L-1'S Offer Determined to be Clearly Superior to BIO-key's offer and in
Best Interests of ComnetiX's Shareholders
OAKVILLE, ON, Jan. 26 /CNW/ - ComnetiX Inc. (TSX: CXI) announced today that its Board of Directors unanimously recommends that ComnetiX shareholders:
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Reject the unsolicited take-over bid for the common shares of ComnetiX
made by BIO-key International, Inc. ("Bio-key")
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Vote in favour of the plan of arrangement between ComnetiX and L-1
Identity Solutions, Inc. at the February 8, 2007 meeting of ComnetiX
shareholders and warrantholders, under which L-1 will pay ComnetiX
shareholders US$1.12 per share in cash for all of the issued and
outstanding shares of ComnetiX.
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The Board's unanimous recommendation to REJECT the BIO-key Bid and the
reasons for the Board's recommendation will be set out in a Directors'
Circular which will be mailed to the shareholders of ComnetiX and available on
SEDAR, at www.sedar.com, no later than January 31, 2007.
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Shareholders of ComnetiX are urged not to tender their common shares to
the BIO-key Bid and, if their shares have already been tendered to the
BIO-key Bid, to withdraw them immediately.
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Reasons for the Unanimous Recommendation to REJECT the BIO-key Bid
In making its unanimous recommendation, the ComnetiX Board of Directors considered many factors, including advice from its financial advisors, Wellington West Capital Markets Inc., and its legal advisor, Gardiner Roberts LLP. Among the reasons for the recommendations were:
Lack of liquidity for the shares of Bio-key to be issued to the
shareholders of ComnetiX.
The BIO-key Bid purports to offer US$1.29 for each ComnetiX share payable
in shares of Bio-key. However, the BIO-key Bid is conditional upon Bio-
key becoming a reporting issuer in Ontario. This is necessary in order
for Bio-key to issue freely-tradeable shares in Canada. Bio-key will be
required to apply to the Ontario Securities Commission to be deemed to be
a reporting issuer. There is no assurance that Bio-key will be able to
obtain the necessary order from the Ontario Securities Commission on a
timely basis. Even if Bio-key becomes a reporting issuer in Ontario,
there is no indication in the BIO-key Bid that Bio-key intends to have
the Bio-key shares listed on the Toronto Stock Exchange or any other
market in Canada.
In addition, the Bio-key shares will be "restricted securities" in the
United States. ComnetiX shareholders will not be able to sell their Bio-
key shares in the United States or to U.S. persons until Bio-key
registers the Bio-key shares with the U.S. Securities and Exchange
Commission. The registration process may take several months and there is
no assurance that such a registration statement will ever become
effective.
Even if Bio-key resolves these issues, there is no certainty that there
will be an active market for Bio-key's shares, given the large number of
Bio-key shares that would be issued and outstanding.
The success of the combined company is dependent upon a working capital
financing.
It is clear that the combined Bio-key and ComnetiX would require
additional financing. The BIO-key Bid does not provide any indication as
to the terms, including amount, timing or pricing, of such financing.
Further, no assurance of any financing is provided. Any financing by Bio-
key would result in further dilution to the shareholders of ComnetiX and
is subject to consent of holders of certain of Bio-key's securities.
Anti-dilution provisions in existing Bio-key securities would create
additional dilution to ComnetiX shareholders.
Anti-dilution provisions contained in the share conditions relating to
Bio-key's outstanding Series A, B and C redeemable convertible preferred
shares provide that if Bio-key were to complete a financing below US$0.50
per share, the conversion price for such shares would be lowered to the
new financing price per share, which would further dilute ComnetiX
shareholders' position in Bio-key, if the BIO-key Bid were successful.
In making its decision, the Board of Directors of ComnetiX was also advised of, and took into account, Bio-key's financial condition, including its operating performance, the decline in the price of Bio-key's stock over the past two years, and the recommendation on January 22, 2007 of Institutional Shareholder Services (Canada) Corp. (ISS) that shareholders vote in favour of the plan of arrangement with L-1 and not tender their shares in response to the BIO-key Bid.
The Board of Directors of ComnetiX has confirmed its unanimous approval of the arrangement with L-1 and its determination that the arrangement with L-1 is fair to, and in the best interests of, ComnetiX, its shareholders and warrantholders. The Board of Directors of ComnetiX unanimously recommends that ComnetiX's shareholders and warrantholders vote FOR the special resolution approving the arrangement with L-1, under which L-1 will pay ComnetiX shareholders US$1.12 per share in cash for all of the issued and outstanding shares of ComnetiX.
ComnetiX wishes to remind its shareholders and its warrant holders that L-1 has expressed to Comnetix that L-1's all-cash offer at US$1.12 per share is its FINAL offer. Time is of the essence for ComnetiX shareholders in terms of voting your shares, and thus to ensure that each shareholder's or warrant holder's vote will be counted, it is imperative that proxies be returned in advance of the Meeting or delivered to the Chairman of the Meeting at any time prior to the commencement of the Meeting on February 8, 2007. SHAREHOLDERS AND WARRANTHOLDERS MAY REVOKE A PREVIOSULY-SUBMITTED PROXY VOTINGAGAINST THE PLAN OF ARRANGMENT BY COMPLETING AND DELIVERING A LATER-DATED COMNETIX MANAGEMENT PROXY. A LATER-DATED PROXY AUTOMATICALLY REVOKES ANY AND ALL PRIOR PROXIES GIVEN IN CONNECTION WITH THE MEETING. Shareholders who need assistance voting or revoking a prior proxy should contact Georgeson at 1-866-598-9985.
About ComnetiX(TM) Inc (www.ComnetiX.com)
ComnetiX(TM) Inc provides secure identification and authentication solutions to both the public and private sectors throughout North America. ComnetiX offers multimode biometric identification solutions for use in areas such as applicant screening, financial services, health care, transportation, airlines and airports, casinos and gaming, and energy and utilities. Clients include American Airlines, Lehman Brothers, New York City Health and Hospital Corporation, New York State Division of Criminal Justice Services, Toronto Police Services Board, Boston Police Department and the Royal Canadian Mounted Police. ComnetiX is also Canada's premier applicant fingerprinting services company, facilitating tens of thousands of criminal background checks each year through its chain of ten offices across Canada. In addition, ComnetiX has established more than 40 applicant fingerprinting services locations throughout the United States.
Forward Looking Statements
Statements made in this news release that relate to future plans, events or performances are forward-looking statements. Any statement in this release containing words such as "believes," "plans," "expects" or "intends" and other statements that are not historical facts are forward-looking, and these statements involve risks and uncertainties and are based on current expectations. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements.