Big Rock Brewery Income Trust
TSX : BR.UN

Big Rock Brewery Income Trust
BIG ROCK BREWERY LTD.

BIG ROCK BREWERY LTD.

October 22, 2010 16:35 ET

Big Rock Brewery Income Trust Announces Conversion Plans

CALGARY, ALBERTA--(Marketwire - Oct. 22, 2010) - Big Rock Brewery Income Trust (TSX:BR.UN) (the "Trust" or "Big Rock") is pleased to announce that its board of directors has unanimously approved the conversion of the Trust (the "Conversion") to a dividend paying corporate entity (the "Corporation"). The Conversion is being undertaken in response to the legislative changes enacted by the federal government that will apply a tax at the income trust level. The Conversion will occur pursuant to a statutory plan of arrangement under Section 193 of the Business Corporations Act (Alberta) (the "Plan of Arrangement") and is expected to become effective on or about January 1, 2011. 

Rationale For The Conversion

Since 2009, Big Rock has been considering alternatives available to it to provide long-term stability of distributions to its securityholders and to avoid the imposition of tax applicable commencing in 2011 in respect of specified investment flow-through ("SIFT") trusts and partnerships announced by the Department of Finance (Canada) on October 31, 2006 and enacted into legislation by the Government of Canada in June 2007. Big Rock believes that completing the Conversion will accomplish both of these objectives.

In addition:

  • the Plan of Arrangement 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 Big Rock's ability to consider strategic acquisitions;
  • the diminishing significance of the public business income trust market may diminish Big Rock's ability to raise capital in the future if it does not convert to a corporation;
  • the Corporation will be managed by the same experienced management team that currently manages Big Rock, thereby providing continuity to the management of the Corporation;
  • the Corporation will have a board of directors comprised of substantially the same individuals who currently serve as directors of Big Rock, thereby providing substantial continuity to the board of directors and corporate governance of the Corporation. Further, the Corporation is expected to have substantially the same committees of the board and committee membership within such committees;
  • following the Conversion, Big Rock will not be restricted in its efforts to broaden its investor base to include more shareholders not resident in Canada as is presently the case under its current legal structure; and
  • the Conversion is anticipated to lead to a simplified and more efficient corporate structure that will reduce overhead and administrative costs.

Corporate Dividend

Big Rock, based on its operational outlook, expects to be able to maintain its current monthly distribution of $0.10 per Trust unit for 2010 ($1.20 per unit annualized). Currently the Trust anticipates that subsequent to the Conversion a quarterly dividend in the amount of approximately $0.20 per share ($0.80 per share annualized) will be paid to shareholders of the Corporation. The dividend level represents an adjustment to the current annualized distribution rate of $1.20 per unit due to the anticipated tax that the business will be subject to in 2011 and the expected impact of current industry trends expected to continue into 2011. The anticipated quarterly dividend would represent a payout ratio of approximately 70% to 80% of after-tax cash flows. This dividend policy will continue to provide investors with an attractive yield, while providing an opportunity for growth.

Provided the Conversion is approved, dividends paid by Big Rock in 2011 will be taxed as dividends rather than regular income, as they are today. Certain investors may be entitled to dividend tax credits which would enhance after-tax yield and may reduce the after-tax impact of the reduction in distributions.

Going forward, Big Rock's intention is to continue to reward its investors with dividends consistent with the performance of the brewery. In determining actual dividend levels, the Board will consider the financial performance, capital plans, growth opportunities, expectations of future economic conditions and other factors. Dividend amounts are subject to the risk factors described herein and in the Trust's public disclosure documents including its current Annual Information Form.

Approvals, Meeting and Circular

The Conversion is subject to, among other standard conditions, the approval of the unitholders of the Trust, the Court of Queen's Bench of Alberta, the approval of the Toronto Stock Exchange. A management information circular respecting the Conversion is expected to be mailed to unitholders in November 2010 and will be available on SEDAR at www.sedar.com. A special meeting of unitholders is anticipated to occur in December 2010. If all necessary approvals and consents are obtained, it is anticipated that the Conversion will be completed on or about January 1, 2011. A further press release announcing the meeting date will follow. An electronic copy of this press release may also be obtained from SEDAR at www.sedar.com.

Forward-Looking Information

This press release contains certain forward-looking statements and forward-looking information ("forward-looking information") within the meaning of applicable Canadian securities laws. Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes. In particular, this press release includes forward-looking information relating to the Conversion, results of operations, the anticipated dividend policy of the Corporation, taxes, plans and objectives, access to capital, projected costs, business strategy and anticipated benefits of the Conversion. Big Rock believes the expectations reflected in such forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking information should not be unduly relied upon. Forward-looking information is based on various assumptions. Those assumptions are based on information currently available to Big Rock, including information obtained from third party industry analysts and other third party sources, and include the historic performance of Big Rock's businesses, current business and economic trends, completion of the Conversion, and the continuance of current tax legislation, currency, exchange and interest rates, trading data and cost estimates. You are cautioned that the preceding list of assumptions is not exhaustive. Forward-looking information is not a guarantee of future performance and involves a number of risks and uncertainties some of which are described herein. Such forward-looking information necessarily involves known and unknown risks and uncertainties, which may cause Big Rock's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, the failure to obtain the approvals required to complete the Conversion, the inability of the Corporation to maintain distributions or dividends as disclosed herein, unanticipated operating results or declines in revenues, profits or sales, limited, unfavorable or no access to capital or credit markets, the lack of availability of qualified management personnel, general economic conditions in Canada, the United States and globally, changes in government regulation of the alcoholic beverages and brewery industry, and other risk factors discussed in other public filings of the Trust including the Trust's current Annual Information Form. Any forward-looking information is made as of the date hereof and, except as required by law, Big Rock assumes no obligation to publicly update or revise such information.

About Big Rock Brewery

The Trust is an unincorporated open-ended limited purpose trust established under the laws of the Province of Alberta. The Trust owns all of the securities of Big Rock Brewery Operations Corp. and Big Rock Brewery Limited Partnership, which entitles the Trust to receive all cash flow available for distribution from the business of Big Rock after debt service payments, maintenance capital expenditures and other cash requirements.

Big Rock Brewery - headquartered in Calgary, Alberta - produces premium, all-natural craft beers. As Canada's leading craft brewer, Big Rock boasts a family of twelve exceptional ales and lagers, Rock Creek dry apple cider and an ongoing selection of seasonal beers. Big Rock products are sold in nine provinces and three territories in Canada and oddly enough they are also available in Korea. This year is Big Rock's 25th year of operations, which marks an important milestone for the brewery.

For more information on Big Rock Brewery visit bigrockbeer.com.

The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.

Contact Information

  • Big Rock Brewery Ltd.
    Aisling (Ash-ling) Tomei
    Manager, Corporate Relations
    (403) 203-3746
    atomei@bigrockbeer.com
    or
    Big Rock Brewery Ltd.
    Dwayne Dubois, CGA, CA
    Chief Financial Officer
    (403) 720-4465
    (403) 236-7523 (FAX)
    www.bigrockbeer.com