Accretive acquisition offers both growth potential and ideal
complement to Enterprise's equipment rental division
/NOT FOR RELEASE IN THE UNITED
STATES OR DISSEMINATION OF UNITED
STATES NEWS WIRE SERVICES/
ST. ALBERT, AB, Dec. 4, 2013 /CNW/ - Enterprise Group, Inc.
("Enterprise," or the "Company") (TSX:E) is pleased to announce
that it has entered into an agreement (the "Acquisition Agreement")
to acquire Hart Oilfield Rentals Ltd. ("Hart"), one of Western Canada's most highly regarded oilfield
service providers, for a purchase price of $22.6 million, which includes $2.0 million of working capital (the
"Acquisition"). The purchase price will be satisfied through a
combination of $1.0 million of common
shares ("Common Shares") of Enterprise and $21.6 million in cash.
HIGHLIGHTS
- Complementary acquisition with significant customer
overlap
- Expands the Company's specialized rental equipment segment
and enhances growth potential
- Hart boasts an attractive track record of organic growth -
realized Compound Annual Growth Rates ("CAGR") on revenue of 22%
and EBITDAS of 37%, over the last four years
- Purchase price represents a trailing EBITDAS multiple of
3.1x (2.9x without working capital), based on Hart's fiscal 2013
EBITDAS of $7.2 million, and a
trailing revenue multiple of approximately 1.0x, based on Hart's
fiscal 2013 revenue of $22.7
million
- Purchase price is equivalent to 1.1x the fair market value
of Hart's equipment, based upon an independent appraisal completed
in May of 2013
- In order to finance the cost of the Acquisition, the Company
intends to conduct a prospectus offering of subscription receipts
for gross proceeds of $15
million
- Purchase will also be facilitated by recent $15 million increase in the Company's credit
facility (See press release dated November
20, 2013)
Hart is a full service oilfield site
infrastructure company that provides both site services and
equipment rentals to its oil and gas customers, all of whom operate
within the Western Canadian Sedimentary Basin. Hart's equipment
fleet consists of approximately 1,500 owned pieces and an
additional 500 pieces that have been rented in order to fulfill
demand. This fleet provides on-site support for oilfield drilling
and completion operations, and includes both traditional well site
equipment (well site trailers, medical facilities, sewage treatment
and fire suppression systems, scaffolding, etc.) and Hart's
proprietary 'combo' equipment, innovative modular designs that are
both easily portable and fulfill multiple functions, creating
significant benefits for customers' operational efficiency.
Hart both designs and manufactures its 'combo'
equipment, and currently possesses 14 pending patents on its
industrial modular design assets. These offerings provide Hart with
a unique competitive advantage. This advantage is further leveraged
by Hart's commitment for exceptional service. Hart works with each
of its customers throughout the order process, employing
proprietary three-dimensional planning software to ensure that the
correct equipment is located in the correct position for maximizing
site efficiency. The combination of Hart's proprietary equipment
designs and dedication to service have earned Hart a sterling
reputation, and have allowed it to develop an enviable list of
high-quality clients.
Hart generated $22.7
million of revenue and $7.2
million of EBITDAS in its most recent fiscal year, which
concluded on April 30, 2013, and has
grown revenue and EBITDAS at CAGRs of 22% and 37%, respectively,
over the past four years. Contingent upon the successful completion
of the acquisition, Enterprise anticipates increasing the 2014
capital expenditure budget of Hart by $9.4
million for the deployment new modular units. The Company
estimates that a full year's deployment of these new units could
increase Hart's annual revenue and EBITDAS to $29.9 million and $12.0
million, respectively.
Hart currently operates from six strategic
locations - five in Alberta and
one in British Columbia.
Enterprise intends to complement these locations by opening up a
new Hart office in Fort St. John, British
Columbia, which will also house divisions of Artic Therm and
Calgary Tunnelling &
Horizontal Augering Ltd., the Company's existing businesses.
The vendors under the Acquisition Agreement will sign two-year
management agreements with Enterprise. It will also be a condition
of the Acquisition Agreement that Hart's key employees will sign
five-year employment agreements.
"We are very pleased to announce this
acquisition, which we believe will create both near and long-term
benefits for our business," stated Leonard
D. Jaroszuk, Enterprise's President and Chief Executive
Officer. "We expect the addition of Hart will be immediately
accretive. When taking into account the anticipated benefit of
investing in new modular units, Enterprise expects that the
acquisition will provide a benefit of approximately $0.07 to Enterprise's earnings per share in
fiscal 2014, based upon Hart's trailing earnings."
"Moving forward, we believe that the equipment
rentals market offers significant potential. Hart, in combination
with our existing rental businesses, will allow us to take full
advantage of this potential. Hart has witnessed rapid and
encouraging returns on its recent investments. Its assets are long
lived, operating from 10 to 20 years, and offer an average gross
payback period of less than 18 months. As a result, new assets have
returned an average of more than 60% EBITDAS to Hart's bottom line.
Historically, Hart has seen demand for its services exceed its
capacity, and has been forced to rent units in order to satisfy
this excess demand. With the appropriate capital support, we
believe we are capable of as much as doubling both Hart's revenue
and EBITDAS over the next three years."
"Enterprise's recent third quarter results
provided encouraging evidence of our Company's ability to quickly
and successfully integrate acquisitions," concluded Mr. Jaroszuk.
