TeraGo Inc. ("TeraGo" or the "Company") (TSX: TGO, www.terago.ca), today announced that it has entered into a definitive share purchase agreement under which TeraGo Networks Inc., a wholly-owned subsidiary of TeraGo, will acquire (the "Acquisition") all of the issued and outstanding shares of Mobilexchange Spectrum Inc. and its parent holding company Mobilexchange Spectrum Holdings Inc. (collectively "MSI") for aggregate cash consideration of $5,664,716 (the "Purchase Price"). The Acquisition is being funded through the net proceeds of TeraGo's bought deal equity offering which previously closed on June 18, 2018.
The Acquisition will provide TeraGo with six 24 GHz spectrum licences totalling 960 MHz (the "Spectrum Licences") in Canada's six largest cities covering approximately 3.1 billion MHz-Pop1. TeraGo has already been using the Spectrum Licences to provide wireless internet services to its business customers through subordinate licences issued to it under an existing lease with MSI. As referenced in TeraGo's final short-form prospectus dated June 11, 2018 (the "Final Prospectus") and filed on Sedar (www.sedar.com), the Company has since delivered its notice to exercise its purchase option to acquire the Spectrum Licences under the lease for an aggregate cash consideration equal to the Purchase Price. Following discussions and negotiations with MSI and its shareholders, the proposed Acquisition provides TeraGo with the Spectrum Licences in lieu of completing the purchase option. At closing, MSI is expected to have no cash or debt, and accordingly, there will be no post-closing adjustments to the Purchase Price. The shareholders of MSI have provided TeraGo with an indemnity to support various representations and warranties provided in connection with the Acquisition.
"With the acquisition of MSI and their spectrum assets, TeraGo will be the primary license holder of 24 and 38 GHz fixed wireless spectrum in Canada's major markets covering approximately 8.1 billion MHz-Pop1," said Tony Ciciretto, President and CEO of TeraGo. "Since 1999, TeraGo has invested in spectrum equipment and technology to provide a competitive alternative to the larger wireline incumbent carriers. With the introduction of 5G technology and the increased bandwidth and capabilities it provides, the value of our millimetre wave spectrum assets will be further enhanced, greatly improving our overall competitiveness."
Along with customary closing conditions, the Acquisition and transfer of the Spectrum Licenses to TeraGo is subject to Innovation, Science and Economic Development Canada ("ISED") approval. The Acquisition is expected to close following ISED approval.