Dominion Lending Centres Enters Agreement to Acquire Remaining 30% of Newton Connectivity Systems
Vancouver, British Columbia – February 15, 2022 – Dominion Lending Centres Inc. (TSX:DLCG) (“DLC” or the “Corporation”) is pleased to announce that it has entered into a purchase agreement with Next4 Holdings Inc. (“Next4”) to acquire the remaining 30% of 10017078 Canada Inc. (“Newton Holdco”) that DLC does not already own (the “Newton Acquisition”) for an aggregate purchase price of $24,000,000 (the “Purchase Price”). The Purchase Price is to be comprised of a cash payment of $16,865,000 and the issuance of 1,853,247 class “A” common shares of the Corporation (the “Common Shares”) having a deemed value of $3.85 per share (the “Share Consideration”). DLC currently owns 70% of Newton Holdco and Newton Holdco owns 100% of the issued and outstanding shares of Newton Connectivity Systems Inc. (“Newton”). Closing of the Newton Acquisition is expected to occur on or about February 28, 2022.
Geoff Willis (President of Newton) and Kevin Dear (Vice-President of Newton) are both directors and indirect 25% shareholders of Next4. As such, the Newton Acquisition is a related-party transaction for the purposes of applicable securities laws, however, the Corporation is relying on exemptions from the valuation and minority shareholder approval requirements prescribed by Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions given the fair market value of the Acquisition is less than 25% of DLC’s market capitalization.
Gary Mauris, Executive Chairman and Chief Executive Officer of the Corporation, commented: “We acquired Newton with Next4 in December, 2016 and are incredibly proud of what we have built over the last 5 years. Newton has become one of the leading connectivity platforms for mortgage professionals and lenders in Canada and has become an integral part of DLC’s franchise system. With Newton able to send deals direct to lenders on its own connectivity bridges effective July 1, 2022 and with more than 50% of the DLC Group’s funded volumes now being submitted through Velocity, we felt this was the perfect time to acquire the outstanding 30% of Newton that we did not already own. Further, we are pleased to report that Geoff Willis and Kevin Dear will be remaining with us to continue their excellent leadership of Newton going forward.”
In order to fund the Newton Acquisition, the Corporation expects to enter into an amending agreement with The Toronto-Dominion Bank (“TD”), whereby the Corporation will increase its acquisition credit line by $24,000,000 (the “Acquisition Credit Line”). An aggregate of $16,865,000 is expected to be drawn on the Acquisition Credit Line to pay the vendors the cash consideration at closing and an aggregate of $7,135,000 is expected to be drawn on the Acquisition Credit Line to transfer to the Corporation’s Non-Core Business unit as compensation for the issuance of the Share Consideration (which amount was paid against the Corporation’s junior term loan with TD). As such, the Newton Acquisition will result in net additional borrowings of $16,865,000, with borrowings by the Corporation’s Core Business increasing by $24,000,000 and borrowings by the Corporation’s Non-Core Business decreasing by $7,135,000. With the issuance of the Share Consideration, the adjustments between the Core Business and the Non-Core Business are necessary to make the Corporations Non-Core business whole for the Share Consideration paid to Next4.
About Dominion Lending Centres Inc.
The DLC Group is Canada’s leading network of mortgage professionals. The DLC Group operates through Dominion Lending Centres and its three main subsidiaries, MCC Mortgage Centre Canada Inc., MA Mortgage Architects Inc. and Newton Connectivity Systems Inc., and has operations across Canada. The DLC Group’s extensive network includes ~7,500 agents and 515 locations. Headquartered in British Columbia, the DLC Group was founded in 2006 by Gary Mauris and Chris Kayat.
Contact information for the Corporation is as follows:
|Robin Burpee Co-Chief Financial Officer 403-455-9670 firstname.lastname@example.org||Amar Leekha|
Sr. Vice-President, Capital Markets
Cautionary Note Regarding Forward-looking Information
Certain statements in this document constitute forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as “anticipate,” “believe,” “estimate,” “will,” “expect,” “plan,” “intend,” or similar words suggesting future outcomes or an outlook. Forward-looking information in this document includes, but is not limited to:
- the anticipated completion of the Newton Acquisition; and
- the anticipated entering into of the credit agreement amendment with TD to increase the Acquisition Credit Line.
Such forward-looking information is based on a number of assumptions which may prove to be incorrect. Assumptions have been made with respect to the following matters, in addition to any other assumptions identified in this news release:
- the conditions to complete the Newton Acquisition will be satisfied and the transactions will be completed as anticipated; and
- the Corporation and TD will negotiate the credit agreement amendment on mutually acceptable terms.
Such forward-looking information is necessarily based on many estimates and assumptions, including material estimates and assumptions, related to the factors identified below that, while considered reasonable by the Corporation as at the date hereof considering management’s experience and perception of current conditions and expected developments, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to, changes in taxes; increased operating, general and administrative, and other costs; changes in interest rates; general business, economic and market conditions; our ability to obtain services and personnel in a timely manner and at an acceptable cost to carry out our activities; DLC’s ability to maintain its existing number of franchisees and add additional franchisees; changes in Canadian mortgage lending and mortgage brokerage laws; material decreases in the aggregate Canadian mortgage lending business; changes in the fees paid for mortgage brokerage services in Canada; changes in the regulatory framework for the Canadian housing sector; demand for DLC’s products remaining consistent with historical demand; changes in, or in the interpretation of, laws, regulations or policies; the outcome of existing and potential lawsuits, regulatory actions, audits and assessments; and other risks and uncertainties described in our other filings with Canadian securities authorities.
Many of these uncertainties and contingencies can affect our actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, us. Readers are cautioned that forward-looking statements are not guarantees of future performance. All forward-looking statements made in this press release are qualified by these cautionary statements. The foregoing list of risks is not exhaustive. For more information relating to risks, see the risk factors identified in our most recent Annual Report. The forward-looking information contained in this document is made as of the date hereof and, except as required by applicable securities laws, we undertake no obligation to update publicly or revise any forward-looking statements or information, whether because of new information, future events or otherwise.