CanaDream Corporation
TSX VENTURE : CDN

CanaDream Corporation

May 08, 2017 12:13 ET

CanaDream Corporation Enters Into Arrangement Agreement to Be Taken Private by Apollo Tourism & Leisure Ltd.

ROCKY VIEW COUNTY, ALBERTA--(Marketwired - May 8, 2017) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS.

CanaDream Corporation ("CanaDream" or the "Company") (TSX VENTURE:CDN) is pleased to announce that it has entered into a definitive arrangement agreement (the "Arrangement Agreement") with Australian-based Apollo Tourism & Leisure Ltd. ("Apollo") and ATL Canada Ltd., an affiliate of Apollo (the "Purchaser"), whereby the Purchaser has agreed to acquire all of the issued and outstanding common shares of CanaDream (the "CanaDream Shares") that are not currently owned by Apollo or its affiliates, pursuant to a plan of arrangement under section 193 of the Business Corporations Act (Alberta) (the "Arrangement").

The Arrangement

Under the terms of the Arrangement Agreement, the Purchaser has agreed to purchase: (i) the CanaDream Shares controlled by Mr. Blaine Nicholson, a director of the Company, and Mr. Brian Gronberg, the President, Chief Executive Officer and a director of the Company (collectively, the "Locked-Up Shareholders") for consideration of $1.68 per share (representing approximately 37% of the CanaDream Shares), and (ii) all other outstanding CanaDream Shares (other than CanaDream Shares held by an affiliate of Apollo) for consideration of $1.85 per share (representing approximately 43% of the CanaDream Shares). Each outstanding option to purchase CanaDream Shares will be purchased by the Company for a price equal to the difference between the exercise price of such option and $1.85. Upon completion of the Arrangement, it is expected that the CanaDream Shares will be de-listed from the TSX Venture Exchange (the "TSXV") and that CanaDream will cease to be a reporting issuer in Canada.

The Arrangement is anticipated to close in mid-July 2017. Closing of the Arrangement is subject to the approval of not less than 66 2/3% of the votes cast by holders of CanaDream Shares and "majority of the minority" approval under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101") at the CanaDream Meeting (as defined below). For the purposes of the "majority of the minority" approval requirement under MI 61-101, the votes cast by affiliates of Apollo will be excluded. The Arrangement is exempt from the formal valuation requirement set out in MI 61-101 pursuant to section 4.4(a) of MI 61-101. The Arrangement is also subject to, among other conditions, the approval of the Alberta Court of Queen's Bench, the receipt of all necessary regulatory approvals and satisfaction of certain other closing conditions that are customary for a transaction of this nature.

It is anticipated that a meeting of the holders of CanaDream Shares will be held on or around July 10, 2017 (the "CanaDream Meeting") following the mailing to the holders of CanaDream Shares of a management information circular regarding the Arrangement in June 2017. CanaDream and the Purchaser have each agreed to pay a non-completion fee of approximately $660,000 in certain circumstances as set forth in the Arrangement Agreement.

CanaDream Board Approval and Recommendation

CanaDream appointed a special independent committee (the "Special Committee") of the Company's board of directors (the "Board") consisting of Alfred Sailer and Gerald Wood to review and evaluate the Arrangement. Based on the recommendation of the Special Committee, the Board has unanimously approved the Arrangement Agreement, determined that the Arrangement is in the best interests of CanaDream and, based on the verbal fairness opinion provided by Grant Thornton LLP, determined that the consideration to be received by the holders of CanaDream Shares (other than the Locked-Up Shareholders) pursuant to the Arrangement is fair, from a financial point of view, to such holders, and the Board has unanimously resolved to recommend that the holders of CanaDream Shares vote in favour of the Arrangement at the CanaDream Meeting. Mr. Luke Trouchet, Chief Executive Officer Apollo and a director of CanaDream, declared his conflict and recused himself from all Board discussions and abstained from voting on all matters related to the Arrangement.

The directors of CanaDream (other than Mr. Trouchet), holding approximately 39% of the outstanding CanaDream Shares have entered into support agreements pursuant to which each has agreed to vote their CanaDream Shares in favour of the Arrangement.

Strategic Rationale

The key benefits to holders of CanaDream Shares with respect to the Arrangement are as follows:

  • The consideration of $1.85 per share offered to the holders of CanaDream Shares (other than the Locked-Up Shareholders) under the Arrangement represents a 15.6% premium to the 90 calendar day volume weighted average trading price of the CanaDream Shares.
  • The consideration paid under the Arrangement is in cash, providing certainty of value and an immediate opportunity for holders to dispose of all of their CanaDream Shares at a premium, without the payment of brokerage commissions.

