All amounts expressed in United
States dollars (US$) unless otherwise noted
TORONTO, May 3, 2024
/CNW/ - FG Acquisition Corp. (TSX: FGAA.U, FGAA.WT.U)
("FGAC" or the "Corporation"), a special purpose
acquisition company, and Strong Global Entertainment, Inc. (NYSE:
SGE) ("Strong Global") are pleased to announce the proposed
acquisition (the "MDI Acquisition") of Strong/MDI Screen
Systems, Inc. ("MDI") by FGAC, pursuant to an acquisition
agreement (the "Acquisition Agreement") dated May 3, 2024 between FGAC, Strong Global, MDI,
FGAC Investors LLC and CG Investments VII Inc (together with FGAC
Investors LLC, the "Sponsors"). The MDI Acquisition,
together with the launch of FGAC's new investment platform, will
constitute FGAC's qualifying acquisition.
"We are excited to present this qualifying acquisition to our
shareholders and believe that MDI provides a compelling investment
opportunity to acquire a leading global manufacturing and
distribution business that will anchor our unique investment
platform" said Larry G. Swets, Jr.,
Chief Executive Officer of FGAC.
In connection with the closing of the MDI Acquisition
("Closing"), the Corporation intends to rename itself
Saltire Holdings, Ltd. ("Saltire"). Saltire intends to build
and grow a portfolio of profitable and cash-flow generating private
equity investments that would not otherwise be available to public
market investors through its proprietary origination process, to
maximize its intrinsic value on a per-share basis over the
long-term by seeking to achieve superior investment performance
commensurate with reasonable risk.
Mark Roberson, Chief Executive
Officer of Strong Global, commented, "MDI is a global leader in
cinema and entertainment, and being part of Saltire will provide
greater access to the Canadian financial markets as the management
team executes on its growth plans. For Strong Global, this
represents an opportunity to unlock the value of our investment in
MDI and we look forward to participating in the future growth and
success of Saltire."
"We are delighted to be partnering with the teams at MDI and
FGAC for the launch of Saltire Holdings. This platform will aim to
benefit both business owners and investors seeking a differentiated
long-term platform", commented Andrew
Clark, proposed Chief Executive Officer of Saltire Partners,
Inc.
Following Closing, the Corporation will be led by Larry G. Swets, Jr., as Executive Chairman,
Andrew Clark as Chief Executive
Officer, Hassan Baqar as Chief
Financial Officer and Robert Clark
as Chief Investment Officer, whose services will be provided
pursuant to the Management Agreement. The Corporation's board of
directors will consist of Larry G.
Swets, Kyle Cerminara,
Andrew Clark, Shaun Alie, Robert
Clark, Andrew B. McIntyre and
Dr. Richard E. Govignon.
FGAC's currently issued and outstanding Class A restricted
voting shares (the "Class A Restricted Voting Shares") and
share purchase warrants (the "Warrants") are listed on the
Toronto Stock Exchange (the "TSX"). In addition, the
Corporation has 2,875,000 Class B shares (the "Class B
Shares") issued and outstanding. It is a condition of Closing
that the Common Shares (as defined below) be listed and the
Warrants continue to be listed on the TSX. The Corporation has
reserved the symbols "SLT" and "SLT.WT" for the Common Shares and
Warrants, respectively.
Saltire: Long-Term Capital Partner
Saltire's investment objectives will be to provide shareholders
with long-term total returns through capital appreciation by
investing in securities of portfolio companies that will be
actively managed and that the Manager believes are under-valued.
The Manager, in evaluating potential investments, will focus on
some of the following
- management strength, including experience, alignment and bench
strength;
- top- and bottom-line growth opportunities, both organic and
inorganic, including the degree of visibility into this growth and
the opportunity for re-investment of capital in support of growth
opportunities;
- operational execution and the sustainability of the business
model, including barriers to entry, competitive position and
durability of cash flows;
- profitability, including margin trajectory, operating leverage,
free cash flow conversion, and per share compounding
expectations;
- capital intensity, including returns on capital, capital
expenditure requirements and balance sheet capacity; and
- corporate health and risk, including risk assessment and
mitigation strategies.
