Park Lawn Income Trust

Park Lawn Income Trust
Park Lawn Company Limited

March 03, 2010 09:10 ET

Park Lawn Income Trust Announces Proposed Conversion to a Corporation and Business Combination involving Park Lawn Company Limited and a Subsidiary of LMS Medical Systems Inc.

TORONTO, ONTARIO--(Marketwire - March 3, 2010) - Park Lawn Income Trust ("Park Lawn")(TSX VENTURE:PLC.UN) and Park Lawn Company Limited ("PLCL") (CNSX:PRL) have entered into an agreement (the "Agreement") among Park Lawn, PLCL, LMS Medical Systems Inc. ("LMS") and a wholly-owned subsidiary thereof ("Subco") pursuant to which such parties will, among other things, participate in a series of transactions (collectively, the "Transaction") undertaken as part of a plan of arrangement (the "Arrangement") under section 182(1) of the Business Corporations Act (Ontario) designed to result in (1) Park Lawn converting from an income trust to a corporation (the "Conversion"), and (2) PLCL indirectly owning all of the assets of Park Lawn and all of the issued and outstanding securities of Subco.

Park Lawn's present monthly distribution of $.055 per unit will continue until the completion of the Transaction, and Park Lawn expects to continue monthly payments, which will be paid as dividends, subsequent to completion of the Transaction.

Rationale and Benefits for the Transaction

On October 31, 2006, the Department of Finance announced the Specified Investment Flow-Through Trust ("SIFT") income and distribution tax (the "SIFT Tax"). As a result of the SIFT Tax, the Department of Finance has made clear its intention to eliminate public income trusts. In order to qualify for a tax-free conversion, Park Lawn must convert to a corporation before the end of 2013. Having regard to these legislative changes and the financing and growth advantages Park Lawn can expect to enjoy as a corporation, Park Lawn believes that it is in its best interests to proceed with the Transaction at this time. The Transaction is also designed to afford LMS the opportunity to participate in the future growth of PLCL through its ownership of the securities of PLCL that will be issued to it as part of the Transaction.

In addition:

  • the Transaction provides for an effective and efficient method of converting from a SIFT to a corporation consistent with existing legislation;
  • the Conversion may result in greater access to capital and the removal of the "normal growth" and "undue expansion restrictions" in the SIFT legislation that limited Park Lawn's ability to consider strategic acquisitions;
  • the Conversion is expected to be a tax deferred rollover for unitholders of Park Lawn ("Park Lawn Unitholders") resident in Canada;
  • in respect of the anticipated future monthly dividends following the Conversion, Canadian taxable Park Lawn Unitholders will receive a dividend tax credit compared to current tax treatment as other income under Canadian tax legislation; and
  • the Conversion will lead to a simplified and more efficient corporate structure that will reduce overhead and administrative costs.

Frank Mills, Chief Executive Officer of the general partner of Park Lawn, stated that, "We are pleased to announce this Conversion as it allows us to continue to create long- term value for our unitholders by converting from a limited partnership to a growth oriented corporation with a continued expectation of the payment of cash dividends. The Conversion will also enable Park Lawn to pursue strategic growth opportunities in the United States and internationally which are limited by our current structure."

Principal Features of the Transaction

Exhaustive terms of the Transaction will be set forth in an arrangement agreement to be entered into among Park Lawn, PLCL, LMS and Subco. The terms of the Arrangement Agreement will, however, reflect those set forth in the Agreement which, among other things, provide that Park Lawn Unitholders will exchange their Park Lawn units, on a tax-free basis, for common shares of PLCL. The ratio pursuant to which units will be exchanged for common shares will be determined based on the relative values of the respective securities, which are yet to be definitively determined. Immediately thereafter, all of the assets of Park Lawn owned indirectly through its subsidiary trust will be transferred, on a tax free basis, to Subco. Park Lawn and its subsidiary trust will then be wound up and the shares of Subco will be distributed up to PLCL. PLCL and Subco will amalgamate and the shares of Subco owned by LMS will be redeemed. Upon completion of the Transaction, PLCL will operate the existing businesses of PLCL, Park Lawn and its subsidiaries and the existing board of directors and management of PLCL will continue to manage the consolidated entity. LMS will receive consideration in the form of cash and common shares of PLCL of an aggregate value of approximately $1,400,000. Completion of the Transaction is subject to satisfaction of customary conditions including, without limitation, receipt of all necessary shareholder, unitholder, board, trustee, regulatory and Court approvals.

About Park Lawn

Park Lawn is a trust established to indirectly hold six cemeteries in the Greater Toronto Area and an interest in Bloorpark Developments Inc. Its units are listed on the TSX Venture Exchange.

About PLCL

PLCL owns a 2.9 acre parcel of land located at 57 Linelle Street and the house and land located at 53 Linelle Street, Toronto. PLCL also holds a promissory note from Park Lawn Limited Partnership. PLCL's common shares are listed on the Canadian National Stock Exchange.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) nor the Canadian National Stock Exchange accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Park Lawn Income Trust
    Frank Mills
    (416) 233-8155 (FAX)
    Park Lawn Company Limited
    Frank Mills
    (416) 233-8155 (FAX)