Complete details of the terms of the Arrangement are set out in the Arrangement Agreement, which will be filed by CanaDream and will be available for viewing under CanaDream's profile at www.sedar.com.

Apollo Entitlement Offer

Apollo is conducting a non-renounceable entitlement offer to raise A $40.3 million ("Entitlement Offer"). The Entitlement Offer is fully underwritten by Morgans Corporate Limited. The proceeds of the Entitlement Offer will provide funds for, among other things, the acquisition of CanaDream. The press release of Apollo announcing, among other things, the Entitlement Offer and Apollo's acquisition of CanaDream which has been released to the Australian Securities Exchange (ASX) is attached as "Schedule A" to this press release.

ADVISORY ON FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements and information ("forward-looking statements") within the meaning of applicable securities laws and is based on the expectations, estimates and projections of management of CanaDream as of the date of this news release, unless otherwise stated. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this news release contains forward-looking statements concerning: anticipated benefits of the Arrangement to the holders of Common Shares, the timing and anticipated receipt of required regulatory, court and securityholder approvals for the Arrangement; the ability of CanaDream to satisfy the other conditions to, and to complete, the Arrangement; the anticipated timing of the management information circular regarding the Arrangement and the holding of the CanaDream Meeting, the Entitlement Offer and the anticipated use of proceeds of the Entitlement Offer. Such forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Investors are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions.

In respect of the forward-looking statements concerning the anticipated benefits and completion of the proposed Arrangement and the anticipated timing for completion of the Arrangement, CanaDream has provided such in reliance on certain assumptions that it believes are reasonable at this time, including assumptions as to the time required to prepare and mail securityholder meeting materials, including the required information circular; the ability of each of CanaDream, Apollo and the Purchaser to receive, in a timely manner, the necessary regulatory, court, securityholder, stock exchange and other third party approvals, and the ability of each of the parties to the Arrangement Agreement to satisfy, in a timely manner, the other conditions to the closing of the Arrangement.

The anticipated dates provided may change for a number of reasons, including unforeseen delays in preparing meeting materials, inability to secure necessary securityholder, regulatory, court or other third party approvals in the time assumed or the need for additional time to satisfy the other conditions to the completion of the Arrangement. Accordingly, readers should not place undue reliance on the forward- looking statements contained in this news release.

Since forward-looking statements addresses future events and conditions, such information by its very nature involves inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to the risks associated with the industries in which each of Apollo and CanaDream operates in general such as: operational risks; delays or changes in plans with respect to growth projects or capital expenditures; costs and expenses; health, safety and environmental risks; interest rate and exchange rate fluctuations; competition; failure to realize the anticipated benefits of the Arrangement;; and changes in legislation, including but not limited to tax laws. Risks and uncertainties inherent in the nature of the Arrangement include the failure to obtain necessary securityholder, regulatory, court and other third party approvals, or to otherwise satisfy the conditions to the Arrangement, in a timely manner, or at all. Failure to so obtain such approvals, or the failure to otherwise satisfy the conditions to the Arrangement, may result in the Arrangement not being completed on the proposed terms, or at all.

Readers are cautioned that the foregoing list of factors is not exhaustive. The reader is cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements contained in this news release are made as of the date hereof and CanaDream undertakes no obligations to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS NEWS RELEASE.

SCHEDULE A

ASX Announcement

8 May 2017

PROPOSED ACQUISITIONS OF CANADREAM AND KRATZMANN CARAVANS, UPDATED OUTLOOK AND CAPITAL RAISING

  • Plan of arrangement to acquire balance of CanaDream Corporation shares for approximately A$28m.
  • Binding agreement to acquire all the assets of Kratzmann Caravans and Clint's Caravan Warehouse for approximately A$15.6m.
  • On track to exceed prospectus FY17 pro forma forecast NPAT by 5% - 10%.
  • Underwritten non-renounceable 4 for 17 entitlement offer to raise approximately A$40.3m at A$1.18 per share.

Apollo Tourism & Leisure Ltd (ASX:ATL) ("Apollo" or "the Company") is pleased to announce that it has taken steps to expand the Company's rental operations into Canada, as well as grow its Australian retail footprint.

Through two proposed transactions, Apollo will acquire:

  • One of the largest RV rental and sales companies in Canada, CanaDream Corporation ("CanaDream"); and
  • Successful, established and growing retailer of new and used caravans and motorhomes, Kratzmann Caravans and Clint's Caravan Warehouse (together, "Kratzmanns").

