Diversified Royalty Corp. (TSX: DIV; DIV.DB) (the
“
Corporation” or “
DIV”) is
pleased to announce it has completed its previously announced
transaction with Oxford Learning Centres, Inc.
(“
Oxford”), to add a sixth royalty stream to DIV's
portfolio. DIV’s subsidiary, OX Royalties Limited Partnership
(“
OX Royalties LP”) acquired the trademarks and
certain other intellectual property rights utilized by Oxford in
its pre-school, elementary and secondary school and post-secondary
supplemental education business (the “
Oxford
Rights”) for a purchase price (the “
Purchase
Price”) of $44.0 million (the
“
Acquisition”), excluding a retained interest
provided to Oxford through the issuance of limited partnership
units of OX Royalties LP (the “
Exchangeable
Units”).
The cash Purchase Price of $44.0 million was
funded with $37.0 million drawn from DIV’s previously undrawn $50
million revolving acquisition facility (the “Acquisition
Facility”) and DIV’s cash on hand following DIV’s drawdown
of the remaining $7.0 million of available capacity under the
existing credit facility secured in connection with the Nurse Next
Door trademarks and royalty (the “Nurse Next Door Credit
Facility”). The refundable Goods and Services Tax of $2.2
million payable by OX LP on the Purchase Price and estimated
transaction costs of $0.5 million were funded with a further $2.7
million drawn from the available capacity under the Acquisition
Facility.
In addition to the cash portion of the Purchase
Price, OX Royalties LP issued the Exchangeable Units to Oxford as a
retained interest having an agreed value of approximately
$33,000.
Immediately following the closing of the
Acquisition, DIV licensed the Oxford Rights back to Oxford for 99
years, in exchange for an initial royalty equal to 7.67% of the
gross sales from Oxford’s 146 franchise and corporate locations in
Canada and the United States included in the initial royalty pool
(the “Royalty” and together with the Acquisition,
the “Transaction”).
For further details with respect to the
Transaction, see DIV’s news release dated February 6, 2020, a copy
of which is available under DIV’s profile at www.sedar.com.
Dividend Increase
Given the successful completion of the
Transaction, DIV’s annual dividend will increase from 23 cents per
share to 23.5 cents per share as previously announced in DIV’s news
release dated February 6, 2020. The dividend increase will take
effect commencing with the March 2020 dividend.
Oxford Credit Facility
DIV and OX Royalties LP have entered into a term
sheet with a Canadian chartered bank for a senior credit facility
(the “Oxford Credit Facility”) that comprises of a
term loan facility of $11.0 million and a revolving facility of
$0.5 million. The Oxford Credit Facility is expected to have a term
of 5 years, be non-amortizing and have a floating interest rate
equal to the Bankers’ Acceptance Rate plus 1.95% per annum. The
proceeds from the Oxford Credit Facility will be used to repay
$11.0 million of the amounts currently drawn under the Acquisition
Facility. The Oxford Credit Facility will be secured against the
Oxford Rights and the royalties payable in connection therewith and
will have covenants customary for this type of credit facility. The
Oxford Credit Facility will also be guaranteed by DIV on a limited
recourse basis through the pledge of DIV’s interest in OX Royalties
LP. The Oxford Credit Facility remains subject to the finalization
of definitive legal documents and customary closing conditions.
About Diversified Royalty Corp.
DIV is a multi-royalty corporation, engaged in
the business of acquiring top-line royalties from well-managed
multi-location businesses and franchisors in North America. DIV’s
objective is to acquire predictable, growing royalty streams from a
diverse group of multi-location businesses and franchisors.
DIV currently owns the Sutton, Mr. Lube, AIR
MILES®, Mr. Mikes, Nurse Next Door and Oxford trademarks. Mr. Lube
is the leading quick lube service business in Canada with 185
locations across Canada and over $235 million of annual system
sales. AIR MILES® is Canada’s largest coalition loyalty program
with over 200 leading brand-name sponsors; approximately two-thirds
of Canadian households actively participate in the AIR MILES®
Program. Sutton is among the leading residential real estate
brokerage franchisor businesses in Canada with over 200 offices
across Canada. Mr. Mikes operates 45 casual steakhouse restaurants
primarily in western Canadian communities with over $85 million of
annual system sales. Nurse Next Door is one of North America’s
fastest growing home care providers and operates over 180 locations
across Canada, the United States and Australia with over $100
million of annual system sales. Oxford is one of Canada’s leading
franchised tutoring services with 155 locations globally.
