Magnolia Colombia Update to Proposed Reverse Takeover Transaction
TORONTO, Feb. 26, 2020 (GLOBE NEWSWIRE) -- Magnolia Colombia Limited (“Magnolia” or the “Company”) (TSXV: MCO) wishes to provide additional information concerning the background to its proposed
transaction with Gamesquare Inc. (the “Target”) as outlined in the press release dated February 10, 2020. Magnolia and the Target have entered into a definitive amalgamation
agreement dated February 26, 2020 (the “Agreement”) pursuant to which Magnolia will acquire of all of the issued and outstanding securities of the Target (“Target
Shares”) in exchange for securities of the Company (the “Transaction”). The Transaction will be carried out by way of a three-cornered amalgamation. As a result of the
Transaction, Magnolia will continue on with the business of the Target.
The Target is a private company incorporated under the Business Corporations Act (Ontario) that has entered into a binding agreement to acquire Code Red Esports Ltd. (“Code Red”). Code Red is a private company incorporated in England and Wales that operates an esports agency representing on screen talent, influencers and players in Europe and throughout the world, and has worked with some of the biggest brands in gaming and technology.
Gamesquare is an esports company seeking to acquire additional assets and entities serving the esports market and more broadly in sports and entertainment. Pursuant to the unaudited financial statements of Code Red for the 11 months ended October 31, 2019, Code Red’s working capital was $138,427 and it held current assets of approximately $521,000. Code Red’s current liabilities were $223,967. For the period, Code Red generated $2.7 million of gross revenue, up 40% over the prior fiscal year whilst realizing positive net income of $41,400. The agency business is benefitting from positive industry trends as a result of esports audience growth and a significant increase in attention and investment from major global brands. Industry experts expect secular growth to continue in the foreseeable future.
The Transaction is structured as a three-cornered amalgamation, pursuant to which 2631443 Ontario Inc. (“Magnolia Subco”), a wholly-owned subsidiary of the Company, and the Target will amalgamate (the “Amalgamation”) to form a newly amalgamated company (“Amalco”). Prior to the completion of the Amalgamation, the existing common shares in the capital of the Company (the “Magnolia Shares”) will be consolidated on a 5.8 to 1 basis resulting in 9,996,050 Magnolia Shares outstanding post consolidation. Pursuant to the Amalgamation, former holders of common shares of the Target (the “Target Shares”) will receive one Magnolia Share (the “Magnolia Shares”) for each Target Share held and Amalco will become a wholly-owned subsidiary of the Company.