Prestige Telecom Inc.
TSX VENTURE : PR

Prestige Telecom Inc.

November 25, 2008 20:02 ET

Prestige Telecom Provides Update on Proposed Acquisition of Radian

MONTREAL, QUEBEC--(Marketwire - Nov. 25, 2008) - Prestige Telecom Inc. ("Prestige" or the "Company") (TSX VENTURE:PR) of Montreal, Quebec, announces that it has amended some of the terms of its previously announced acquisition of all of the outstanding shares of Radian Communication Services (Canada) Limited ("Radian"), as well as certain United States assets of an affiliate of Radian (the "Acquisition"). After completion of the Acquisition, Prestige will provide outsourced telecommunications infrastructure services to wireless, wireline, cable television networks and OEM companies across Canada. Prestige will be well-positioned to capitalize on the announced capital expenditure plans for new wireless networks and network build-outs of Canada's incumbents and new entrants following the Advanced Wireless Services spectrum auction.

Under the revised terms of the Radian purchase agreement, the purchase price of Radian will be approximately $20.3 million, plus assumed debt of approximately $0.6 million, subject to adjustments. The consideration paid to the owners of Radian will consist of:

- Cash of $7.7 million;

- Approximately $6.3 million in common shares of Prestige (the "Common Shares") at a deemed issue price of $0.25 per share; and

- Approximately $6.3 million in the form of convertible notes bearing interest at 10% per annum if paid in cash or 12% per annum if interest is paid in kind ("PIK") in the form of additional PIK convertible notes (the "Convertible Notes"), which Convertible Notes will be convertible at a price of $0.31 per share for a period of three years.

Financing for the Acquisition will be as follows:

- The Company is in negotiations to establish a bank credit facility (the "Credit Facility") in the anticipated authorized amount of $17.0 million with a major Canadian financial institution, subject to satisfactory completion of any outstanding due diligence, and satisfaction of all outstanding conditions precedent;

- Prestige intends to complete a concurrent private placement offering of up to 28,000,000 Common Shares at a price of $0.25 per share for gross proceeds of up to $7.0 million (the "Private Placement Financing");

- Prestige intends to complete a concurrent private placement of up to $4.5 million principal amount of convertible notes with the same terms as the Convertible Notes being issued pursuant to the Acquisition (the "Convertible Note Financing"); and

- Prestige intends to complete a brokered private placement of a minimum of 4,000,000 and a maximum of 12,000,000 Common Shares at a price of $0.25 per share for gross proceeds of a minimum of $1 million and a maximum of $3 million (the "Brokered Private Placement Financing"). The Common Shares issued pursuant to the Brokered Private Placement Financing are eligible and meet the criteria set under the Quebec SMB Growth Stock Plan (ACCRO), which program allows eligible institutions to claim a 100% deduction on their Quebec taxes for any ACCRO eligible shares they purchase, and all or a portion thereof may be sold to such eligible institutions.

Prestige intends to use the gross proceeds of the Credit Facility, the Private Placement Financing, the Convertible Note Financing and the Brokered Private Placement Financing, to fund the cash portion of the purchase price for the Acquisition, to repay Prestige's current bank credit facility, to pay the costs of the Acquisition, and for working capital purposes.

"We are very pleased to proceed with the acquisition of Radian, creating a $100 million telecommunications infrastructure services company with a national footprint and with wireless, wireline and cable TV network expertise," said Pierre Yves Methot, Chairman and Chief Executive Officer of Prestige. "In the past few months, following the AWS spectrum auction in Canada, telecommunications companies have acted quickly to announce plans to utilize their new spectrum, with incumbents announcing plans to upgrade their wireless networks and new entrants announcing plans for network build outs. We are now well-positioned to take advantage of the rapid expansion and upgrading of our customers' networks, as well as the growing trend to increased outsourcing of infrastructure services by these telecommunications companies."

