- Purchase and sale agreement executed with simultaneous closing
with TIDI Products, LLC as buyer
- The transaction materially improves Covalon's balance sheet to
an estimated net cash position of approximately CDN$24 million or CDN$0.93 per share after repayment of all
outstanding debt
- The sale results in a net gain, prior to transaction expenses,
of approximately CDN$20 million or
CDN$0.77 per share on an after-tax
basis over what Covalon paid for the AquaGuard business
approximately 3 years ago
- AquaGuard's customers and distribution partners are expected to
benefit from TIDI's current extensive market reach, bringing
AquaGuard to more patients and more hospitals
- Covalon will now focus on accelerating the growth of its three
core patented platforms of infection prevention products, including
Collagen Dressings, Antimicrobial Silicone Adhesive Dressings and
Advanced Medical Coatings, in addition to other technologies
developed by Covalon's advanced medical laboratory
MISSISSAUGA, ON, July 29, 2021 /CNW/ - Covalon Technologies
Ltd. (the "Company" or "Covalon") (TSXV: COV) (OTCQX:
CVALF), an advanced medical technologies company, is pleased to
announce that it has today closed the sale of its AquaGuard product
line to TIDI Products, LLC ("TIDI"), an arm's length party,
for US$30 million (or approximately
CDN$38 million), subject
to adjustment for estimated cash, inventory and working capital
amounts at closing.
Brian Pedlar, Covalon's President
and Chief Executive Officer, said, "After carefully evaluating
numerous expressions of interest during our previously announced
strategic review process led by the Special Committee, the Covalon
Board of Directors decided that the transaction with TIDI was the
best option for Covalon to proceed with at this time. The
transaction results in a strong balance sheet with
significant cash and no debt, and allows us to focus on
accelerating the growth of our core patented medical platforms in
the United States and
internationally, including our Collagen Dressings, Antimicrobial
Silicone Adhesive Dressings and Advanced Medical Coatings
platforms."
Amir Boloor, Chair of Covalon's
Board of Directors and the Special Committee, said, "The Strategic
Review process validated how valuable Covalon's technologies are,
and how highly regarded they are by the medical industry. The fact
that we were able to divest a non-core asset at fair value for an
amount that is approximately equal to the market capitalization of
the entire Company speaks to the opportunity to unlock significant
further value in our core platforms. Retaining the valuable
patented intellectual property and medical platforms, as well as
its talented lab, positions Covalon extremely well going
forward."
Under the terms of a purchase agreement, Covalon sold all of its
interest in Covalon Technologies Holdings (USA), Ltd. and Covalon Technologies AG Ltd.
(the "Former Subsidiaries") to TIDI. The transaction
includes the sale of moisture barrier products sold under the
AquaGuard brand, certain trademarks and intellectual property,
related customer contracts, and the manufacturing assets to support
the AquaGuard business. AquaGuard's customers and distribution
partners are expected to benefit from TIDI's current extensive
market reach, bringing AquaGuard to more patients and more
hospitals. Immediately prior to closing, Covalon spun-off all of
its assets in the Former Subsidiaries other than its AquaGuard
product line of business to an existing subsidiary of Covalon,
which will carry on Covalon's ongoing business in the United States. The purchase price of
US$30 million includes US$2 million placed in escrow for indemnity
claims (which escrow amount will be released 50% in 12 months
following closing and the remaining 50% in 14 months following
closing, assuming no claims).
Covalon used net proceeds from the sale to fully satisfy its
indebtedness to its senior lender, HSBC Bank Canada
("HSBC"), and the credit facility with HSBC has
now been terminated. Covalon will explore putting in place a new
credit facility that reflects the Company's improved balance sheet
and financial position.