"Our acquisition of Hart will continue this trend. Since our
inception, Enterprise has sought to establish itself as the largest
construction services and specialized equipment rental provider in
Western Canada. Today's
announcement is a significant step towards achieving that
objective."
The Acquisition is expected to close
January 3, 2014, subject to customary
conditions and all regulatory approvals, including the approval of
the Toronto Stock Exchange.
Canaccord Genuity Corp. acted as exclusive
financial advisor to Enterprise in connection with the
Acquisition.
Offering
Enterprise also announces that it has filed and
received a receipt for a preliminary short form prospectus in
connection with a $15,000,000
overnight marketed public offering (the "Offering") of subscription
receipts of the Company (the "Subscription Receipts"). The Offering
will be conducted through a syndicate of underwriters led by
Canaccord Genuity Corp. (the "Underwriters"). The definitive
price of the Offering will be determined in the context of the
market with the final terms to be agreed at the time of entering
into of an underwriting agreement. The gross proceeds from
the sale of the Subscription Receipts will be held in escrow
pending the completion of the Acquisition. If all outstanding
conditions to the completion of the Acquisition (other than payment
of the purchase price) are met, the net proceeds from the sale of
the Subscription Receipts will be released to Enterprise to
finance, in part, the purchase price of the Acquisition, and each
Subscription Receipt will be exchanged for one Common Share and one
half of a Common Share purchase warrant of Enterprise for no
additional consideration.
The Subscription Receipts will be offered for
distribution in all provinces of Canada, except Quebec, by short form prospectus. The
Subscription Receipts may also be placed privately in the United States with certain qualified
institutional buyers in transactions in accordance with Rule 144A
under the United States
Securities Act of 1933. The net proceeds from the
Offering will be used to finance the Acquisition. Additional
capital required to finance the Acquisition will be drawn from cash
on hand and the Company's line of credit.
The Offering is expected to close on or before
December 23, 2013, subject to
customary conditions and all regulatory approvals including the
approval of the Toronto Stock Exchange and of applicable securities
regulatory authorities.
The securities being offered have not, nor will
they be registered under the United
States Securities Act of 1933, as amended, and may
not be offered or sold within the United
States absent U.S. registration or an applicable exemption
from such registration requirements. This release does not
constitute an offer for sale or the solicitation of an offer to buy
securities in the United States or
in any jurisdiction in which such offer, solicitation or sale would
be unlawful.
About Enterprise Group, Inc.
Enterprise Group, Inc. is a consolidator of construction services
companies operating in the energy, utility and transportation
infrastructure industries. The Company's focus is primarily
construction services and specialized equipment rental. The
Company's strategy is to acquire complementary service companies in
Western Canada, consolidating
capital, management and human resources to support continued
growth. Enterprise became a Western Canadian leader in flameless
heat technology in September 2012
with its acquisition of Artic Therm International Ltd. and became a
technological leader in underground infrastructure construction by
the closing of Calgary Tunnelling
& Horizontal Augering Ltd. In June
2013.
Forward Looking Information
Certain statements contained in this news release constitute
forward-looking information. These statements relate to future
events or the Company's future performance. The use of any of the
words "could", "expect", "believe", "will", "projected",
"estimated" and similar expressions and statements relating to
matters that are not historical facts are intended to identify
forward-looking information and are based on the Company's current
belief or assumptions as to the outcome and timing of such future
events. In particular, forward-looking statements contained
in this press release include, but are not limited to: the expected
approvals for, and the closing of, the Offering, the expected
closing of the Acquisition, the anticipated benefits of the
Acquisition and the resultant operational synergies, expected
capital expenditures, expected results, expected location
expansions, the benefits and timing of investing in new modular
units and the cost of doing so and earnings forecasts and revenue
expectations. These forward-looking statements are based on
assumptions and are subject to numerous risks and uncertainties,
certain of which are beyond the Company's control, including the
impact of general economic conditions, the satisfaction of the
conditions precedent to the Acquisition, the satisfaction of the
escrow release conditions pursuant to the Offering, industry
conditions, volatility of commodity prices, competition, stock
market volatility and the ability to access sufficient
capital. Actual future results may differ materially. The
Company's annual information form for the year ended December 31, 2012 and other documents filed with
securities regulatory authorities (accessible through the SEDAR
website www.sedar.com) describe the risks, material assumptions and
other factors that could influence actual results and which are
incorporated herein by reference. The Company disclaims any
intention or obligation to publicly update or revise any
forward-looking information, whether as a result of new
information, future events or otherwise, except as may be expressly
required by applicable securities laws.
Forward-looking information relating to Hart's
annual revenue and EBITDAS and Enterprise's earnings per share are
included herein to provide information relating to the anticipated
financial impact of the Acquisition and may not be appropriate for
other purposes.
Non-IFRS Measures
The Company uses International Financial Reporting Standards
("IFRS"). EBITDAS is not a measure that has any standardized
meaning prescribed by IFRS and is therefore referred to as a
non-IFRS measure. This news release contains references to
EBITDAS. This non-IFRS measure used by the Company may not be
comparable to a similar measure used by other companies.
Management believes that in addition to net income, EBITDAS is a
useful supplemental measure as it provides an indication of the
results generated by the Company's principal business activities
prior to consideration of how those activities are financed or how
the results are taxed. EBITDAS is calculated as net income
excluding depreciation, amortization, interest, taxes and stock
based compensation.
SOURCE Enterprise Group, Inc.