Concurrently with Closing, Saltire will enter into a management
agreement (the "Management Agreement") with Saltire
Partners, Inc. (the "Manager"), which will act as the
manager and promoter of Saltire and will provide management
services to Saltire. Saltire's unique structure will also include a
20% ownership position in the Manager, a stand-alone investment
manager that will seek to develop, through organic growth and
selected strategic acquisitions, a strong and differentiated asset
management platform. The Manager will also have executive
responsibilities at Saltire, including investment and capital
allocation decisions.
Saltire will seek to hold investments until it believes market
valuations materially exceed inherent underlying valuation of the
business, using traditional valuation metrics appropriate for each
industry. In so doing, Saltire intends to be a permanent capital
partner for the companies it invests in. Accordingly, Saltire's
principal form of return will be through aggregating and
compounding cash flows over the long-term
MDI Investment Highlights
MDI is a leading manufacturer and distributor of premium large
format projection screens to the cinema industry in North America and around the globe. MDI has
contractual relationships to supply screens to IMAX, AMC, Cinemark
and many of the other major cinema operators worldwide. It also
manufactures innovative screen support structures custom-built to
adapt to virtually any venue requirement, with a unique
self-standing modular construction that allows for easy assembly
and adjustable size.
MDI also sells to non-cinema customers, such as theme parks,
immersive attractions, and other entertainment venues as well as
for use in training simulators. Some of these other customer
verticals include the largest theme park operators in the world,
immersive venues such as the Illuminarium and the immersive Van
Gogh exhibits. MDI is also a subcontractor on several large
government projects providing its projection screen technology for
use in military training simulators.
MDI's management believes that MDI's screens are among the
highest quality in the industry in terms of performance including
the amount of gain (or brightness of the image reflected from the
screen's surface), viewing angles, and other characteristics
important to the viewing experience. The high-quality is driven by
the innovative manufacturing process, focus on quality control and
MDI's proprietary coatings. MDI's management believes that it is
the only major screen manufacturer that develops and produces its
own proprietary coatings, which are critical to the overall quality
and continued innovation of MDI's screens.
Summary of the MDI Acquisition
On May 3, 2024 FGAC and the
Sponsors entered into the Acquisition Agreement with Strong Global
and MDI, pursuant to which FGAC intends to acquire, directly or
indirectly, all of the outstanding shares in the capital of MDI. As
a result of the MDI Acquisition, MDI will become a wholly-owned
subsidiary of FGAC. The MDI Acquisition will constitute FGAC's
Qualifying Acquisition, and values MDI at a pre-money valuation of
$30 million (as adjusted pursuant to
the Acquisition Agreement, the "MDI Equity Value").
On Closing, FGAC will satisfy the Purchase Price (as defined in
the Acquisition Agreement) with: (i) cash, in an amount equal to
25% of the net proceeds of a concurrent private placement, if any
(the "Cash Consideration"), (ii) the issuance to Strong
Global of preferred shares ("Preferred Shares") with an
initial preferred share redemption amount of $9,000,000, and (iii) the issuance to Strong
Global of that number of Common Shares equal to (a) the MDI Equity
Value minus * the Cash Consideration and (y) the Preferred Shares,
divided by (b) $10.00.
Upon completion of the MDI Acquisition, (a) the Class A
Restricted Voting Shares not required to be redeemed will convert
into Common Shares on a one for one basis, (b) the Class B Shares
will be exchanged for Common Shares, and (c) the Common Shares and
Warrants will trade separately on the TSX, subject to meeting the
TSX listing requirements. Listing of the securities issuable
pursuant to the MDI Acquisition is subject to the TSX listing
requirements.
