt financing sufficient to satisfy the offer price; and (e) other standard conditions of closing for a transaction of this nature. Furthermore, the arrangement agreement may be terminated by the company if, prior to 5 p.m. ET on Jan. 13, 2025, the purchaser has not obtained a commitment letter in respect of such debt financing. There can be no assurance that all necessary approvals will be obtained or that all conditions to the completion of the transaction will be satisfied.
The transaction is subject to approval at a special meeting of Ackroo shareholders and requires: (a) an affirmative vote in favour from 66.67 per cent of the votes cast by Ackroo shareholders at the Ackroo meeting; and (b) a simple majority of votes cast by Ackroo shareholders, excluding votes held by persons described in items (a) through (d) of Section 8.1(2) of Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions. Paystone does not require shareholder approval of the transaction.
Transaction timeline
Pursuant to the arrangement agreement and subject to satisfying all necessary conditions and the receipt of all required approvals, the parties anticipate completing the transaction in February, 2025. In connection with the completion of the transaction, the Ackroo shares will be delisted from the TSX-V, and following closing, Ackroo will make an application to cease to be a reporting issuer under Canadian securities laws.
Recommendation of the board of directors and fairness opinion
After consultation with its financial and legal advisers, and following the receipt of the unanimous recommendation by a special committee of Ackroo entirely comprising independent directors, the board of directors of Ackroo unanimously approved the entering into of the arrangement agreement (with interested directors abstaining). The Ackroo board recommends that Ackroo shareholders vote in favour of the transaction. Paradigm Capital Inc. provided a verbal fairness opinion to the Ackroo board, to be confirmed by a written opinion, to the effect that, as of the date of such opinion and subject to the assumptions, limitations and qualifications stated in such opinion, the consideration to be received by Ackroo shareholders (other than the deferring shareholders) pursuant to the transaction is fair, from a financial point of view, to such Ackroo shareholders.
Voting supporting agreements
In connection with signing of the arrangement agreement, certain directors, officers and shareholders of Ackroo have entered into voting support agreements with Paystone, agreeing to vote their Ackroo shares in favour of the transaction at the Ackroo meeting. An aggregate of 72,669,960 Ackroo shares, representing approximately 63.19 per cent of the issued and outstanding Ackroo shares, are subject to these voting support agreements.
Advisers and counsel
Paradigm Capital is acting as financial adviser to Ackroo and had provided a fairness opinion to the Ackroo board. Cassels Brock & Blackwell LLP is acting as legal counsel to Ackroo, and Miller Thomson LLP is acting as legal counsel to Paystone.
About Paystone Inc.
Paystone is a leading North American payment and software company redefining the way merchants engage their customers and grow their businesses. The company's suite of automated payment processing, customer loyalty programs, gift-card solutions and reputation marketing software is used at over 35,000 merchant locations across Canada and the United States, which collectively process over $10-billion a year in bank-card volume. The financial technology company employs over 150 employees and serves as the technology partner of choice for hundreds of partners across North America.
About Ackroo Inc.
As an industry consolidator, Ackroo acquires, integrates and manages gift-card, loyalty marketing, payment and point-of-sale solutions used by merchants of all sizes. Ackroo's self-serve, data-driven, cloud-based marketing platform helps merchants in store and on-line process and manage loyalty, gift-card and promotional transactions at the point of sale. Ackroo's acquisition of payment ISOs affords Ackroo the ability to resell payment-processing solutions to its growing merchant base through some of the world's largest payment technology and service providers. As a third revenue stream, Ackroo has acquired certain custom software products, including hybrid management and point-of-sale solutions that help manage and optimize the general operations for niche industries, including automotive dealers. All solutions are focused on helping to consolidate, simplify and improve the merchant marketing, payments and point-of sale ecosystem for the company's clients. Ackroo is headquartered in Hamilton, Ont., Canada.
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