Business Context and Reporting Period
This Form 8-K, dated December 27, 2019, reports that Leisure Acquisition Corp. (LACQ) entered into a definitive Merger Agreement with GTWY Holdings Limited (the "Company"), the parent of Gateway Casinos & Entertainment Limited. The transaction is a business combination intended to take LACQ private and list the combined entity on the New York Stock Exchange. The filing does not contain financial results for a specific reporting period but outlines the terms of the proposed merger.
Key Financial Metrics and Transaction Terms
- Transaction Value: The Company's issued and outstanding share capital is expected to have an aggregate value of approximately $222,917,162, subject to adjustments.
- Exchange Ratio: LACQ shareholders will receive one Company Share for each LACQ Share held. LACQ Warrants will be exchanged for Company Warrants.
- Reference Price: The conversion of Company capital is calculated based on a reference price of $10.00 per share.
- Forward Purchase: HG Vora Capital Management, LLC agreed to purchase 3,000,000 units (one share and one-half warrant) at $10.00 per unit.
- Share Forfeiture: LACQ initial stockholders agreed to forfeit 1,000,000 LACQ Shares for no consideration.
- Post-Closing Ownership: If no redemptions occur, LACQ stockholders will hold approximately 57% of the Company Shares, while existing Company shareholders will hold approximately 43%.
- Termination Fees: LACQ may owe a fee of $9,509,235 if it accepts a superior proposal. The Company may owe LACQ up to $5,000,000 (or legal expenses) if the Company terminates under specific conditions.
Material Changes and Operational Details
The primary material change is the entry into the Merger Agreement, which will result in LACQ becoming a wholly-owned subsidiary of the Company. Gateway Casinos & Entertainment Limited operates 25 gaming properties in Canada with over 8,200 employees, 13,915 slots, and 440 table games. The transaction includes a management transition where Marc J. Falcone (current LACQ director) is expected to become President and CEO, replacing Tony Santo. Mr. Falcone's compensation includes a base salary of $650,000 (potentially increasing to $800,000) and 400,000 restricted stock units.
Guidance, Outlook, and Risks
- Closing Timeline: The transaction is expected to close in the second quarter of 2020, subject to shareholder approvals and other conditions.
- Conditions to Closing: Includes approval by LACQ and Company shareholders, court approval in British Columbia, NYSE listing approval, and the availability of at least $15,000,000 (or transaction expenses) from LACQ's trust account.
- Net Tangible Assets: LACQ cannot consummate the transaction if it has less than $5,000,001 of net tangible assets remaining after closing.
- Risks: The filing includes standard forward-looking statement disclaimers. Key risks include failure to obtain shareholder approval, failure to meet closing conditions, and the possibility that the transaction does not close.
- Outlook: Gateway intends to continue its growth strategy, including developing proprietary brands and improving the customer experience.
Investor Verification Checklist
- Verify the final approval status of the transaction by LACQ and Company shareholders.
- Confirm the amount of cash remaining in LACQ's trust account to ensure it meets the $15,000,000 minimum requirement.
- Monitor the filing of the Form F-4 registration statement and proxy materials for detailed risk factors and financial data.
- Check for any material adverse effects on either party that could trigger termination rights.
- Review the final terms of Marc J. Falcone's employment agreement and the vesting schedule for the 400,000 restricted stock units.