Plurilock Security files circular for Quantum eMotion takeover vote
Holders would receive C$0.084 cash and 0.0763 QeM shares per share, with former Plurilock owners projected to hold 4.03 per cent after closing.
Julian Okafor
A C$33.8 million cybersecurity takeover has moved toward a shareholder vote, with most of its announced value payable in stock. Plurilock Security Inc. CVEPLUR OTCMKTSPLCKF, a Vancouver cybersecurity provider serving government and enterprise customers, said on Wednesday it filed meeting materials for a Nov. 18 vote on the proposed takeover.
The buyer, Quantum eMotion Corp. CVEQNC NYSEAMERICANQNC FRA34Q0, is a Montreal developer of quantum-secure cybersecurity technologies. Under the Sept. 28 agreement, each Plurilock share would receive C$0.084 cash and 0.0763 QeM shares.
QeM's Sept. 30 material change report projects that existing QeM shareholders would own 95.97 per cent of the outstanding shares after closing. Former Plurilock holders would own 4.03 per cent, on a basic basis and subject to security exercises and customary adjustments. The companies expect closing in late November, subject to approvals and other conditions.
Plurilock closed at C$0.20 on the TSX Venture Exchange at 4 p.m. EDT on Tuesday, according to its CVEPLUR quote page. That close preceded Wednesday's circular announcement.
The Fixed Ratio Changes The Offer's Value
At QeM's C$1.80 Tuesday close, recorded at 4 p.m. EDT on its CVEQNC page, the announced formula implied about C$0.22 for each Plurilock share. That calculation combines the fixed cash payment with the value of the stock component at that closing price.
The Oct. 21 release repeats an implied consideration value of C$0.28 per Plurilock share. The agreement fixes the exchange ratio, so the value received at completion will depend on QeM's share price. The companies described the announced consideration as approximately 30 per cent cash and 70 per cent stock in their Sept. 28 release.
The Sept. 30 report says outstanding Plurilock options would be cancelled for cash and QeM shares in the consideration's proportions. Their value would equal any excess of C$0.28 over the applicable exercise price. Restricted share units would vest immediately before the arrangement takes effect and settle for the consideration. Warrants and convertible debentures would entitle holders, upon exercise or conversion, to the consideration instead of Plurilock shares.
The board's stated premium of about 100 per cent uses Plurilock's volume-weighted average price over the 20 trading days through Sept. 25. That historical benchmark differs from the price at which the target traded before Wednesday's circular announcement.
The filing follows the September acquisition agreement without changing the stated cash payment or exchange ratio. The Oct. 21 announcement adds a dated shareholder decision and a proxy deadline to the proposed combination.
Read more: Quantum eMotion agrees to buy Plurilock for C$33.8M
Minority Shareholders Have A Separate Vote
The Oct. 21 release identifies Oct. 1 as the shareholder record date for the meeting. Approval requires at least two-thirds of votes cast in person or by proxy, alongside a simple majority that excludes specified insiders' shares.
Completion also requires Supreme Court of British Columbia approval and customary regulatory, stock exchange and third-party approvals. The board recommends approval, excluding directors required to abstain under applicable law.
Plurilock says it filed the meeting materials with applicable securities regulators and mailed them to shareholders. The special-meeting circular itself was not read: the release's circular link led to a shareholder-meetings page displaying June annual-meeting documents.
The Agreement Includes A Secured Bridge Loan
The Sept. 30 report says QeM agreed to lend Plurilock up to C$2 million for collaborative initiatives and Plurilock's transaction and operating expenses before closing. The financing is secured against Plurilock's personal property in Canada and carries annual interest of 8.5 per cent.
The report sets maturity at the earliest of Sept. 28, 2028, completion of the arrangement, or termination following a superior proposal. Its terms describe an agreed lending ceiling, rather than an amount already advanced.
The Sept. 30 report also describes a reciprocal C$1.5 million termination fee and expense reimbursement of up to C$500,000. Those amounts become payable in specified termination circumstances, with the payer depending on the circumstances.
"Following completion of the Arrangement, Plurilock intends to apply to delist the Plurilock Shares from the TSXV and to cease to be a reporting issuer under applicable Canadian securities laws," QeM said in its Sept. 30 report.
The proxy deadline is 10 a.m. PST on Nov. 16, according to the companies' Oct. 21 release. Shareholders are scheduled to consider the arrangement in person in Vancouver at 10 a.m. PST on Nov. 18, ahead of the companies' conditional late-November closing target.