The Closing is conditional on, among other things, there being
no legal impediments to Closing and all required authorizations,
consents and approvals necessary to effect Closing having occurred,
or being filed or obtained, as applicable, the Common Shares being
conditionally listed for trading on a stock exchange, the approval
of the Qualifying Acquisition by the holders of Class A Restricted
Voting Shares at a meeting of shareholders to be held in connection
with the Qualifying Acquisition, receipts having been obtained for
both the preliminary and final prospectus and other usual and
customary conditions for transactions of this nature. The
obligations of Strong Global at Closing are also conditional on,
among other usual and customary conditions for transactions of this
nature, (a) the truth and accuracy of FGAC's representations and
warranties, (b) the compliance and/or performance by FGAC of its
covenants under the Acquisition Agreement, and (c) there having
been no material adverse change with respect to FGAC. The Closing
is also conditional on, among other usual and customary conditions
for transactions of this nature, the following conditions of
Closing in favour of FGAC: (a) the truth and accuracy of Strong
Global and MDI's representations and warranties, (b) the compliance
and/or performance by Strong Global and MDI of their covenants
under the Acquisition Agreement, (c) the completion of all required
third party authorizations, consents and approvals, and (d) there
having been no material adverse change with respect to MDI or its
business and there being no events, facts or circumstances that
shall have occurred which would result or which could reasonably be
expected to result, individually or in the aggregate, in a material
adverse change with respect to MDI or its business.
The expenses relating to the completion of the MDI Acquisition
as well as funds required for the ongoing operations of the
Corporation will be funded from a combination of (i) cash
available to FGAC from the sale of the Sponsors' Warrants and the
OTM Warrants to the Sponsors, its IPO and the closing of the
over-allotment option granted in connection with the IPO, plus
(ii) accrued interest on invested cash less taxes on interest
earned, less (iii) any amounts used to settle redemptions of
Class A Restricted Voting Shares, if any (currently held in
escrow), plus (iv) cash on hand (including a portion of the
cash received pursuant to a concurrent private placement, if
any).
It is anticipated that, upon completion of the MDI Acquisition,
on a non-diluted basis and assuming completion of a $10 million private placement and the issuance of
338,560 Common Shares to CG Investments VII Inc. as consideration
for its deferred underwriting fee:
- the shareholders of Class A Restricted Voting Shares
(immediately before the Closing), which consist of FGAC's current
public shareholders, will hold an ownership interest of
approximately 1.62% in Saltire;
- the Sponsors will hold an aggregate ownership interest of
51.42% in Saltire;
- Strong Global will hold an ownership interest of approximately
29.6% in Saltire;
- there will be 10,100,000 Warrants to acquire Common Shares
outstanding; and
- there will be 1,500,000 OTM Warrants to acquire Common Shares
outstanding.
Timing and Additional Information
Pursuant to applicable rules, the Corporation will file with the
Canadian securities regulatory authorities in each of the provinces
and territories of Canada (other
than Quebec) a preliminary
non-offering prospectus containing disclosure regarding MDI and the
Qualifying Acquisition. Once filed, the preliminary prospectus may
be viewed by shareholders and interested parties under FGAC's
profile on the System for Electronic Document Analysis and
Retrieval Plus ("SEDAR+") at www.sedarplus.ca.
In connection with the proposed Qualifying Acquisition, the
Corporation will call a special meeting of the shareholders of the
Corporation (the "Meeting"). At the Meeting, shareholders
entitled to vote will be asked to consider and approve, in addition
to the Qualifying Acquisition, an amendment of the articles of FGAC
to: (i) provide that the Corporation's outstanding Class B Shares
automatically convert into Common Shares on Closing rather than
proportionate voting shares; (ii) create a class of preferred
shares, issuable in series; and (iii) remove the Class A Restricted
Voting Shares, Class B Shares and proportionate voting shares. As
the MDI Acquisition constitutes a "related party transaction" under
applicable securities laws, the MDI Acquisition and the approval
thereof will be subject to the provisions of Multilateral
Instrument 61-101 – Protection of Minority Security Holders in
Special Transactions and a formal valuation of MDI will be
provided to FGAC shareholders.
Goodmans LLP is acting as legal counsel to the Corporation and
Canaccord Genuity Corp. is acting as financial advisor. Gowling WLG
is acting as legal counsel to Strong Global and MDI.
Further details are set out in an investor presentation (the
"Investor Presentation") and the Acquisition Agreement,
which will be filed under FGAC's profile on SEDAR+ at
www.sedarplus.ca.
About FGAC
FG Acquisition Corp. is a special purpose acquisition company
incorporated under the laws of British
Columbia for the purpose of effecting, directly or
indirectly, an acquisition of one or more businesses or assets, by
way of a merger, amalgamation, arrangement, share exchange, asset
acquisition, share purchase, reorganization, or any other similar
business combination involving the Corporation. Kyle Cerminara serves as Chairman, Larry Swets, Jr. serves as Director and Chief
Executive Officer, and Hassan R.
