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Message #26
From: NewsBot
Date: January 9, 2007 08:49:00 AM

SPGR News DGSE Companies, Inc. Announces Material Changes to Definitive Agreement to Acquire Superior Galleries, Inc.; Immediate Interim Agreement to Manage Superior

DALLAS--(BUSINESS WIRE)--DGSE Companies, Inc. (Nasdaq: DGSE), which wholesales, retails and auctions fine watches, jewelry, diamonds and precious metal and rare coin products via traditional and Internet channels, today announced that it has agreed to significant changes in its previously announced agreement to acquire Superior Galleries, Inc. (OTCBB: SPGR). The changes include the following:

1. The total number of DGSE shares to be issued to Superior stockholders has been reduced to an estimated 3,700,000, using an exchange ratio of 0.2731 DGSE shares for each outstanding Superior share, subject to an escrow equal to 15 percent of the total shares to be issued.

2. The DGSE acquisition subsidiary and Superior have entered into a management agreement under which DGSE senior management assumed day-to-day operational control of the business of Superior on January 6, 2006. William Oyster (COO of DGSE) has been appointed the new interim Chief Executive Officer of Superior, Scott Williamson (Executive Vice-President of DGSE) has been appointed the new interim Chief Operating Officer of Superior and John Benson (Chief Financial Officer of DGSE) has been appointed the new Vice-President, Finance and interim Chief Financial Officer of Superior. All three individuals have also been elected to fill the vacancies on Superior’s Board of Directors created upon the resignations of Silvano DiGenova, Paul Biberkraut, Lee Itner and Anthony Friscia. Mitchell Stolz and David Rector remain on the Board of Superior and will serve as a Committee of Independent Directors. Dr. L.S. Smith, Chairman and CEO of DGSE, will be a non-voting observer to the Superior Board.

3. Stanford International Bank Ltd. (SIBL) has increased its existing line of credit to Superior by $11.5 million to approximately $20,00,000, and executed a forbearance agreement with respect to existing defaults. As a condition to the closing of the merger, Stanford will have to exchange approximately $8.4 million of its current debt for Superior common stock at $1.70 per share, and to replace the existing credit facilities with a new $11.5 million term facility that will be available to the combined operations.

4. Both SIBL and Silvano DiGenova have converted their preferred stock into common shares of Superior, and Superior has repaid Mr. DiGenova’s $400,000 note in full.

5. Silvano DiGenova, the former Chief Executive Officer, President and director of Superior, has exchanged 355,000 common shares in Superior for a non-transferable warrant to acquire 96,951 DGSE shares at the closing of the merger, which reflects the same exchange ratio being used in the definitive merger agreement. Should the merger not be consummated, the warrant will terminate and DGSE will transfer the Superior shares to DiGenova’s designee. Any shares acquired by DiGenova upon exercise of the warrant, in the merger or otherwise will be subject to a one-year lock-up agreement.

Upon successful completion of the acquisition, Superior stockholders as a group will own approximately 42.9 percent of the outstanding shares of the combined entity, and SIBL will own approximately 30 percent of DGSE.

DGSE expects substantial continuity in the Superior staff. Superior’s former CEO, Silvano DiGenova, has agreed to remain with the new enterprise as the Managing Director-Numismatics, and Larry Abbott will remain as Executive Vice-President of Auctions and Sales at Superior.

The acquisition will enhance the size of DGSE and diversify its activities, making it one of the nation’s largest rare coin firms. Upon the completion of the acquisition, the inventory at the current showroom facility of Superior will be significantly expanded to include a full inventory of jewelry, diamonds and fine watches. In addition, with Superior’s national and international activities and through a preferred provider agreement with Stanford Coin and Bullion, DGSE expects to increase substantially its wholesale and retail precious metals business. Superior plans to expand its dynamic internet website (www.SGBH.com) significantly and to integrate the website with DGSE’s websites – www.DGSE.com, www.USBullionExchange.com, www.FairchildWatches.com (Fairchild International), and www.CGDEInc.com (Charleston Gold & Diamond Exchange).

“The revised terms of this transaction represent a substantially enhanced opportunity for DGSE and its stockholders,” noted William H. Oyster, President and Chief Operating Officer of DGSE Companies, Inc. and interim Chief Executive Officer of Superior. Mr. Oyster continued, “The interim period leading up to the merger will give us the knowledge and opportunity to effect a more efficient and accelerated integration of the operations of the two companies post-acquisition. In addition, SIBL’s commitment to the combined entity’s success through the exchange of debt and the new credit facility provides robust tools for the new combined enterprise. With expected revenues for the combined entities more than double our current level, substantial financing in place and a history that can be traced to 1930, we believe that the infrastructure will be in place to have a major impact on our revenues and earnings.”

DGSE and Superior expect the acquisition to close late in March 2007, subject to the satisfaction or waiver of the various closing conditions in the merger agreement, including the approval of the stockholders of both companies and the effectiveness of a registration statement on a Form S-4.

Additional Information and Where to Find It

In connection with the proposed acquisition, DGSE and Superior intend to file relevant materials with the SEC. DGSE and Superior each have filed a current report on Form 8-K related to the proposed acquisition on or before the date of this release. In the near future, DGSE intends to file a registration statement on Form S-4, which will contain a prospectus and related materials to register the DGSE common stock to be issued in the proposed acquisition, and a joint proxy statement, which DGSE and Superior plan to mail to their respective stockholders in connection with the approval of the proposed acquisition by their respective stockholders.

The current report contains, and the registration statement and the joint proxy statement/prospectus included therein will contain, important information about DGSE, Superior, the proposed acquisition and related matters. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE FILINGS CAREFULLY WHEN THEY ARE AVAILABLE. Investors and security holders will be able to obtain free copies of these documents (when they become available) and other documents filed with the SEC at the SEC’s web site at www.sec.gov or by calling the SEC at 1-800-SEC-0330. In addition, investors and security holders may obtain free copies of the documents filed by DGSE with the SEC by contacting