Fronsac Capital Inc.

Fronsac Capital Inc.

February 03, 2011 08:53 ET

Fronsac Capital Inc. Proposes to Convert Into REIT

SAINT-JEAN-BAPTISTE-DE-ROUVILLE, QUEBEC--(Marketwire - Feb. 3, 2011) - Fronsac Capital inc. ("Fronsac") (TSX VENTURE:GAZ) announced today a proposal to convert the corporation into a real estate investment trust ("REIT") to pursue the growth of its real estate portfolio. Upon conversion, the new REIT, to be named Fronsac Capital REIT ("Fronsac REIT"), will hold the properties currently held by Fronsac and will continue Fronsac's growth strategy by looking for real estate properties which, ideally, offer a combination of gas station, convenience store and fast food services.

The proposed conversion will set the basis for long-term growth and shareholder value enhancement. Fronsac intends to maintain its policy of cautiously using cashflow generated from its properties for further acquisitions, and therefore does not plan to pay distributions to its unitholders in the short term or until management believes the real estate portfolio has reached suitable size to pay and maintain distributions without compromising portfolio growth.

The directors of Fronsac unanimously recommend that shareholders approve the conversion. Directors of Fronsac together hold a total of 7,288,359 shares of Fronsac, or 52.9% of the outstanding shares of the corporation, and have indicated their intention to vote in favour of the proposed conversion. The board of directors of Fronsac believes that creating the REIT will, in the long term, enhance shareholder value by broadening the investor base to retail and institutional investors. In establishing the terms of the conversion and in making its recommendation, the board of directors considered the following factors:

  • Fronsac is currently cash taxable. The REIT structure sets the basis for a more tax-efficient structure by reducing the liability at the corporate level. The majority of the tax liability will shift from Fronsac to unitholders;
  • Units of Fronsac REIT are expected to be valued in more favourable terms than are the common shares of Fronsac; and
  • Fronsac REIT is expected to have improved access to capital markets to finance growth and acquisitions, which would further enhance unit value.

If approved by the TSX Venture Exchange, Fronsac REIT units will commence listing on that exchange immediately following closing of the transaction. Holders of Fronsac common shares will receive one unit of Fronsac REIT for each common share of Fronsac held. Upon closing of the transaction, Fronsac's common shares will be delisted from the TSX Venture Exchange and all of its common equity will be indirectly owned by Fronsac REIT. Fronsac's real estate portfolio, will be indirectly owned by Fronsac REIT.

The transaction will be effected by way of a plan of arrangement under section 192 of the Canada Business Corporations Act. It requires the approval of at least two-thirds of the votes cast by all shareholders. The transaction must also be approved by the Superior Court of Québec. The transaction is also conditional to the receipt of all necessary regulatory, TSX Venture Exchange and third party consents and approvals.

Shareholders Meeting

The proposed transaction is to be submitted for approval at the annual and special shareholders meeting to be held in the second quarter of 2011. Information describing the transaction is anticipated to be included in the management information circular to be mailed to shareholders in connection with this shareholders meeting and will be available on SEDAR at

About Fronsac Capital

Fronsac is a Canadian corporation listed on the TSX Venture Exchange engaged in the commercial real estate business. Fronsac currently holds two properties, one bordering highway 20 in Mont St-Hilaire (Quebec) including a McDonald's restaurant, a convenience store and Ultramar gas station, the other located in St-Jean-sur-le-Richelieu (Quebec) bordering highway 35 including a convenience store, a Shell gas station and car wash. These two properties are the main assets of Fronsac.

Fronsac is always on the lookout for real estate properties which, ideally, offer a combination of gas station, convenience store and fast food services.

Forward-Looking Statements

This press release contains forward-looking statements and information within the meaning of applicable securities legislation, including statements about Fronsac and expectations relating to the proposed transaction and benefits that are expected to be realized as a result of the transaction. There can be no assurance that the proposed transaction will be consummated or that the anticipated benefits will be realized. The proposed transaction is subject to various approvals and consents and there can be no assurance that any such approvals or consents will be obtained. Fronsac cautions the reader that actual results may differ materially from those in the forward-looking statements, because they involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from anticipated future results. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements and information include but are not limited to, general economic conditions; local real estate conditions; dependence on tenants' financial condition; the uncertainties of real estate activities; interest rates; availability of equity and debt financing; the impact of newly-adopted accounting principles on accounting policies as well as other risks and factors described from time to time in the documents filed by Fronsac with the securities regulators, including management's discussion and analysis. Fronsac disclaims any intention or undertaking to update or revise any forward-looking statements even as a result of future events or otherwise, except as required by applicable law.

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

Contact Information

  • Fronsac Capital Inc.
    Mr. Michel Lassonde
    President and CEO