Alaris Royalty Corp.

Alaris Royalty Corp.

November 29, 2010 08:08 ET

Alaris Royalty Corp. Adds a $32,500,000 Partnership, Increases Dividend by 6.25% and Enters Into Bought Deal Financing

CALGARY, ALBERTA--(Marketwire - Nov. 29, 2010) -


Alaris Royalty Corp. ("Alaris" or the "Corporation") (TSX:AD) is pleased to announce that it has entered into a new partnership agreement (the "Agreement") with Solowave Design Inc. ("Solowave") to form Solowave Design LP (the "Partnership") and has agreed to contribute $32,500,000 (the "Solowave Contribution") to the Partnership in return for an initial $5,000,000 annual preferred distribution. The investment in the new Partnership will be funded by a $25,000,500 bought deal financing led by Acumen Capital Finance Partners Limited, an expected increase to the Corporation's existing senior debt facility and working capital. In addition, subject to the completion of the investment in the Partnership, Alaris' board of directors (the "Board of Directors") has determined to increase Alaris' monthly dividend by $0.005 to $0.085 per share, an increase of 6.25%.


Solowave is a leading designer and manufacturer of ready-to-assemble residential wooden play centers. Based in Mount Forest, Ontario, Solowave also has operations in the United States and Asia, and sells its products globally throughout North America, Europe, Australia and the United Arab Emirates. Solowave has consistently increased its revenues throughout the economic downturn achieving a four year compound annual net revenue growth rate of 29%. 

Similar to its transactions with Alaris' other partners, Alaris will acquire Preferred Units in the Partnership that will entitle Alaris to receive an initial annual preferred distribution of $5,000,000, payable monthly, in priority to holders of other units in the Partnership. For the first twelve months following the closing of the Solowave Contribution, Alaris' distribution will represent an expected 15.4% return on contributed cash. The preferred distribution will be adjusted annually based on the Partnership's change in "same customer net sales", subject to a maximum annual increase or decrease of 6%. The closing of the Solowave Contribution is conditional upon the Company obtaining financing for the transaction.

Following the completion of the Solowave Contribution, the distributable cash per share generated by Alaris is expected to increase by approximately $0.13 per share.

"The addition of Solowave as a partner is a significant event for our Company" said Steve King, President and Chief Executive Officer of Alaris. "Solowave is a world class company that diversifies our revenue stream and adds growth to our company. Solowave has everything that we look for in a potential private company partner: a young, proven management team; low levels of debt; a track record of sales and earnings growth; and Alaris' distribution represents a minority of Solowave's prior year cash flow. We look forward to subsequent transactions with Solowave as they continue to grow their business around the world."

"Solowave received several competing offers for investment. However, it was an easy choice to move forward with Alaris; their proposal was not only competitive financially but also provided Solowave with the maximum freedom and flexibility to run and grow its business."- Richard S. Boyer, Chief Executive Officer of Solowave.

Dividend Increase

After considering the positive impact the Solowave Contribution is expected to have on Alaris, the Board of Directors has approved, subject to the completion of the Solowave Contribution, an increase to the monthly dividend on the Corporation's outstanding voting common shares (the "Common Shares") and non-voting common shares (the "Non-Voting Shares" and together with the Common Shares, the "ARC Shares") by $0.005 per ARC Share to $0.085 per ARC Share (or $1.02 on an annualized basis) from $0.08 per ARC Share ($0.96 on an annualized basis). 

Provided that the Solowave Contribution closes on or before December 31, 2010, the first increased dividend is expected to be paid on January 17, 2011 to holders of ARC Shares of record at the close of business on December 31, 2010. It is expected that the Corporation's payout ratio will be reduced by approximately 6% after giving effect to the transactions with Solowave and the dividend increase.

Bought Deal Financing

In connection with the Solowave Contribution, Alaris has entered into an agreement with a syndicate of underwriters (the "Underwriters") led by Acumen Capital Finance Partners Limited and including CIBC World Markets Inc., Raymond James Ltd., Canaccord Genuity Corp. and Cormark Securities Inc., pursuant to which the Corporation will sell and the Underwriters will purchase, on a "bought deal basis", subject to regulatory approval, 2,381,000 subscription receipts of the Corporation (the "Subscription Receipts") at a price of $10.50 per Subscription Receipt for total gross proceeds of $25,000,500 (the "Offering"). The Corporation has also granted to the Underwriters an over-allotment option (the "Over-Allotment Option") to purchase up to an additional 96,000 Subscription Receipts at the same price, exercisable in whole or in part at any time for a period of up to 30 days following closing of the Offering, to cover overallotments.