Baqar serves as Director and Chief Financial Officer of the
Corporation. In addition, Robert I.
Kauffman, a former co-founder and Principal of Fortress
Investment Group, serves as a Senior Advisor to the Corporation.
The Corporation received $115 million
of proceeds from its initial public offering which was completed on
April 5, 2022 and the closing of the
over-allotment option granted in connection with such initial
public offering which was completed on April
20, 2022. The gross proceeds of the offering were placed in
an escrow account with TSX Trust Company immediately thereafter and
will be released upon consummation of the Qualifying Acquisition in
accordance with the terms and conditions of the escrow
agreement.
About MDI
MDI is a leading global manufacturer and distributor of premium
large format projection screens and coatings. MDI supplies cinema
screens to IMAX, AMC, Cinemark and many of the other major cinema
operators worldwide. MDI also manufactures innovative screen
support structures custom built to adapt to virtually any venue
requirement. MDI also manufactures specially designed screens,
haptic flooring and other solutions for theme parks, immersive
applications such as interactive dark rides, 3D/4D theme park
rides, flying theaters and motion simulators. MDI's manufacturing
facility is located in Joliette, Quebec,
Canada.
About Saltire
Following Closing, Saltire will be a long-term capital partner
that intends to invest in equity, debt and/or hybrid securities. It
is intended that investments made by Saltire will consist of
meaningful and influential stakes in carefully selected private
companies that the Manager believes are under-valued businesses
with high barriers to entry, predictable revenue streams, cash
flows and defensive characteristics, with a view to significantly
improve the fundamental value over the long-term. Although Saltire
intends to primarily invest in private companies, Saltire may, in
certain circumstances if the opportunity arises, also explore
potential investments in public companies to the extent it is able
to identify opportunities for take-private transactions that
otherwise fall within Saltire's investment strategy. This
opportunity will provide retail investors access to private and
control-level investments typically reserved for larger players,
while maintaining liquidity, as well as an ownership interest in
the Manager.
Forward-Looking Statements
Certain statements in this news release are prospective in
nature that constitute forward-looking information and/or
forward-looking statements within the meaning of applicable
securities laws (collectively, "forward-looking
statements"). Forward-looking statements include, but are not
limited to, statements concerning the completion and proposed terms
of, and matters relating to, the MDI Acquisition, the Qualifying
Acquisition, the level of share redemptions, the listing of common
shares and warrants on the TSX, the expected impact of the MDI
Acquisition on the business of MDI, the expected operations,
financial results and condition of the Corporation following the
MDI Acquisition, and MDI's and Saltire's business plans, strategies
and growth prospects, opportunities for their respective investors,
and use of proceeds, as well as other statements with respect to
management's beliefs, plans, estimates and intentions, and similar
statements concerning anticipated future events, results, outlook,
circumstances, performance or expectations that are not historical
facts.
Forward-looking statements generally, but not always, can be
identified by the use of forward-looking terminology such as
"outlook", "objective", "may", "could", "would", "will", "expect",
"intend", "estimate", "forecasts", "project", "seek", "anticipate",
"believes", "should", "plans" or "continue", or similar expressions
suggesting future outcomes or events and the negative of any of
these terms.
Forward-looking statements reflect management's current beliefs,
expectations and assumptions and are based on information currently
available to management. With respect to the forward-looking
statements included in this news release, the Corporation has made
certain assumptions with respect to, among other things, approval
of various matters by the shareholders of the Corporation, the
number of Class A Restricted Voting Shares that will be subject to
redemption in connection with the MDI Acquisition, the exercise of
the Warrant Put Rights, the anticipated receipt of any required
regulatory approvals and consents (including the approval of the
TSX of the MDI Acquisition and the approval of the TSX to list the
Common Shares and the Warrants), the expectation that no event,
change or other circumstance will occur that could give rise to the
termination of the Acquisition Agreement or the proposed Private
Placement, the expenses and timing of Closing, that the Corporation
is capable of meeting and will meet its future objectives and
strategies, that the Corporation's future projects and plans are
achievable and will proceed as anticipated, the Corporation's
competitive position in its industry, the Corporation's ability to
successfully predict and respond to client preferences and demand,
availability of favourable regulations and government incentives
affecting the industry and markets in which the Corporation
operates, that the Manager will be able to identify suitable
investment opportunities in Portfolio Companies and that the
Corporation will be able to complete investments in such Portfolio
Companies, competition, including from established and future
competitors, the Manager's ability to attract and retain management
and other employees who possess specialized knowledge and technical
skills, and general economic and market growth rates, currency
exchange and interest rates and competitive intensity.