Managing Director and CEO, Luke Trouchet said, "Since listing in November 2016, we have identified and executed opportunities to support our growth plans and these investments will both make important contributions to Apollo's business."

"CanaDream is a major strategic acquisition that will support Apollo's growth plans in North America and expand our leadership to include a highly capable senior management team, with deep experience in the North American RV industry."

"Kratzmanns contributes to Apollo's strategy of becoming a leading player in the Australian RV retail market and further expands our retail sales network across the country."

The CanaDream and Kratzmanns transactions and the related capital raising are expected to be earnings accretive in FY18 on a 12 month basis.

Reference should be made to the offer information booklet released to the ASX on 9 May 2017.

ACQUISITION OF CANADREAM

Highlights

Apollo has proposed to acquire all the common shares in TSX Venture Exchange listed company CanaDream not currently owned (approximately 80%) by Apollo for approximately A$28m cash consideration by way of a plan of arrangement ("Plan").

The Plan is in two parts - C$1.68 per share for shares owned by the Chairman and President/CEO of CanaDream (approximately 37%) and C$1.85 per share for all other shareholders (approximately 43%). Apollo currently owns approximately 20% of CanaDream.

The CanaDream Chairman and President/CEO have also entered into irrevocable agreements to vote in favour of the Plan. CanaDream's Independent Directors are recommending shareholders vote in favour of the Plan in the absence of a superior proposal. The plan is expected to complete in July 2017.

CanaDream has a fleet of approximately 1,000 rental units servicing the Canadian RV rental market. For the 12 month period to 31 January 2017, CanaDream reported profit before tax ("PBT") of C$5.05 million on C$49.29m revenue, reflecting a PBT valuation multiple of 6.95x.

Strategic Rationale

  • 100% ownership of CanaDream supports Apollo's growth plans in North America and provides access to a highly capable local management team.
  • Apollo has a deep knowledge of CanaDream, having owned approximately 20% and held Board representation since 2009. The long-term co-operation between the two businesses will now be formalised and deliver additional operational and financial synergies, which have not been incorporated into any management projections or Plan metrics.
  • Deepens leadership team and increases regional management strength.

Earnings impact

The CanaDream acquisition is earnings accretive on a FY17 12 month pro forma basis and is expected to be earnings accretive on a 12 month basis into FY18.

Website: www.canadream.com

ACQUISITION OF KRATZMANN CARAVANS

Highlights

Apollo has entered into a binding agreement to acquire the assets, including the brand names, of the businesses known as Kratzmann Caravans and Clint's Caravan Warehouse for A$[15.6]m. The acquisition will be funded by a combination of A$6.7m cash, A$0.9m in Apollo shares (escrowed for 18 months), and floor plan financing of A$8m, subject to normal completion adjustments.

Kratzmanns is based in south-east Queensland and is a leading retailer for a number of popular motorhome and caravan brands. Kratzmanns has four locations across south east Queensland.

Strategic Rationale

The Kratzmanns acquisition accelerates Apollo's strategy to grow its Australian retail sales business and leverage the Winnebago, Adria and Talvor brands.

Earnings impact

The Kratzmanns acquisition is earnings accretive on a FY17 12 month pro forma basis and is expected to be earnings accretive into FY18.

Websites: www.kratzmann.com.au and www.thecaravanwarehouse.com.au

OUTLOOK

  • Apollo is on track to exceed its prospectus FY17 pro forma net profit after tax forecast by between 5% and 10%.
  • There is expected to be a material once off tax benefit from tax consolidation in the FY17 result. The quantum is still being finalised and will be disclosed once known.
  • The CanaDream and Kratzmanns acquisitions are earnings accretive on a FY17 12 month pro forma basis and expected to be earnings accretive into FY18.
  • Forward rental bookings are looking positive in all geographies. Continued growth in new vehicle sales is expected in Australia and New Zealand, particularly for Adria and Winnebago brands.
  • It is intended that the Brisbane manufacturing facility will move to a larger premises in the 2018 financial year, which will add to leasing costs but will provide medium term efficiency benefits and allow for expected future growth.

ENTITLEMENT OFFER

Apollo is conducting a fully underwritten non-renounceable entitlement offer to raise approximately A$40.3 million ("Entitlement Offer").

Under the Entitlement Offer, eligible shareholders will be able to subscribe for 4 fully paid ordinary shares ("New Shares") for every 17 Apollo shares that they hold at 7.00pm (AEST) on Friday, 12 May 2017 ("Record Date") at the issue price of A$1.18 per New Share. Apollo shares will trade cum entitlements on Tuesday, 9 May and Wednesday, 10 May 2017.