DIV expects to increase cash flow per share by
making accretive royalty purchases and through the growth of
purchased royalties. DIV expects to pay a predictable and stable
dividend to shareholders and increase the dividend as cash flow per
share increases allow.
Forward Looking Statements
Certain statements contained in this news
release may constitute “forward-looking information" within the
meaning of applicable securities laws that involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking information. The use
of any of the words “anticipate”, “continue”, “estimate”, “expect”,
“intend”, “may”, “will”, ”project”, “should”, “believe”,
“confident”, “plan” and “intends” and similar expressions are
intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words.
Specifically, forward-looking information in this news release
includes, but are not limited to, statements made in relation to:
the effective date of the increase to the annual dividend; the
expectation that the goods and services tax paid by OX Royalties LP
in connection with its acquisition of the Oxford Rights will be
refundable; the expected terms of the Oxford Credit Facility and
the intended use of proceeds therefrom; DIV’s corporate objectives;
and DIV’s expectation that it will pay a predictable and stable
dividend to shareholders and increase the dividend as cash flow per
share increases allow. These statements involve known and unknown
risks, uncertainties and other factors that may cause actual
results or events, performance, or achievements of DIV to differ
materially from those anticipated or implied in such
forward-looking statements. DIV believes that the expectations
reflected in these forward-looking statements are reasonable but no
assurance can be given that these expectations will prove to be
correct. In particular there can be no assurance that: the Oxford
Credit Facility will be completed on the terms currently
contemplated or in accordance with the timing currently expected,
or at all, the goods and services tax paid by OX Royalties LP will
be refunded, and the timing thereof; DIV will be able to achieve
any of its corporate objectives or make monthly dividend payments
to the holders of its common shares. Given these uncertainties,
readers are cautioned that forward-looking information included in
this news release are not guarantees of future performance, and
such forward-looking information should not be unduly relied upon.
More information about the risks and uncertainties affecting DIV’s
business and the businesses of its royalty partners can be found in
the “Risk Factors” section of its Annual Information Form dated
March 11, 2019 and the “Risk Factors” section of its management’s
discussion and analysis for the three and nine months ended
September 30, 2019 that are available under DIV’s profile on SEDAR
at www.sedar.com.
In formulating the forward-looking statements
contained herein, management has assumed that, among other things,
DIV will obtain the expected benefits of the Transaction, the
Oxford Credit Facility will be completed on the terms currently
contemplated, OX Royalties LP will receive a full refund of the
goods and services tax paid in connection with its acquisition of
the Oxford Rights, and the business and economic conditions
affecting DIV and its royalty partners will continue substantially
in the ordinary course, including without limitation with respect
to general industry conditions, general levels of economic activity
and regulations. These assumptions, although considered reasonable
by management at the time of preparation, may prove to be
incorrect.
All of the forward-looking information disclosed
in this news release is qualified by these cautionary statements
and other cautionary statements or factors contained herein, and
there can be no assurance that the actual results or developments
contemplated thereby will be realized or, even if substantially
realized, that they will have the expected consequences to, or
effects on, DIV contemplated by such forward-looking information
contained herein. The forward-looking information included in this
news release is made as of the date of this news release and DIV
assumes no obligation to publicly update or revise such information
to reflect new events or circumstances, except as may be required
by applicable law.
THE TORONTO STOCK EXCHANGE HAS NOT
REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR THE
ACCURACY OF THIS RELEASE.
Additional Information
Additional information relating to the
Corporation and other public filings, is available on SEDAR at
www.sedar.com.
Contact:Sean Morrison, President and Chief
Executive Officer Diversified Royalty Corp.(604) 235-3146
Greg Gutmanis, Chief Financial Officer and VP
AcquisitionsDiversified Royalty Corp.(604) 235-3146
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