Readers are cautioned not to place undue reliance on
forward-looking statements, as there can be no assurance that the
future circumstances, outcomes or results anticipated or implied by
such forward-looking statements will occur or that plans,
intentions or expectations upon which the forward-looking
statements are based will occur. By their nature, forward-looking
statements involve known and unknown risks and uncertainties and
other factors that could cause actual results to differ materially
from those contemplated by such statements. Factors that could
cause such differences include, but are not limited to: inability
to predict future results of operations and other operating
metrics, which fluctuate from quarter to quarter, the impact of
fluctuations in foreign currency exchange rates on earnings, the
Corporation's failure to outperform its competitors and keep pace
with industry and technological changes in an evolving and
competitive market, failure to attract or retain clients or
generate growth and revenue for the Corporation, the impact on the
Corporation's growth and/or tax profile of applicable tax laws,
damages or penalties imposed as a result of civil litigation or
regulatory enforcement actions, the business of the Corporation
being disrupted as a result of operational risks or otherwise,
dependence on third party service providers, suppliers and other
third-party relationships, non-performance or early termination of
contracts, alleged infringement of the intellectual
property rights of third parties, the Manager being unable to
attract and retain skilled personnel and qualified management,
changes in business, economic or political conditions impacting the
Corporation's business and reputation, the Manager not being able
to identify suitable investment opportunities in Portfolio
Companies or the Corporation not being able to complete investments
in such Portfolio Companies, the Corporation being unable to raise
additional funds to meet its capital requirements, the Corporation
not being able to continue as a going concern, Saltire failing to
obtain or maintain adequate insurance coverage, potential conflicts
of interest arising with the Sponsors in determining whether the
MDI Acquisition is appropriate, failure to satisfy the conditions
precedent and required approvals in connection with the MDI
Acquisition, termination of the MDI Acquisition, delays or
amendments to the implementation of the MDI Acquisition, costs
relating to the MDI Acquisition having to be paid even if the MDI
Acquisition is not completed, losses arising from any
misrepresentations in the representations, warranties and covenants
of MDI or Strong Global pursuant to the Acquisition Agreement,
which terminate on Closing, subsequent to the completion of the MDI
Acquisition, the Corporation having to take write-downs or
write-offs, restructuring or other charges, the TSX not approving
the MDI Acquisition and the Corporation's securities for listing,
and the Corporation's ability to comply with continued listing
standards, the MDI Acquisition's benefits not meeting the
expectations of investors or securities analysts, the impact of
FGAC shareholders redeeming their shares for cash, there being no
market for the Corporation's securities, fluctuations in the market
price of the Common Shares, sales of Common Shares by significant
shareholders, increases in the number of shares eligible for future
resale in the public market and dilution as a result of Warrants,
OTM Warrants, or other convertible or exchangeable securities
becoming exercisable for Common Shares, the Warrants never being
in-the-money, FGAC being unable to continue as a going concern and
consummate a qualifying acquisition, the Corporation incurring
significant expenses and devoting significant resources and
management time as a result of being a public company, the Manager
and the Corporation's executive officers having limited experience
in managing a public company, the Corporation being unable to
implement and maintain effective internal controls over financial
reporting, securities or industry analysts not publishing research,
or publishing inaccurate or unfavourable research about the
Corporation, and the Corporation's management having broad
discretion in the use of FGAC's escrowed funds and the net proceeds
from a private placement, if completed.
All forward-looking statements included in and incorporated into
this news release are qualified by these cautionary statements.
Unless otherwise indicated, the forward-looking statements
contained herein are made as of the date of this news release, and
except as required by applicable law, the Corporation does not
undertake any obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
SOURCE FG Acquisition Corp.