NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES
OR FOR DISSEMINATION IN THE U.S.
Park Lawn Corporation (TSX:PLC)
(“PLC” or the “Company”) is
pleased to announce that it has entered into definitive agreements
to acquire all of the outstanding membership interests of two U.S.
businesses: Signature Funeral and Cemetery Investments, LCC
(“Signature” or “Signature
Acquisition”) and Citadel Management LLC
(“Citadel”, together with Signature the
“Acquisitions”) for a total purchase price of
approximately US$136.4 million in cash, subject to customary
working capital adjustments.
In conjunction with the Acquisitions, the
Company also announced that it has entered into an agreement with a
syndicate of underwriters (the “Underwriters”)
co-led by National Bank Financial Inc., CIBC Capital Markets and
Cormark Securities Inc. to issue, on a bought deal basis,
approximately C$165 million of subscription receipts (the
“Subscription Receipts”) to finance the Signature
Acquisition (the “Offering”). The
acquisition of Citadel will be funded from PLC’s existing credit
facility.
“The acquisitions of Signature and Citadel
present an exciting opportunity for Park Lawn. The acquisitions are
in line with our communicated growth strategy and significantly
increase our footprint and presence in the U.S. market,” said
Andrew Clark, Chairman and Chief Executive Officer of the PLC. “The
addition of Signature’s executive management team to PLC’s existing
leadership team will allow us to facilitate the consolidation of
our expanding U.S. operations.”
Highlights of the
Acquisitions
Strategically Compelling
- Significantly increase PLC’s footprint
and scale in the U.S. market. Together
add six new states into PLC’s portfolio, while expanding its
footprint in the Texas market.
- Enhanced scale leading to a highly attractive portfolio
of both funeral homes and cemeteries. Together add 38
cemeteries, 29 funeral homes and 5 crematoria to PLC’s
portfolio.
- Provide PLC with opportunities to grow in markets with
attractive dynamics. Locations in Dallas provide entry
into a high-growth geography, while the cemetery locations in New
Mexico and Kansas City create strong regional platforms from which
to grow. In addition, on-site funeral home operations are expected
to provide additional top-line growth, as well as incremental
margin expansion.
- Provide strong inventory and real estate
value. Key sites offer over 90 years of inventory capacity
and augment the existing PLC business with a strong portfolio of
real estate.
- Strong management team that will establish central PLC
U.S. platform. Signature Group’s Jay Dodds and Brad Green
will be taking on senior leadership positions within PLC, with a
particular focus on integrating U.S. operations into a centralized
platform. It is anticipated that both Jay and Brad will become
named executive officers of the Company following closing.
Financially Attractive
- Significantly increase PLC’s revenue, while
individually providing strong operating margins.
- In the first full year of operations following closing, PLC
management expects Signature to generate approximately US$32.9
million of revenue and US$9.6 million of EBITDA. If Signature
achieves these results and expected synergies are realized the
purchase price of US$123 million would represent a multiple of
approximately 9.8x.
- In the first full year of operations following closing, PLC
management expects Citadel to generate approximately US$15.5
million of revenue and US$2.5 million of EBITDA. If Citadel
achieves these results, the purchase price of US$13.4 million would
represent a multiple of approximately 5.4x EBITDA.
- Immediately accretive. The transactions
are expected to be immediately accretive to both PLC’s adjusted net
earnings per share and adjusted EBITDA per share before any
synergies are achieved.
- Significant synergies are expected in the near
term. Management expects annual synergies of
approximately US$3 million to be realized within 24 months of
closing, with a one-time cost of US$750 thousand, primarily in the
areas of IT systems, back office integration, consolidated
procurement, implementing proven sales practices into different
operational areas and management team optimization.
- Financed to provide PLC with dry powder to execute on
organic growth initiatives and opportunistic tuck in acquisitions
going forward. Pro forma the Acquisitions and the
Offering, PLC’s net leverage is expected to be under 1.75x adjusted
EBITDA.
“Signature is very excited to partner our
business with Park Lawn. Jay and I look forward to serving Park
Lawn in our new expanded roles. We view this as an opportunity to
match our operational and integrational expertise with the
continued growth of Park Lawn,” said Brad Green, Chief Executive
Officer of Signature. “Combining our respective portfolios under a
single leadership group will give our employees a great opportunity
and Park Lawn a competitive edge in the market place,” added Jay
Dodds, Chief Operating Officer and President of Signature.