Covalon also extinguished US$7,552,300 of secured indebtedness owed to
Cenorin, LLC under a promissory note dated as of October 1, 2018, as amended, by making a cash
payment of US$4,000,000 to Cenorin
and issuing to Cenorin 200,000 warrants for the purchase of common
shares in the capital of Covalon (the "Warrants"). Each
Warrant entitles the holder to acquire a common share of Covalon at
a price of CDN$4.00 for a period of
five years. The issuance of the Warrants has been approved by the
TSX Venture Exchange. The Warrants and the common shares of Covalon
underlying them will be subject to a hold period of four months and
one day in accordance with applicable securities laws.
The transaction results in Covalon having a pro forma cash
position of approximately CDN$24 million or CDN$0.93 per share after repayment of all
outstanding debt.
The sale results in a net gain, prior to transaction expenses,
of approximately CDN$20 million or
CDN$0.77 per share on an after-tax
basis over what Covalon paid for the AquaGuard business
approximately 3 years ago.
Advisors
Stikeman Elliott LLP and Foley & Lardner LLP acted as legal
advisors, and Morrison Park Advisors acted as financial advisor, to
Covalon. Sidley Austin LLP acted as legal advisor to TIDI Products,
LLC.
Non-IFRS Financial Measures
This press release makes reference to certain non-IFRS
measures. These measures are not recognized or defined
measures under IFRS, do not have standardized meaning
prescribed by IFRS and are therefore unlikely to be comparable
to similar measures presented by other companies. Rather,
these measures are provided as additional financial
information to complement those IFRS measures by providing further
understanding of our results of operations from management's
perspective. Accordingly, these measures should not be considered
in isolation or as a substitute for analysis of our financial
information reported under IFRS. The non-IFRS financial measures,
adjustments, and reasons for adjustments should be carefully
evaluated as these measures have limitations as analytical tools
and should not be used in substitution for an analysis of the
Company's results under IFRS. We use non-IFRS measures to provide
investors with supplemental measures of our operating performance
and thus highlight trends in our core business that may not
otherwise be apparent when relying solely on IFRS measures. We
believe that securities analysts, investors and other interested
parties frequently use non-IFRS measures in the evaluation of
issuers. Our management also uses non-IFRS measures in order
to facilitate operating performance comparisons from
period to period, to prepare annual operating budgets and
forecasts and to determine components of management
compensation
About Covalon
Covalon Technologies Ltd. is a researcher, developer,
manufacturer, and marketer of patent-protected medical products
that improve patient outcomes and save lives in the areas of
advanced wound care, infection management and surgical procedures.
Covalon leverages its patented medical technology platforms and
expertise in two ways: (i) by developing products that are sold
under Covalon's name; and (ii) by developing and commercializing
medical products for other medical companies under development and
license contracts. The Company is listed on the TSX Venture
Exchange, having the symbol COV and trades on the OTQX Market under
the symbol CVALF. To learn more about Covalon, visit our
website at www.covalon.com
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
This news release contains forward-looking statements which
reflect the Company's current expectations regarding future events.
The forward-looking statements are often, but not always,
identified by the use of words such as "seek", "anticipate", "plan,
"estimate", "expect", "intend" and statements that an event or
result "may", "will", "should", "could" or "might" occur or be
achieved and other similar expressions. These forward-looking
statements involve risk and uncertainties, including the difficulty
in predicting product approvals, acceptance of and demands for new
products, the impact of the products and pricing strategies of
competitors, delays in developing and launching new products, the
regulatory environment, fluctuations in operating results, the
impact and timing of COVID-19 on operating activities and market
conditions, and other risks, any of which could cause
results, performance, or achievements to differ materially from the
results discussed or implied in the forward-looking statements.
Many risks are inherent in the industry; others are more specific
to the Company. Investors should consult the Company's ongoing
quarterly filings for additional information on risks and
uncertainties relating to these forward-looking statements.
Investors should not place undue reliance on any forward-looking
statements. The Company assumes no obligation to update or alter
any forward-looking statements whether as a result of new
information, further events or otherwise.
SOURCE Covalon Technologies Ltd.