The issue price under the Entitlement Offer of A$1.18 represents a discount of:

  • 8.2% to the theoretical ex-rights issue price ("TERP")1; and
  • 9.9% to the last traded price of Apollo shares before this announcement.

The Entitlement Offer is fully underwritten by Morgans Corporate Limited ("Underwriter").

The proceeds of the Entitlement Offer will provide funds for the acquisition of CanaDream, reset the balance sheet after Apollo's acquisitions of Kratzmanns (which is expected to settle prior to allotment of New Shares under the Entitlement Offer), Sydney RV and Camplify, and to fund the costs of the Entitlement Offer.

The Entitlement Offer is non-renounceable, meaning that shareholders may not sell their Entitlements to third parties if they do not wish to take them up. A market will not be established for Entitlements trading. If shareholders do not take up all or any part of their Entitlements by the Closing Date, they will lapse.

The Entitlement Offer will include a top-up facility, allowing shareholders who take up their full entitlement to elect to receive more shares under the Entitlement Offer. The top-up facility is subject to the availability of New Shares which are not subscribed for under the Entitlement Offer and allocation is at the discretion of the board.

The Entitlement Offer will be made to all eligible shareholders ("Eligible Shareholders"), being all shareholders who:

  • have a registered address in Australia, New Zealand, Hong Kong or Singapore;
  • are not in the United States of America and not persons (including nominee or custodian) acting for the account or benefit of a person in the United States of America; and
  • are eligible under all applicable securities laws to receive an offer under the Entitlement Offer without any requirement for a prospectus to be lodged or registered.

Apollo's non-executive directors will be taking up their entitlements in full. The Company's founding shareholder will be taking up A$1m of its entitlement.

Apollo will notify shareholders who are on the share register on the Record Date as to whether they are eligible to participate in the Entitlement Offer. Eligible Shareholders will receive an information booklet, including a personalised entitlement and acceptance form, which will provide further details of how to participate in the Entitlement Offer.

34,145,372 New Shares will be issued as part of the Entitlement Offer. The New Shares will rank equally in all respects with existing shares of Apollo.

1 The theoretical ex-rights price of A$1.285 is calculated using ATL's closing price on 5 May 2017 assuming proceeds from the Entitlement Offer are approximately A$40.3 million. TERP is the theoretical price at which shares should trade immediately after the ex-date for the Entitlement Offer assuming 100% take-up of the Entitlement Offer. TERP is a theoretical calculation only and the actual price at which shares trade immediately after the ex-date for the Offer will depend on many factors and may not be equal to the TERP.

The potential effect the Entitlement Offer will have on the control of the Company, and the consequences of that effect will depend on a number of factors, including Eligible Shareholders' interest in taking up their entitlements as well as the level of participation of Eligible Shareholders to take up Additional Shares under the shortfall facility.

The potential effect that the Entitlement Offer will have on the control of Apollo is set out in the cleansing notice issued on the same date as this announcement.

The Entitlement Offer is being made under section 708AA of the Corporations Act (as notionally modified by ASIC Corporations (Non-Traditional Rights Issues) Instrument 2016/84). Accordingly, the Company will not prepare a prospectus or other disclosure document. The Company will release a copy of the Entitlement Offer information booklet to ASX on 9 May 2017 and send a copy (along with a personalised entitlement and acceptance form) to all Eligible Shareholders on Wednesday, 17 May 2017.

Key dates2

Activity Date
Announcement of the Entitlement Offer Tuesday, 9 May 2017
Investor Presentation and Information Booklet released to the ASX Tuesday, 9 May 2017
Despatch of letters to Shareholders regarding eligibility Wednesday, 10 May 2017
Record Date for Entitlement Offer (7.00pm AEST) Friday, 12 May 2017
Information Booklet and Entitlement and Acceptance Form despatched Wednesday, 17 May 2017
Entitlement Offer opens Wednesday, 17 May 2017
Closing date for acceptances under Entitlement Offer (5.00pm AEST) Wednesday, 31 May 2017
Allotment of New Shares issued under the Entitlement Offer Wednesday, 7 June 2017
Normal ASX trading for New Shares issued under the Entitlement Offer commences Thursday, 8 June 2017
Despatch of holding statements for New Shares issued under the Entitlement Offer Friday, 9 June 2017

2 All dates are indicative only and subject to change. Apollo and the Underwriter reserve the right to withdraw or vary the timetable without notice.

Further information

If you are an Eligible Shareholder and have not received an application form for the Entitlement Offer, please contact Computershare on 1300 850 505 (within Australia) or +61 3 9415 4000 (outside Australia) between 8.30am and 5.00pm (AEST) Monday to Friday.