“We look forward to working with Park Lawn and
see them as the right partner to continue growing our business
throughout our communities,” stated William W. Gaffney, current
President of Citadel. “The team at Park Lawn has established a
strong portfolio and management team that will allow us to maximize
the opportunity for growth in the long term.”
The Acquisitions are expected to close before
the end of the third quarter, with each separately subject to the
satisfaction or waiver of certain closing conditions, including,
among other things, third party consents and approvals, which are
currently in progress.
Description of Signature
Signature currently owns and operates 9
cemeteries, 21 funeral homes (including 7 on-sites) and 5
crematoria in Texas, Kansas, Missouri, New Mexico and Mississippi.
Through management’s successful growth strategy, Signature is a
recognized leader in the death care industry in the United States.
Founded in 2011 by Brad Green (CEO) and Jay Dodds (President
and COO), who together bring more than 40 years of industry
experience with them, Signature has successfully executed on a
number of accretive acquisitions over the last seven years.
Description of Citadel
Citadel currently owns and operates 29
cemeteries and 8 funeral homes (including 1 on-site) throughout
North and South Carolina. The portfolio is strategically located in
cities with attractive growth opportunities. Citadel was
established in 2001 by William W. Gaffney (CEO and majority owner),
who has more than 40 years of industry experience.
PLC Post Acquisition
With the Acquisitions, PLC and its subsidiaries
will own and operate 176 properties, including cemeteries,
crematoria, funeral homes, chapels, planning offices and a transfer
service, with its footprint now covering 11 U.S. states and 5
Canadian provinces. The Company continues to experience
strong organic growth opportunities throughout Canada and the
United States. Going forward, PLC intends to continue executing on
strategic acquisitions that complement its existing
portfolio.
Subscription Receipt
Offering
The Company has reached an agreement with a
syndicate of underwriters co-led by National Bank Financial Inc.,
CIBC Capital Markets and Cormark Securities Inc. to issue 6,735,000
Subscription Receipts at a price of C$24.50 per Subscription
Receipt, on a bought deal basis, for gross proceeds of
approximately C$165 million. The Company has also granted the
Underwriters an option to purchase up to an additional 1,010,250
Subscription Receipts on the same terms and conditions, exercisable
at any time, in whole or in part, up to 30 days after the closing
of the Offering (the “Over-Allotment Option”).
Upon the satisfaction or waiver of each of the
conditions precedent to the closing of the Signature Acquisition
(other than the payment of the consideration for the Signature
Acquisition): (a) one common share of the Company (a
“Common Share”) will be automatically issued in
exchange for each Subscription Receipt (subject to customary
anti-dilution protection), without payment of additional
consideration or further action by the holder thereof; (b) an
amount per Subscription Receipt equal to the per-share cash
dividends declared by the Company on the Common Shares to holders
of record on a date during the period that the Subscription
Receipts are outstanding, net of any applicable withholding taxes,
will become payable in respect of each Subscription Receipt; and
(c) the net proceeds from the sale of the Subscription Receipts
will be released from escrow to the Company for the purposes of
completing the Signature Acquisition.
The net proceeds from the sale of the
Subscription Receipts will be held by an escrow agent pending the
fulfillment or waiver of all outstanding conditions precedent to
closing of the Signature Acquisition (other than the payment of the
consideration for the Signature Acquisition). There can be no
assurance that the applicable consents and regulatory approvals
will be obtained, that the other closing conditions will be met or
that the Signature Acquisition will be consummated.
If the Signature Acquisition fails to close as
described above by October 31, 2018 or if the
Signature Acquisition is terminated at an earlier time, the gross
proceeds of the Offering and pro rata entitlement to interest
earned or deemed to be earned on the Subscription Receipts, net of
any applicable withholding taxes, will be paid to holders of the
Subscription Receipts and the Subscription Receipts will be
cancelled.
The Subscription Receipts will be offered
pursuant to a short-form prospectus to be filed in each of the
provinces of Canada, which will describe the terms of the Offering.
The Offering is expected to close on or about May 4, 2018 and is
subject to certain conditions including, but not limited to, the
receipt of all regulatory approvals including the approval of the
TSX Exchange (the “TSX”).
