Founders Advantage Capital Corp. Completes Acquisition of a Majority Interest in Dominion Lending Centres
CALGARY, ALBERTA–(Marketwired – June 3, 2016) –
NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES
Founders Advantage Capital Corp. (TSX VENTURE:FCF) (the “Corporation”) is pleased to announce that it has completed its previously announced acquisition of a 60% majority interest (the “Transaction”) in the Dominion Lending Centres group of companies (“DLC”) for aggregate consideration of $73,887,888 (the “Purchase Price”). The Purchase Price was satisfied by the issuance of 4,761,905 class A common shares of the Corporation (the “FCF Shares”) at an ascribed price of $2.625 per FCF Share and a cash payment of $61,387,888. The founders of DLC, comprised of Gary Mauris, Christopher Kayat and certain other minority shareholders (the “Founders”), have retained a 40% interest in DLC and they will continue to manage the day-to-day business and operations of DLC. Following closing, the business of DLC will be overseen by a combined board of directors, consisting of Gary Mauris, Christopher Kayat and three nominees of the Corporation, initially Stephen Reid, Ron Gratton and James Bell.
The Transaction has been structured to provide the Corporation with 60% of the first $14.6 million of annual distributions (the “Annual Threshold”) paid by DLC to its securityholders, with the Founders receiving 40% of such Annual Threshold. The Annual Threshold was fixed based on the anticipated 2016 cash flow for DLC based on current information available to the parties, however, all cash distributions by DLC to its securityholders are subject to Board approval. To the extent that any distributions are paid in a year in excess of the Annual Threshold, Founders who remain active in the business will receive 70% of such excess distributions, with the Corporation receiving the remaining 30% of such excess distributions. In addition, with respect to any liquidity event, the net proceeds of disposition will be allocated amongst the Corporation and the Founders based upon their proportionate shares of distributions received as at the date of the liquidity event. As a result, the Transaction provides strong incentives for management to pursue continued free cash flow and earnings growth.
The FCF Shares issued as partial consideration for the Transaction will be subject to a four-month hold period in accordance with applicable securities laws.
For further information on the Transaction please refer to the Corporation’s press release dated May 13, 2016.
Concurrent with closing of the Transaction, the net proceeds of the Corporation’s previously announced offering of subscription receipts, which closed April 14, 2016, were released from escrow in partial satisfaction of the cash portion of the Purchase Price. As a result, as of the release date of June 3, 2016, an aggregate of 13,709,291 FCF Shares (after giving effect to the consolidation of the Corporation’s common shares on the basis of one common share on a post-consolidation basis for fifteen (15) common shares on a pre-consolidation basis which occurred on May 16, 2016) were issued at the release time upon the automatic exercise of the subscription receipts into FCF Shares. These FCF Shares remain subject to a hold period until August 15, 2016.
TD Securities acted as sole financial advisor to DLC in connection with the Transaction. Bennett Jones LLP acted as legal counsel to the Corporation and Blake, Cassels & Graydon LLP acted as legal counsel to DLC in connection with the Transaction.
DLC group of companies is Canada’s leading and largest mortgage brokerage with $33 billion in funded mortgages in 2015. DLC group of companies operates through three main subsidiaries, Dominion Lending Centres, Mortgage Centre Canada and Mortgage Architects and has operations in all 13 provinces and territories. DLC group of companies’ extensive network includes over 5,000 agents, 325 franchises and 650 locations. Headquartered in British Columbia, DLC group of companies was founded in 2006 by Gary Mauris and Chris Kayat.
About Founders Advantage Capital Corp.
The Corporation is listed on the TSX Venture Exchange as an Investment Issuer (Tier 1) and employs a passive and permanent investment approach. The Corporation has developed an investment approach to create long-term value for its shareholders and partner entrepreneurs (investees) by pursuing majority interest acquisitions of cash flow positive middle-market privately held entities. The Corporation seeks to win mandates by appealing to the segment of the market which is not aligned with traditional Private Equity control, royalty monetizations or related structures. The Corporation’s innovative platform offers disproportionate incentives (contractually) for growth in favour of our partner entrepreneurs. This unique platform is designed to appeal to entrepreneurs who believe in the growth of their businesses and who want the added ability to maintain operational control with a long-term and passive partner.
The FCF Shares are listed on the TSX Venture Exchange under the symbol “FCF”.
For further information please refer to the Corporation’s website at www.advantagecapital.ca.
The TSX Venture Exchange has in no way passed upon the merits of the Transaction and has neither approved nor disapproved of the contents of the news release.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
Not an Offering under US Securities Laws
The FCF Shares that will be issued in connection with the Transaction have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any U.S. state securities laws and may not be offered or sold in the United States absent registration or an available exemption from the registration requirement of the U.S. Securities Act and applicable U.S. state securities laws. This news release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful.
Caution concerning forward-looking information
This news release or documents referred to herein contain “forward-looking information” and “forward-looking statements” within the meaning of applicable securities laws, including statements regarding the Annual Threshold amount being the anticipated cash flow for DLC for 2016. These information and statements address future activities, events, plans, developments and projections. All statements, other than statements of historical fact, constitute forward-looking statements or forward-looking information. Such forward-looking information and statements are frequently identified by words such as “may”, “will”, “should”, “anticipate”, “plan”, “expect”, “believe”, “estimate”, “intend” and similar terms, and reflect assumptions, estimates, opinions and analysis made by management in light of its experience, current conditions, expectations of future developments and other factors which it believes to be reasonable and relevant. Forward-looking information and statements involve known and unknown risks and uncertainties that may cause actual results, performance and achievements to differ materially from those expressed or implied by the forward-looking information and statements and, accordingly, undue reliance should not be placed thereon. Risks and uncertainties that may cause actual results to vary include general economic, market and business conditions, risks associated with the Canadian housing sector, fluctuations in interest rates, housing demand in the markets in which DLC and its franchisees operate, DLC’s ability to renew and expand upon its franchise arrangements, as well as other risks and uncertainties which are more fully described in our annual and quarterly Management’s Discussion and Analysis and in other filings made by us with Canadian securities regulatory authorities and available at www.sedar.com. The Corporation disclaims any obligation to update or revise any forward-looking information or statements except as may be required by applicable law.