CALGARY, Alberta, July 12, 2017 (GLOBE NEWSWIRE) — Groundstar Resources Limited (TSX-V:GSA) (“Groundstar” or the “Company”) is pleased to announce that it has signed a letter of intent (the “LOI”) to acquire certain oil and gas assets located in Rainbow Lake and Farrell, Alberta (the “Assets”) from a private Alberta company (“PrivateCo”). The proposed transaction is an arm’s length transaction and constitutes a “reverse take-over” of Groundstar under Policy 5.2 – Changes of Business and Reverse Takeovers of the TSX Venture Exchange Inc. (the “Exchange”).
PrivateCo is a privately-held junior oil and gas company with operations in Alberta and Saskatchewan. It focuses on the acquisition, development and exploitation of existing oil and gas assets through re-drilling and re-entry opportunities.
The purchase price for the Assets is $3,070,092, which Groundstar intends to satisfy by issuing to PrivateCo 153,504,596 common shares at a deemed price of $0.02 per common share. The LOI also contemplates a non-brokered private placement of up to 25,000,000 common shares of Groundstar at a price of $0.02 per common share for gross proceeds of up to $500,000. Groundstar currently has 44,626,149 common shares outstanding. Groundstar will be making an application to the Exchange for an exemption from the requirement to issue shares at a price of no less than $0.05 in connection with this financing.
The LOI further contemplates that all of the directors of Groundstar except for Stephen Hughes would resign upon the closing of the transaction and be replaced by nominees of PrivateCo. In addition, the President and Chief Executive Officer of PrivateCo would become the President and Chief Executive Officer of Groundstar and Chairman of the Board of Directors. Nominees of PrivateCo would also become the Chief Operating Officer and Chief Financial Officer and Stephen Hughes would become Corporate Secretary. All of the current members of the Groundstar management team would resign upon the completion of the transaction.
Groundstar and PrivateCo expect to close the proposed transaction on or about September 29, 2017. Closing is subject to certain conditions, including but not limited to, Exchange acceptance and the approval of the shareholders of Groundstar and PrivateCo.
Stock Exchange Matters
Groundstar will issue, in due course, a comprehensive press release in accordance with the requirements of Policy 5.2 – Changes of Business and Reverse Takeovers of the Exchange.
Completion of the proposed transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable, disinterested shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the proposed transaction will be completed as proposed or at all. Investors are cautioned that, except as disclosed in the management information circular to be prepared in connection with the proposed transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the common shares of Groundstar should be considered highly speculative.