MagIndustries closes $12.1 million private placement; volume improves despite stocks

By Sheri Kasprzak

Atlanta, May 10 - MagIndustries Corp. wrapped up a private placement it has revamped a few times.

The company finally settled for selling 16,133,333 units at $0.75 each for $12.1 million.

The units are comprised of one share and one half-share warrant. The whole warrants provide for an additional share at $1.20 each for two years.

MagIndustries first came out with the deal on March 15 as a $20 million offering comprised of 23,529,411 units at $0.85 each. The company slashed the price and downsized the number of units associated with the deal on May 3. The offering then included up to 20 million shares at $0.75 each.

Kingsdale Capital Markets Inc. was the placement agent.

In addition to the brokered deal, after the downsizing, MagIndustries announced a non-brokered sale of up to $2.9 million of units on the same terms.

Based in Halifax, N.S., MagIndustries provides magnesium alloys for the automotive industry. The proceeds will be used to develop its three business sectors - potash, magnesium and energy, and for general corporate purposes.

The company's stock closed unchanged at $0.76 on Tuesday.

In the broader private placement market, sell-siders said volume improved somewhat Tuesday, despite a dismal stock market.

"I'd say it [volume] was probably helped by yesterday's stocks," said one market source. "But it also has to do with creative structuring."

The source said he felt if stocks are down, issuers may try structures other than stock-for-cash deals, like convertibles or even equity lines where a company's stock doesn't have to improve overnight to be appealing to investors.

That view was evident in the day's announcements. Of the four U.S. deals announced Tuesday that either priced or settled on Tuesday, all used convertible structures, three coming to market as preferreds and one as a debenture.

The Dow Jones Industrial Average dove 103.23 to close at 10,281.11; the Nasdaq composite index ended the day down 1,962.77 and the S&P 500 closed down 12.62 at 1,166.22.

"There were a lot of smaller deals I don't really follow," said one Canadian market source. "I would agree that there were more deals priced today, but small deals."

HEI raises $3.34 million

HEI, Inc. completed a private placement of convertible preferred stock for $3,393,988, the company said Tuesday.

The company issued 130,538 shares of preferreds at $26 each.

Each preferred share is convertible into 10 common shares.

The preferreds do not pay dividends.

The investors also received warrants for up to 522,152 shares, exercisable at $3.05 each for five years.

"This equity infusion represents an opportunity to strengthen our cash position and provide working capital to continue the aggressive pursuit of our sales and profit goals," said the company's president and chief executive officer Mack Traynor in statement. "This additional growth capital will enable us to attract new customers, expand relationship with existing customers and invest in capital equipment to enhance our manufacturing capabilities."

Think Equity Partners, LLC was the financial advisor.

Based in Minneapolis, HEI manufactures microelectronics and other technologies for companies in the medical equipment and medical device industry. The proceeds will be used for working capital.

On Tuesday, HEI's stock closed up $0.08 at $2.85.

BioEnvelop plans C$2 million deal

BioEnvelop Technologies Corp. has arranged a private placement of units for C$2 million.

The offering includes 8,888,889 units at C$0.225 each.

The units are comprised of one share and one warrant. The warrants allow for an additional share at C$0.275 each for five years.

"It looks okay," said one market source. "I'd say right about in line."

The company's stock did get a boost from the deal, the market source said, gaining C$0.02, or 8.7%, to close at C$0.25 after the deal was announced Tuesday morning.

Based in Montreal, BioEnvelop manufactures a biodegradable coating solution used to prolong the shelf life of baked good and frozen foods. The proceeds will be used for research and development, sales and marketing and working capital.

PharmaGap plans C$1.5 million deal

PharmaGap Inc. said it will head to the private placement market with a C$1.5 million offering.

The company plans to sell up to 3.75 million units at C$0.40 each.

The units are comprised of one share and one half-share warrant. The whole warrants allow for an additional share at C$0.60 each for two years.

"The private placement process in Canada can be a very efficient way for small public issuers to quickly raise capital without the use of a registered prospectus," said Simon Goulet, the company's chief operating officer, in an interview Tuesday.

"The [Toronto Stock Exchange] Venture Exchange is an active supporter of emerging-growth companies in the life sciences sector and has designed a process with minimal hurdles for compliance issuers to meet. PharmaGap was pleased to attract a few anchor lead orders from certain larger investors and anticipates additional interest from sophisticated, accredited retail investors in Canada."

SC Stormont Holdings Inc. said it plans to buy C$500,000 of the offering.

Based in Ottawa, Ont., PharmaGap is a biotechnology company focused on developing therapeutic compounds to treat cancer.

PharmaGap's stock lost C$0.02, or 5.41%, to close at C$0.35 after making gains earlier in the day.

ScanSoft's stock drops

A day after announcing the closing of its $75,217,600 private placement, ScanSoft, Inc.'s stock took a dive.

The company's stock lost $0.76, or 16.78%, to close at $3.77 Tuesday.

On Monday, when the closing was first announced, the company's stock gained $0.07 to close at $4.53, but lost $0.46, or 10.15%, in after-hours trading.

The company sold shares at $4.24 each as part of its acquisition of Nuance Communications, Inc.

Based in Peabody, Mass., ScanSoft develops speech and imaging technologies.

Pico's stock drops

After making gains Monday following the closing of its $22,625,000 private placement, Pico Holding, Inc.'s stock slipped Tuesday.

The company's stock edged down $0.02 to close at $25.63.

The company's stock rose $0.55 to close at $25.65 on Monday, but had dropped $0.65 to close at $25.10 on Friday when the closing of the private placement was first announced.

Pico sold shares at $25 each.

Based in La Jolla, Calif., Pico is a holding company for a water-resource development company and a private landowner in Nevada.

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