Boyd Group Income Fund

TSX : BYD.UN


Boyd Group Income Fund

November 29, 2012 16:03 ET

Boyd Group Income Fund Announces Agreement to Acquire U.S. Collision Repair Company and a $30 Million Bought Deal Financing of Convertible Debentures

WINNIPEG, MANITOBA--(Marketwire - Nov. 29, 2012) -

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Boyd Group Income Fund (TSX:BYD.UN) ("the Fund," "Boyd" or "the Boyd Group") today announced that it has entered into a definitive agreement to acquire (the "Acquisition") the shares of Ellis Hopkins, Inc., Timron Holdings, Inc. and S&L Autoglass, Inc., who together own and operate 14 collision repair centers and a glass repair and replacement business in northern Florida under the trade names Autocrafters Collision Repair, Walker Collision Repair and S&L Auto Glass (collectively "Autocrafters"). Autocrafters is the leading provider of automotive collision repair services in the Jacksonville area of north Florida, with extended operations in Tallahassee and Gainesville, Florida. The addition of Autocrafters is expected to be immediately accretive to the Fund's earnings and cash flows. Autocrafters generated sales of approximately US$32.6 million for the year ended December 31, 2011 and Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") of approximately US$4.0 million. Without considering other negative or positive adjustments or synergies, the Fund will incur additional rent expense of an estimated US$0.6 million per annum due to the fact it is not acquiring the land and buildings. The Acquisition is expected to be completed on November 30, 2012.

"We are very pleased to announce another multi-location collision repair operator acquisition," said Brock Bulbuck, President and Chief Executive Officer of the Boyd Group. "This will be our fourth multi-location acquisition this year, and the third in Florida. At the end of last year, we had no presence in Florida. Upon completion of the Autocrafters acquisition, we will have a total of 37 locations in the state, including the recently completed acquisition of The Recovery Room. These acquisitions build a strong presence in Florida, a market we consider attractive, and provides us with additional growth opportunities. Autocrafters has a similar customer base and business model to Boyd's, which should facilitate integration. This transaction demonstrates our commitment to our stated growth strategy and to solidifying our industry-leading position while continuing to look for attractive growth opportunities."

The total consideration of approximately US$19.5 million, subject to working capital adjustments, will be funded through a combination of cash, bank debt, convertible debt, and third-party financing.

Convertible Debenture Offering

In conjunction with the Acquisition, Boyd has entered into an agreement with National Bank Financial Inc. on behalf of a syndicate of underwriters consisting of National Bank Financial Inc., Cormark Securities Inc., CIBC World Markets Inc. acting as co‐leads and joint bookrunners, and including Laurentian Bank Securities Inc. and Octagon Capital Corp. (collectively, the "Underwriters"), pursuant to which the Fund will issue and the Underwriters shall purchase on a "bought-deal" basis, $30,000,000 aggregate principal amount of 5.75% convertible unsecured subordinated debentures due December 31, 2017 (the "Debentures") with a conversion price of $23.40 (the "Offering"). The Fund has granted the Underwriters an over-allotment option to purchase up to an additional $4,500,000 aggregate principal amount of Debentures exercisable in whole or in part at any time for a period of up to 30 days following the close of the Offering.

The net proceeds of the Offering will be principally used to replenish the cash balances of the Fund following its acquisition of Autocrafters and The Recovery Room as well as to fund ongoing growth for 2013, with the remainder being used for general working capital purposes.

The Fund expects to file a preliminary short form prospectus relating to the Offering on December 5, 2012 and closing of the Offering is expected to occur on or about December 19, 2012. The Offering is subject to normal regulatory approvals, including approval of the Toronto Stock Exchange. The Debentures will be offered in each of the provinces of Canada, excluding Quebec and, if offered in the United States, by way of private placement in accordance with applicable registration exemptions.

