DealNet Capital Corp.
TSX VENTURE : DLS

DealNet Capital Corp.

January 21, 2016 16:08 ET

Dealnet to Acquire EcoHome Financial

Acquisition to be Financed by a $30 Million Bought Deal Private Placement of Subscription Receipts

TORONTO, ONTARIO--(Marketwired - Jan. 21, 2016) -

THIS NEWS RELEASE IS INTENDED FOR DISTRIBUTION IN CANADA ONLY AND IS NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

Dealnet Capital Corp. ("Dealnet" or the "Company") (TSX VENTURE:DLS) today announced that it has entered into a definitive agreement to acquire EcoHome Financial Inc. ("EcoHome"), a premier non-bank lender in the Canadian heating, ventilation and air conditioning (HVAC) and home improvement segments, from Chesswood Group Limited (the "Acquisition") for total consideration of approximately $35 million.

The cash portion of the purchase price will be financed from the proceeds of a bought deal private placement of Subscription Receipts of the Company described below, led by GMP Securities L.P., Paradigm Capital Inc., Cormark Securities Inc. and INFOR Financial Inc.

Under the terms of the definitive agreement, Dealnet will acquire all of the shares of EcoHome, which has a seasoned loan book of over $60 million and a year over year origination growth rate of approximately 40%. The EcoHome portfolio consists of finance assets that have historically demonstrated low default rates and predictable revenue and cash flows. Key EcoHome lending facilities will transfer, and be increased on close adding low cost incremental capacity to Dealnet's existing funding facilities.

"Our current platform is designed for large scale volume and to accept these acquisitions with no disruptions to business operations. With our incremental significant scale in origination volume we expect additional capital efficiencies in terms of lowering the cost of underwriting, driving incremental yield," said Michael Hilmer, Dealnet's Chief Executive Officer. "This acquisition will establish Dealnet as a new leader in the HVAC/Home Improvement consumer financing segment with a full market offering and end-to-end value added services. We continue to see opportunity for accretive acquisitions in markets where our equity and lending capacity, is a valuable currency. We will continue to focus on strong organic growth while continuing to review complementary acquisitions."

Steven Small, Executive Chairman, stated "We have delivered on our penetration into the HVAC/Home Improvement space. This strong advance now allows us to continue as planned into retail and healthcare consumer finance. Our march to become the dominant 'prime' non-bank consumer finance company is proceeding as planned."

As part of the Acquisition, Dealnet will acquire customer contracts, vendor finance agreements, employees, operating platform, systems, agreements and other assets of EcoHome. Dealnet expects to combine treasury functions, technology, risk and credit management and overall origination capabilities with no job loss due to the considerable growth trajectory demonstrated by EcoHome and Dealnet.

Under the terms of the agreement, Dealnet will satisfy the purchase price by a combination of (i) approximately $30 million in cash, (ii) common shares of Dealnet having an aggregate value of $3 million, and (iii) an unsecured convertible vendor take-back note in the principal amount of $2 million.

The Acquisition is expected to close in February, and is subject to certain conditions, including, but not limited to, the receipt of all necessary approvals including the approval of the TSX Venture Exchange.

Cormark Securities Inc. and INFOR Financial Inc. are acting as the financial advisors to Dealnet on the Acquisition.

Bought Deal Private Placement

Dealnet has entered into an agreement with a syndicate of underwriters led by GMP Securities L.P., Paradigm Capital Inc., Cormark Securities Inc. and INFOR Financial Inc. (the "Underwriters"), pursuant to which the Underwriters have agreed to purchase, on a "bought deal" private placement basis, 54,545,700 subscription receipts (the "Subscription Receipts") of the Company at a price of $0.55 per Subscription Receipt (the "Offering Price") for gross proceeds of approximately $30 million (the "Offering").

Dealnet has also granted the Underwriters an option, exercisable up to two business days prior to the closing date of the Offering, to arrange for the purchase of up to an additional 8,181,855 Subscription Receipts at the Offering Price for additional gross proceeds of approximately $4.5 million. The net proceeds of the Offering will be used to fund the cash portion of the purchase price of the Acquisition, and Dealnet's future growth as well as for general corporate purposes.

Each Subscription Receipt will entitle the holder thereof to receive, without payment of further consideration or further action, one common share of Dealnet (a "Common Share") in exchange for each Subscription Receipt upon satisfaction of certain escrow release conditions, including the satisfaction of all conditions precedent (but for the payment of the purchase price) of the Acquisition, provided that the conditions have been satisfied by March 31, 2016.

The Subscription Receipts will be issued pursuant to a subscription receipt agreement (the "Subscription Receipt Agreement"). Pursuant to the Subscription Receipt Agreement, the proceeds of the Offering, net of 50% of the Underwriters' fee payable in connection therewith, will be held in escrow pending delivery of notice of the closing of the Acquisition. If: (i) the Acquisition closing does not occur prior to 5:00 p.m. (Toronto time) on March 31, 2016; (ii) the Acquisition share purchase agreement is terminated at an earlier date; or (iii) Dealnet announces that it does not intend to proceed with the Acquisition, the subscription receipt agent and Dealnet will return to holders of Subscription Receipts an amount per Subscription Receipt equal to the Offering Price plus a pro rata share of the interest earned or deemed to be earned on the escrowed funds, net of any applicable withholding taxes.

The Offering is expected to close on February 5, 2016 and is subject to certain conditions, including the receipt of TSX Venture Exchange approval.

The Subscription Receipts will be sold in all of the provinces and territories of Canada on a private placement basis pursuant to the "accredited investor" exemption under National Instrument 45-106 - Prospectus Exemptions and certain other available and agreed upon exemptions. The Subscription Receipts, including the underlying Common Shares, will have a hold period of four months and one day from the closing date of the Offering.

The securities being offered have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from the registration requirements. This press release shall 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 Dealnet Capital Corp.

Dealnet is an engagement enabled consumer finance company that is initially focused on home improvement finance solutions including heating ventilation and air conditioning financing and leasing. Dealnet leverages its large scale customer service and engagement technology platform to attract home improvement dealers by providing front and back office services to them resulting in dealer origination growth.

Forward Looking Statements

This release includes forward-looking statements regarding Dealnet, its business, the Acquisition and the Offering. Such statements are based on the current expectations and views of future events of Dealnet's management. In some cases the forward-looking statements can be identified by words or phrases such as "may", "will", "expect", "plan", "anticipate", "intend", "potential", "estimate", "believe" or the negative of these terms, or other similar expressions intended to identify forward-looking statements. Forward-looking statements in this release include those related to the closing of the Offering and the Acquisition, the anticipated benefits of the Acquisition, the anticipated growth in originations and financial revenue, the integration of the Acquisition with the Company, expected reduction in Dealnet's funding costs and the impact of the Acquisition on the Company's business and its reach into new and existing markets. The forward-looking events and circumstances discussed in this release may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting Dealnet, including risks relating to the ability of the Company to satisfy the closing conditions to the Acquisition and the Offering, challenges in integrating the business and product lines of Dealnet and EcoHome, general risks regarding the consumer finance industry, and many other factors beyond the control of the Company. No forward-looking statement can be guaranteed. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statement or information. Accordingly, readers should not place undue reliance on any forward-looking statements or information. For a description of the risks and uncertainties facing the Company and its business and affairs, readers should refer to the Company's Management's Discussion and Analysis. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Dealnet undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

For additional information please visit www.sedar.com.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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