The transaction would also be subject to approval of the shareholders of both Jones Soda and Reed's.
Under the binding provisions of the LOI, Reed's and Jones Soda have until April 5, 2010 to negotiate a definitive agreement on an exclusive basis. If Jones Soda receives an unsolicited acquisition, financing or other strategic transaction proposal that the board of directors of Jones Soda determines is superior to the proposed merger transaction with Reed's, then Jones Soda may terminate the LoI and reimburse Reed's for its third party out-of-pocket expenses (not to exceed $75,000).
Jones Soda also said that Joth Ricci will be stepping down as CEO effective April 2, 2010 in order to pursue other business opportunities.
The proposed merger would also provide the two companies with the opportunity to realize the potential benefits of increased size and scale, as well as cost efficiencies in several aspects of the combined business, including administration, operations, and customer interface.
The strength of the Reed's portfolio in the direct selling channel combined with Jones Soda's strong national distributor structure allows for future growth opportunities for each company's brands across these channels.
The non-binding provisions of the LOI contemplate a merger transaction in which Reed's would acquire Jones Soda for a combination of cash and Reed's common stock. The shareholders of Jones Soda would receive an aggregate of 4.5 million shares of Reed's common stock and cash of $0.10 per share of Jones Soda common stock.
Jones Soda has added that since the transaction terms of the LoI are non-binding, they are subject to the negotiation, execution and delivery of a definitive agreement approved by the respective boards of directors of each company.
Accordingly, the proposed terms of the transaction are subject to change, and there can be no assurance that Reed's and Jones Soda will enter into a definitive agreement on the terms outlined above, if at all, or that any transaction between the parties will ultimately be consummated. The companies do not intend to disclose developments with respect to negotiation of the definitive agreement until their respective boards of directors deem it appropriate.
Chris Reed, founder, chairman and CEO of Reed's, said: “We have watched Jones for years and have been impressed with its innovative marketing programs, strong brand recognition, and loyal customer following. I am confident that our portfolio of brands will benefit from Jones Soda's marketing savvy, as well as its organization's deep mainstream distribution relationships.”
How far this LoI will help both the companies?
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