Proposed Unit Sales

Mr. Bulbuck and Mr. Tim O'Day, President and Chief Operating Officer of the Boyd Group's U.S. operations, have confirmed their intention to sell up to 191,900 units held by them. Approximately 63% of these units will be sold in "off market" transactions to existing Boyd trustees and senior managers at a price equal to a 5% discount to the 10 day volume weighted average price of the units ending November 28, 2012 so as to broaden and deepen management and insider ownership in the Fund. The balance of the units are being sold through the facilities of the TSX at market prices to third parties. In total, Mr. Bulbuck intends to sell 91,900 units and Mr. O'Day intends to sell 100,000 units, representing 14.2% and 17.5% respectively of each of their total investment in Boyd, including options. In relation to the purchase of units by the Boyd senior managers, The Boyd Group Inc. will provide loan support of approximately $1,000,000 for up to 75% of each senior manager's purchase, which loan shall be secured by the purchased units. Mr. Bulbuck and Mr. O'Day have agreed to coordinate all such sales exclusively through National Bank Financial Inc.

About The Boyd Group Inc.

The Boyd Group Inc. is the largest operator of collision repair centres in North America. The Company operates locations in the four Western Canadian provinces under the trade name Boyd Autobody & Glass (http://www.boydautobody.com), as well as in 14 U.S. states under the trade names Gerber Collision & Glass (http://www.gerbercollision.com), Pearl Auto Body and The Recovery Room. The Company also operates Gerber National Glass Services, an auto glass repair and replacement referral business with approximately 3,000 affiliated service providers throughout the United States. For more information on The Boyd Group Inc. or Boyd Group Income Fund, please visit our website at http://www.boydgroup.com.

About The Boyd Group Income Fund

The Boyd Group Income Fund is an unincorporated, open-ended mutual fund trust created for the purposes of acquiring and holding certain investments, including a majority interest in The Boyd Group Inc. and its subsidiaries. The Boyd Group Income Fund units trade on the Toronto Stock Exchange (TSX) under the symbol BYD.UN.

Caution concerning forward-looking statements

Statements made in this press release, other than those concerning historical financial information, may be forward-looking and therefore subject to various risks and uncertainties. Some forward-looking statements may be identified by words like "may", "will", "forecast", "anticipate", "estimate", "expect", "intend", or "continue" or the negative thereof or similar variations. Forward-looking statements in this press release include the likelihood of the Acquisition and the Offering being completed on the stated terms or at all and the accretive nature of the Acquisition to the Fund's earnings and cash flows.

Readers are cautioned not to place undue reliance on such statements, as actual results may differ materially from those expressed or implied in such statements. Factors that could cause results to vary include, but are not limited to: dependence upon The Boyd Group Inc. and its Subsidiaries; cash distributions not guaranteed; inability to successfully integrate acquisitions; economic downturn; operational performance; rapid growth; loss of key customers; brand management and reputation; insurance risk; quality of corporate governance; tax position risk; risk of litigation; acquisition risk; credit & refinancing risks; dependence on key personnel; employee relations; decline in number of insurance claims; market environment change; reliance on technology; weather conditions; expansion into new markets; fluctuations in operating results and seasonality; increased government regulation and tax risk; execution on new strategies; operating hazards; energy costs; U.S. health care costs and workers compensation claims; low capture rates; key supplier relationships; capital expenditures; competition; potential undisclosed liabilities associated with acquisitions; foreign currency risk; ability to successfully integrate acquisitions and realize synergies; regulatory risks; margin pressure; acquisition and start-up growth and ongoing access to capital; environmental, health and safety risk; interest rates; and the Fund's success in anticipating and managing the foregoing risks.

We caution that the foregoing list of factors is not exhaustive and that when reviewing our forward-looking statements, investors and others should refer to the "Risk Factors" section of the Fund's Annual Information Form, the "Risks and Uncertainties" and other sections of our Management's Discussion and Analysis of Operating Results and Financial Position and our other periodic filings with Canadian securities regulatory authorities. All forward-looking statements presented herein should be considered in conjunction with such filings. All forward-looking statements are made as of this date and the Fund assumes no obligation to update such statements.

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