Stephenson's Rental Services Income Fund
TSX : RNT.UN

Stephenson's Rental Services Income Fund

June 11, 2007 16:00 ET

Joint Announcement by Stephenson's Rental Services Income Fund and Edgestone Capital Partners

MISSISSAUGA, ONTARIO--(Marketwire - June 11, 2007) - Stephenson's Rental Services Income Fund (the "Fund") (TSX:RNT.UN) and EdgeStone Capital Partners today announced that they have begun mailing the takeover bid circular (the "Offer Circular") and the trustees' circular (the "Trustees' Circular") to unitholders of the Fund ("Unitholders") in connection with the transaction announced on May 24, 2007. With the mailing of the Offer Circular, 1731807 Ontario Inc., an indirect affiliate of EdgeStone Capital Equity Fund III (Canada), L.P., is formally launching its offer (the "Offer") to acquire all of the issued and outstanding class A fund units and class B fund units of the Fund (collectively, the "Units") at a price of $6.875 cash per Unit. The Offer will be open for acceptance until 5:00 p.m. (Toronto time) on July 17, 2007, unless withdrawn, modified or extended. The full terms and conditions of the Offer are outlined in the Offer Circular.

The Trustees' Circular contains, among other things, the recommendation of the Board of Trustees of the Fund (the "Board") that Unitholders accept the Offer and tender their Units to the Offer and the reasons for the recommendation of the Board. In reaching its conclusions, the Board, assisted by its financial and legal advisors, carefully considered all aspects of the Offer as well as the factors described in the Trustees' Circular including:

- The Offer represents the best result following an extensive strategic review process conducted by the Board, which included the investigation of various refinancing alternatives and the undertaking of an extensive auction process for the Fund. The strategic review process was initiated by the Board after concluding that the Fund's growth strategy outlined at the time of the July 2005 initial public offering could not be executed in light of the factors highlighted below. Following this process, the Board concluded that the Offer represents the best alternative for Unitholders.

- The consideration offered for the Units under the Offer implies a transaction multiple of approximately 7.6x calculated with reference to the Fund's EBITDA for the twelve month period ended March 31, 2007. This multiple exceeds the high end of the range of multiples paid in recent transactions in the equipment rental industry, such as the purchase by Stephenson's of A-1 Equipment Rental Ltd. for 5.9x EBITDA in May 2006 and the recent initial public offering multiple of 6.7x for Rental Service Corporation. In addition, this multiple also exceeds the trading multiple of 5.6x EBITDA for United Rentals Inc., the largest equipment rental company in North America.

- The consideration offered for the Units pursuant to the Offer represents a premium of approximately 30% over the closing price on January 4, 2007 of $5.30, the last trading day prior to the announcement of the Fund's commencement of the strategic review process. The offered premium is comparable to the premiums offered or paid in the 19 other transactions involving income trusts announced since October 31, 2006.

- Tax proposals announced by the Minister of Finance (Canada) have constrained the Fund's ability to repay or refinance the outstanding bridge facility originally due in May 2007. Following a review of potential refinancing alternatives, the Board believes that the terms and conditions of any refinancing would require a material reduction in distributions and an equity offering, potentially further reducing distributions per Unit.

- The proposed tax changes have created significant uncertainty in the Canadian income trust market. The proposed changes would reduce the tax benefits of the trust structure for many investors and are expected to make it more difficult and/or expensive for certain income trusts, particularly income trusts with smaller market capitalizations, such as the Fund, to raise additional equity capital.

- The Fund's growth strategy outlined at the time of its initial public offering contemplated the requirement for significant capital for acquisitions and the growth of its rental fleet. The Board has concluded that the absence of viable alternatives to refinance the bridge loan and to execute this strategy would have a detrimental effect on the Fund and its Unitholders. Additionally, the use of cash resources to finance required capital expenditures to maintain or grow market share would negatively affect the Fund's ability to continue to make distributions to Unitholders at current levels.

"The Board has spent considerable time thoroughly examining all alternatives available to the Fund for maximizing Unitholder value," said Warren Walker, Chairman of the Board. "Following this exhaustive review, we have concluded that the Offer represents the best alternative for Unitholders and we unanimously recommend that Unitholders accept the offer and tender their Units to the Offer."

Unitholders are urged to carefully read the Offer Circular and Trustees' Circular, which contain important information about the Offer. Unitholders may obtain a copy of the Offer Circular or the Trustees' Circular on the website maintained by the Canadian securities regulatory authorities at www.sedar.com or by contacting Georgeson, the information agent for the Offer, at 1-866-717-8273.

About Stephenson's:

Stephenson's is the leading equipment and tool rental company in Toronto and the surrounding areas. Over the past 50 years, Stephenson's has grown from a single location into one of the top ten equipment rental businesses in Canada.

Through its 18 branches, Stephenson's provides rental equipment and sells consumables to a diverse base of over 30,000 customers, divided into three primary categories: (i) residential, new construction; (ii) non-residential, new construction; and (iii) renovations.

Further information can be found in the disclosure documents filed by Stephenson's Rental Services Income Fund with the securities regulatory authorities, available at www.sedar.com.

Contact Information

  • Stephenson's Rental Services Income Fund
    William D. Swisher
    Chief Executive Officer
    (905) 507-3650 Ext. 204