Blackmont Capital Inc. ("Blackmont" or the "Agent") was retained by Prestige to act as financial advisor in connection with the Acquisition of Radian and Prestige has engaged Blackmont, to act as agent of Prestige on a commercially reasonable efforts basis for the Brokered Private Placement Financing and the Private Placement Financing. In connection with the Brokered Private Placement Financing, the Agent will be paid a cash commission of 8%, will be reimbursed for its expenses, and will be issued agent's compensation options to purchase up to 8% of the Common Shares issued under the Brokered Private Placement Financing. In connection with the Private Placement Financing, the Agent will be paid a cash advisory fee of 4.5%.

The Acquisition of Radian is expected to close concurrent with the closing of the Private Placement Financing, Convertible Note Financing, Credit Facility and Brokered Private Placement Financing, and is also subject to the receipt of required regulatory and other approvals; the entering into of non-competition agreements with certain of the Radian vendors; the entering into of a qualification rights agreement among Prestige, Radian's shareholder and other parties; and the receipt of all necessary third party consents.

The Company is in negotiations with an arm's length private entity based in Montreal, Quebec (the "Major Investor"), pursuant to which, in the event such transactions are completed, the Major Investor would acquire 18,000,000 Common Shares pursuant to the Private Placement Financing and $4,500,000 principal amount of Convertible Notes pursuant to the Convertible Note Financing.

Upon completion of the Acquisition, Private Placement Financing, Convertible Note Financing, Credit Facility and Brokered Private Placement Financing, a nominee of the Major Investor will join the Board of Directors of Prestige and Brian W. McFadden will resign as a Director to make room on the Board for the nominee.

About Radian

Radian (www.radiancorp.com), 89%-owned by Onex Corporation, provides technical and aerial services to the Canadian communications and broadcast industries. Radian has over 310 full-time-equivalent employees operating from seven branch and service offices across Canada and the U.S. Radian's services include network design, equipment installation, tower engineering, site construction, and infrastructure and equipment maintenance. Radian's deployment expertise ranges from stand-alone projects such as a broadcast tower installation, to large multi-site network deployments on a national basis for wireless communications. Given the significant reorganization of the balance sheet of Radian as part of the acquisition, management of Prestige is of the view the only relevant financial information of Radian for the year ended December 31, 2007, is that Radian had revenue of $57.7 million and adjusted EBITDA(1) of $3.3 million, and for the six months ended June 30, 2008, Radian had revenue of $26.8 million and adjusted EBITDA(1) of $1.0 million. The Radian financial statements for the year ended December 31, 2007 are audited and the Radian financial statements for the six months ended June 30, 2008 are unaudited.

About Prestige Telecom Inc.

Prestige is a leading provider of network engineering, materials furnishing, installation and support services (commonly referred to as EF&I services) required to construct, operate and maintain wireline, wireless and cable television networks. Prestige assists telecommunications original equipment manufacturers and service providers to engineer, install and upgrade their infrastructures to support enhanced voice, high speed data and video services.

In Canada, Prestige operates eight service locations based in Montreal, Quebec; Mississauga and Markham, Ontario, Surrey, British Columbia, Calgary and Edmonton, Alberta, Bedford, Nova Scotia and St-John, New Brunswick and has 400 professional and technical personnel. Prestige operates in the United States market through a mutual subcontractor agreement with Comforce Telecom Inc. under the trade name Prestige Comforce Professional Services ("PCPS"). PCPS is based in Plano, Texas and provides services to customers throughout the United States.

Prestige currently has 55,691,568 Common Shares outstanding.

(1) Earnings before interest, taxes, depreciation, amortization, foreign exchange and integration costs. Adjusted EBITDA for Radian represents the EBITDA for this company, adjusted for the assets being sold and non-recurring expenses.

Except for historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially. Prestige will not update these forward-looking statements to reflect events or circumstances after the date hereof. More detailed information about potential factors that could affect financial results is included in the documents filed from time to time with the Canadian securities regulatory authorities by Prestige.

The securities of Prestige being offered have not been, nor will be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent U.S. registration or an applicable exemption from U.S. registration requirements. This release does not constitute an offer for sale of securities in the United States.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the Acquisition and has neither approved nor disapproved the contents of this press release.

Contact Information

  • Prestige Telecom Inc.
    Pierre Yves Méthot
    Chairman and Chief Executive Officer
    (514) 457-4488, Ext. 277
    Email: pymethot@prestige-tel.com