Each Subscription Receipt will represent the right to receive one Common Share without the payment of any additional consideration, on the closing of the Solowave Contribution. The proceeds of the Offering will be deposited in escrow pending the closing of the Solowave Contribution. If the Solowave Contribution closes on or before January 31, 2011, the net proceeds of the Offering will be released to Alaris and used by Alaris to fund a portion of the Solowave Contribution. The Corporation intends to draw additional debt on its senior debt facility and use existing working capital to fund the remaining portion of the Solowave Contribution.

Completion of the Offering is subject to certain conditions, including the receipt of all necessary regulatory approvals.

The Subscription Receipts will be offered in each of the provinces of Canada, except Quebec, by way of a short form prospectus. Closing of the Offering is expected to occur on or before December 16, 2010.

The securities offered have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold within the United States absent registration or an exemption from the registration requirements. This release does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any State in which such offer, solicitation or sale would be unlawful.

About Alaris:

Alaris provides alternative financing to private companies ("Private Company Partners") in exchange for royalties or distributions, with the principal objective of generating stable and predictable cash flows for dividend payments to its shareholders. Royalties or distributions from the Private Company Partners are structured as a percentage of a "top line" financial performance measure such as gross margin, same-store sales and same customer net sales and rank in priority to the owners' common equity position.

Non-GAAP Measures

This press release refers to certain non-GAAP measures, including distributable cash per share and payout ratio. The terms "distributable cash per share" and "payout ratio" (collectively, the "Non-GAAP Measures") are financial measures used by the Corporation that are not standard measures under Canadian generally accepted accounting principles ("GAAP"). The Corporation's method of calculating the Non-GAAP Measures may differ from methods used by other issuers. Therefore, the Corporation's use of the Non-GAAP Measures may not be comparable to similar measures presented by other issuers. These Non-GAAP Measures should be read in conjunction with the annual audited and quarterly reviewed financial statements of the Company, which are available on SEDAR at Distributable cash per share means Alaris' net income prepared in accordance with GAAP excluding non-cash items that include stock-based compensation expense, future income taxes, and depreciation and amortization divided by the weighted average number of Common Shares issued and outstanding in the share capital of the Corporation over such period. Payout ratio is defined as dividends divided by cash from operations before any changes in non-cash working capital. Management believes distributable cash per share and payout ratio are useful supplemental measures from which to determine the Corporation's performance and its ability to service debt, working capital, capital expenditures, income taxes and dividends. 

Forward-Looking Statements

Alaris' public communications often include written or oral statements which contain forward-looking information. Statements of this type are included in this news release and may be included in our other filings with Canadian securities regulators, or in our other communications. Many of these statements can be identified by words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues", or similar words, or the negative of such words. All such statements are made pursuant to the applicable provisions of, and are intended to be forward-looking statements under, applicable Canadian securities legislation. Statements containing forward-looking information include, but are not limited to, comments with respect to: the completion of the Solowave Contribution and the Offering; Alaris' expected distributions from the Partnership; the structure of the Solowave Contribution; the increase in Alaris' senior debt facility; the effect of the Solowave Contribution and the Offering on Alaris; the Corporation's intention to increase its monthly dividend and the effective date thereof; the effect of the dividend increase and the Solowave Contribution on the Corporation's payout ratio; the closing date of the Offering; and the use of proceeds of the Offering.

By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. These assumptions include assumptions concerning: Solowave's ability to continue to grow and add to its business, maintain its relationships with its existing customers and further diversify its customer base; Solowave's ability to continue to increase its cash flow and earnings, which will be favourable to Alaris; the receipt of regulatory approvals for the Offering; the closing of the Offering; and the calculation of distributable cash per share. Alaris is also assuming that any changes to the economy, the sporting goods industry or regulations on the sporting goods industry will not adversely affect Solowave's business. These assumptions are material factors considered when setting the outlook for Alaris' partnership with Solowave.

There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur. Forward-looking statements are subject to risks, uncertainties and assumptions and should not be read as guarantees or assurances of future performance. The actual results of Alaris and Solowave could materially differ from those anticipated in the forward-looking statements contained herein as a result of certain risk factors, including, but not limited to, the following: a loss of a key customer by Solowave; general economic conditions; failure to complete or realize the anticipated benefit of the Solowave Contribution; government regulations; and risks relating to the Solowave and its business. Accordingly, readers are cautioned not to place undue reliance on any forward-looking information contained in this news release. Statements containing forward-looking information reflect management's current beliefs and assumptions based on information in its possession on the date of this news release. Although management believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct, as such undue reliance should not be placed on forward-looking statements. The foregoing lists are not intended to be exhaustive. The forward-looking statements contained herein are made as of the date hereof and Alaris undertakes no obligation to update any such forward-looking statements unless required under applicable securities legislation.

Contact Information

  • Alaris Royalty Corp.
    Curtis Krawetz
    Investor Relations