US: XStream looks to fund acquisitions
XStream Beverage Group has completed a US$3m financing to push its acquisition strategy forward. The financing, with New York-based Laurus Master Funds, was facilitated through XStream's investment banking relationship with H.C. Wainwright & Co.
The capital will be used primarily to fund the company's ongoing, aggressive acquisition program. The company has completed and successfully integrated four acquisitions of distributors and two branded products.
"This financing arrangement with Laurus Funds is our first institutional investment," said XStream CEO Jerry Pearring in a statement. "It validates our short and long-term growth strategies which call for the acquisition of small to medium-sized distributors in key markets around the nation while concurrently introducing our own proprietary products through those distribution channels."
The financing consists of a $3m Senior Secured Convertible Note that bears interest at the rate of prime plus 2% and has a term of three years. Initially, $2.45m of the proceeds of the Note will be held in a restricted account controlled by Laurus Funds for the purpose of the company consummating an acquisition (which must be approved by Laurus) or until all or a portion of the outstanding principal amount of the Note is converted into shares of the company's common stock.
The Note is convertible into shares of the company's common stock at a fixed price of $0.23 per share for the first $50,000 with the remaining $2.95m convertible at a fixed price of $0.26 per share, a premium to the 22-day average closing share price as of 14 May 2004.
In connection with the financing, Laurus Funds was also issued a Warrant to purchase up to 4.5m shares of the company's common stock. The warrants are exercisable as follows: 1.5m shares at $0.32 per share; 1.5m shares at $0.39 per share and the balance at $0.45 per share.
John Clarke, president of H.C. Wainwright & Co, said: "We are quite impressed with XStream's tactical approach to the beverage industry. Their plans are well thought-out and innovative yet very pragmatic."
XStream recently acquired Massachusetts-based Ayer Beverage. The company also owns and operates Beverage Network of South Florida. XStream also recently acquired the Maui Juice Company and the Squeeze soda brand.
Going forward, XStream plans to continue acquiring small- to medium-sized beverage distributors, developing brands under its own label or through acquisition and leveraging those brands through its current and future distribution channels.
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