The securities offered pursuant to the Offering
have not been, nor will they be, registered under the United States
Securities Act of 1933, as amended, (the “1933
Act”) and may not be offered, sold or delivered, directly
or indirectly, in the United States, or to, or for the account or
benefit of, “U.S. persons” (as defined in Regulation S under the
1933 Act), except pursuant to an exemption from the registration
requirements of the 1933 Act. This press release does not
constitute an offer to sell or a solicitation of an offer to buy
any securities in the United States or to, or for the account or
benefit of, U.S. persons.
Conference Call and Presentation
A short presentation on the acquisition is available on
the Company’s website at www.parklawncorp.com
PLC will hold a conference call on April 16, 2018 at 3:45 p.m.
ET to review the Acquisitions. To access the conference call by
telephone, dial 647-427-7450 or 1-(888) 231-8191. Please connect
approximately 15 minutes prior to the beginning of the call to
ensure participation. A recording of the call will be available on
the company’s website following the call.
About Park Lawn Corporation
PLC provides goods and services associated with the disposition
and memorialization of human remains. Products and services are
sold on a pre-planned basis (pre-need) or at the time of a death
(at-need). PLC and its subsidiaries own and operate 104 properties
including cemeteries, crematoria, funeral homes, chapels, planning
offices and a transfer service. PLC operates in five Canadian
provinces and six US states.
Cautionary Statement Regarding Forward-Looking
Information
This news release may contain forward-looking
statements (within the meaning of applicable securities laws)
relating to the business of the Company and the environment in
which it operates. Forward-looking statements are identified by
words such as “believe”, “anticipate”, “project”, “expect”,
“intend”, “plan”, “will”, “may”, “estimate” and other similar
expressions. These statements are based on the Company’s
expectations, estimates, forecasts and projections and include,
without limitation, statements regarding the completion of the
Acquisitions, the completion of the Offering, the proposed use of
proceeds of the Offering, the Company’s continued growth strategy,
the anticipated effect of the Acquisitions and the Offering on the
performance of the Company (including the extent to which the
Acquisitions are expected to be accretive to adjusted net earnings
per share and adjusted EBITDA per share and post-closing leverage),
the quantum and timing of potential cost synergies, expected
revenues, expected EBITDA and the expected purchase price
multiples. The forward-looking statements in this news release are
based on certain assumptions, including without limitation that all
conditions to completion of the Acquisitions and the Offering will
be satisfied or waived, the Signature and Citadel businesses will
continue their recent trends of improved operating performance, the
Company will be able to implement business improvements and achieve
cost savings, the Company will be able to retain key personnel,
there will be no unexpected expenses occurring as a result of the
Acquisitions, and that currency exchange rates remain consistent.
They are not guarantees of future performance and involve risks and
uncertainties that are difficult to control or predict. A number of
factors could cause actual results to differ materially from the
results discussed in the forward-looking statements, including, but
not limited to, the risk that either (or both) of the Acquisitions
will not be completed, the Offering will not be completed, the
Signature and Citadel businesses will not perform as expected, the
Company will not be able to successfully integrate Signature and
Citadel, and the other factors discussed under the heading
“Risk Factors” in the Company’s annual information form available
at www.sedar.com. There can be no assurance that forward-looking
statements will prove to be accurate as actual outcomes and results
may differ materially from those expressed in these forward-looking
statements. Readers, therefore, should not place undue reliance on
any such forward-looking statements. Further, these forward-looking
statements are made as of the date of this news release and, except
as expressly required by applicable law, the Company assumes no
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise.
Non-IFRS Measures
EBITDA, adjusted EBITDA and adjusted net
earnings are not measures recognized under IFRS and do not have a
standardized meaning prescribed by IFRS. Such measures are
presented in this news release because management of the Company
believes that such measures are relevant in interpreting the effect
of the Acquisitions on the Company. Such measures, as computed by
the Company, may differ from similar computations as reported by
other similar organizations and, accordingly, may not be comparable
to similar measures reported by such other organizations. Please
see the Company’s most recent management's discussion and analysis
for how the Company reconciles such measures to the nearest IFRS
measure.
Contact Information
Andrew ClarkChairman & Chief Executive
Officer(416) 231-1462
Joseph LeederChief Financial Officer &
Director(416) 231-1462
Suzanne Cowan VP, Business Development &
Corporate Affairs scowan@parklawncorp.com(416) 231-1462
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