If you have any other queries, please contact Apollo on +61 7 3265 9222 between 8.30am and 5.00pm (AEST) Monday to Friday.

Investor Conference Call

Luke Trouchet, Managing Director & CEO, and Karl Trouchet, Executive Director & CFO, will be conducting an investor conference call at 9.30am (AEST - BNE) today, Tuesday, 9 May 2017, in regards to this announcement.

Dial-in (Australia): +61 2 9083 3212
Dial-in (International): +65 6713 5090
Conference ID: 19689933

About Apollo

Apollo is a multi-national, vertically integrated manufacturer, rental fleet operator, wholesaler and retailer of a broad range of RVs in Australia, New Zealand and the USA. Apollo has benefited from a healthy global tourism industry and an ageing population with increasing level of savings, and has formed a growth strategy based on an expansion into the east coast of the USA and development of its new RV sales division in Australia.

Apollo has manufacturing operations in Brisbane and Auckland where it produces and assembles RVs for its own rental fleet, and, in Australia and New Zealand for the production of new RVs to the retail market. Apollo is currently manufacturing Talvor and Winnebago branded RVs. It also has exclusive rights to import Adria and Winnebago products in Australia and New Zealand.

Apollo's rental offering is comprised of different types, sizes and brands of RVs, targeting specific segments in the RV rental market. Apollo also has a strategic investment in CanaDream (now subject to a plan or arrangement), a Canadian rental fleet operator listed on the TSX Venture Exchange. CanaDream operates an additional seven rental offices across Canada, and runs a fleet of approximately 1,000 RVs.

Apollo sells both new and ex-rental RVs through its own retail sales centers and selected dealers in Australia. In New Zealand and the USA, Apollo sells ex-rental RVs (and, in New Zealand, new RVs) through a network of selected dealers.

Important information

This announcement does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States of America, or in any other jurisdiction in which such an offer would be illegal. The securities referred to in this document have not been and will not be registered under the United States Securities Act of 1933 (the 'US Securities Act'), or under the securities laws of any state or other jurisdiction of the United States and may not be offered or sold within the United States, unless the securities have been registered under the US Securities Act or an exemption from the registration requirements of the US Securities Act is available.

This document may not be distributed or released in the United States of America.

This announcement contains certain 'forward-looking statements' within the meaning of the securities laws of applicable jurisdictions. Forward-looking statements can generally be identified by the use of forward-looking words such as 'may,' 'should,' 'expect,' 'anticipate,' 'estimate,' 'scheduled' or 'continue' or the negative version of them or comparable terminology. Any forecasts or other forward looking statements contained in this announcement are subject to known and unknown risks and uncertainties and may involve significant elements of subjective judgment and assumptions as to future events which may or may not be correct. There are usually differences between forecast and actual results because events and actual circumstances frequently do not occur as forecast and these differences may be material. Apollo does not give any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur and you are cautioned not to place undue reliance on forward- looking statements.

Additional Canadian Early Warning Reporting Disclosure

CanaDream Corporation's head office is located at 292154 Crosspointe Drive, Rocky View County, AB, T4a 0V2. The address of Apollo Tourism & Leisure Ltd, and its affiliates, Apollo Motorhome Ultimate Holdings Pty Ltd, Apollo Finance Pty Ltd and ATL Canada Inc., is 698 Nudgee Road Northgate (Brisbane), Australia QLD 4013. Apollo Motorhome Ultimate Holdings Pty Ltd and Apollo Finance Pty Ltd collectively own 3,949,115 common shares, or approximately 20.2% of the outstanding common shares of CanaDream. Apollo plans to acquire control of CanaDream by purchasing all of the outstanding common shares it does not already own. Upon completion of the acquisition, Apollo currently intends to cause CanaDream to delist its common shares from the TSX Venture Exchange and to cease to be a reporting issuer in any jurisdiction in Canada. An early warning report will be filed by Apollo with applicable Canadian securities regulatory authorities shortly. To obtain a copy of the early warning report, please contact Robert Hansen at 416-601-8259.

Apollo Tourism & Leisure Ltd, ACN 614 714 742

Head Office: 698 Nudgee Road Northgate (Brisbane) Qld 4013 Australia / Ph: +61 7 3265 9200 / Fax: +61 7 3265 9201 Free Call: Australia: 1800 777 779 / International: +800 3260 5466

www.apollotourism.com / info@apollotourism.com

Contact Information

  • Mr. Brian Gronberg
    President & CEO
    CanaDream Corporation
    Toll Free: 800 461 7368
    BRIAN@canadream.com