NAPEC Inc.
TSX : NPC

NAPEC Inc.

November 03, 2016 07:44 ET

NAPEC Inc. Announces the Acquisition of the Assets of PCT Contracting LLC, a $15.0 Million Bought Deal Public Offering and a $8.0 Million Private Placement

DRUMMONDVILLE, QUEBEC--(Marketwired - Nov. 3, 2016) -

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NAPEC Inc. ("NAPEC" or the "Corporation") (TSX:NPC) today announced the execution of an agreement to acquire the assets of PCT Contracting LLC ("PCT"), a service provider to the gas utility segment in the Greater New York area (the "Transaction").

The Corporation has also entered into an agreement to sell to a syndicate of underwriters led by Desjardins Securities Inc. (collectively the "Underwriters"), on a bought-deal basis, 15,500,000 subscription receipts of the Corporation (the "Subscription Receipts") at a price of $0.97 per Subscription Receipt, for gross proceeds of $15.0 million (the "Public offering"), which could reach $17.3 million if the Underwriters exercise the full over-allotment option. The Subscription Receipts will be offered under the terms of a short form prospectus which will be filed by NAPEC in the provinces of Québec, Ontario, Alberta and British Columbia.

Concurrently with its Public offering, NAPEC will complete a private placement of Subscription receipts (the "Private placement") with the Caisse de dépôt et placement du Québec, the Fonds de solidarité des travailleurs du Québec and certain insiders which will include the same terms and conditions as the Subscription receipts issued under the Public offering (the Public offering and the Private placement are collectively named the "Offering"), for gross proceeds of approximately $8.0 million.

The net proceeds received by the Corporation from the sale of the Subscription Receipts issued under the Offering will be used to pay a portion of the acquisition price of the assets under the terms of the Transaction. The other portion will be paid through credit facilities.

Acquisition of PCT Contracting LLC

Based in Mount Vernon, Westchester County, New York, PCT provides turnkey solutions to utility service providers and industrial companies, with a key expertise in the installation, maintenance and repair of natural gas infrastructure. PCT has a highly trained workforce of 130 employees and has a preferred contractor status with a major utility service provider in the New York area.

For the year ended on December 31, 2015, PCT generated revenues of approximately US$42.5 million and earnings before interest, taxes, depreciation and amortization ("EBITDA") of approximately US$6.5 million. As of June 30, 2016, the value of PCT's order backlog stood at approximately US$285 million, including options for an amount of US$159 million. NAPEC anticipates that the Transaction will be immediately accretive to earnings per share.

The Transaction provides for a purchase price of US$33.0 million, subject to certain adjustments, of which approximately US$28.0 million will be paid at closing. A US$5.0 million balance of sale will be paid on December 31, 2018. PCT's management team will remain in place.

The Transaction remains subject to other customary closing conditions and is expected to close concurrently with the Offering in November 2016.

"The acquisition of PCT is a highly strategic transaction for NAPEC, as it will broaden its geographical coverage in the U.S. Northeast and enhance its expertise in the fast-growing gas sector. PCT also has a solid reputation in regards to efficient project management and technical ability. In addition, this Transaction will allow NAPEC to broaden the field of expertise of its American subsidiary Riggs Distler & Company, Inc. in the gas segment and to realize synergies between its various entities through cross-selling opportunities. We expect this Transaction to be accretive to NAPEC as we continue to methodically execute our strategic plan," said Pierre L. Gauthier, President and Chief Executive Officer of NAPEC.

$15.0 Million Public Offering and $8.0 Million Private Placement

The Corporation has entered into an agreement to sell to a syndicate of underwriters led by Desjardins Securities Inc. (collectively the "Underwriters"), on a bought-deal basis, 15,500,000 Subscription Receipts at a price of $0.97 per Subscription Receipt, for gross proceeds of $15.0 million.

The Subscription Receipts will be exchangeable at the closing of the Transaction, for no further consideration or action to be taken, at the ratio of one Subscription Receipt for one unit, each unit consisting of one common share of NAPEC and one-half of one share purchase warrant. Each whole warrant will be exercisable at a price of $1.30 at any time during the 24-month period following the closing of the Offering.

The Corporation has also agreed to grant to the Underwriters an over-allotment option, exercisable in whole or in part, to purchase up to an additional 2,325,000 Subscription Receipts at the issue price on the same conditions than the Offering. This option will be exercisable until 5:00 p.m. (Montreal time) 30 days following the closing of the Offering. If the Over-Allotment option is exercised in full, the total gross proceeds to the Corporation will be $17.3 million. The Subscription Receipts issued under the Public offering will be offered under the terms of a short form prospectus which will be filed by NAPEC in the provinces of Québec, Ontario, Alberta and British Columbia.

Concurrently with the Public offering, NAPEC will complete a Private placement with the Caisse de dépôt et placement du Québec, the Fonds de solidarité des travailleurs du Québec and certain insiders which will include the same terms and conditions as the Subscription Receipts issued under the Public offering, for gross proceeds of approximately $8.0 million.

Certain officers and directors of the Corporation have indicated their intent to participate in the Offering and purchase up to 324,515 Subscription Receipts.

The Offering is expected to close on or about November 24, 2016 and is subject to customary conditions and regulatory approvals, including approval of the TSX. The Subscription Receipts and underlying securities issued under the Private placement will be subject to a four month and one day resale restriction from the closing date. If the Transaction is completed concurrently with the closing of the Offering, the subscribers will receive units instead of Subscription receipts.

The securities offered have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any U.S. State securities laws and may not be offered or sold, directly or indirectly, within the United States or its territories or possessions or to or for the account of any U.S. person (as defined in Regulation S under the U.S. Securities Act) other than under an available exemption from the registration requirements of the U.S. Securities Act. This press release does not constitute an offer to sell or a solicitation of an offer to buy any such securities within the United States, or its territories or possessions, or to or for the account of any U.S. person, nor shall there be any sale of the securities in any territory in which such offer, solicitation or sale would be unlawful.

NON-IFRS MEASURE

EBITDA does not have a standardized meaning prescribed by IFRS and is therefore considered to be a non-IFRS measure. It is therefore not necessarily comparable to similar measures presented by other companies. This measure is presented and described in this release in order to provide additional information regarding the Corporation's liquidity and its ability to generate funds to finance its operations.

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements that reflect management's current expectations regarding future events. Forward-looking statements are based on a number of factors and include risks and uncertainties. Actual results may differ from forecast results. Management assumes no obligation beyond what is required under the law to update or revise forward-looking statements pursuant to new information or future events.

OVERVIEW OF THE CORPORATION

NAPEC is a company operating in the energy sector. The Corporation is a leading provider of construction and maintenance services to the public utility and heavy industrial markets, mainly in Québec, Ontario, and the eastern United States. NAPEC and its subsidiaries build and maintain electrical transmission and distribution systems and natural gas networks. The Corporation also installs gas-powered and electric-powered heavy equipment for utilities, gas-fired industrial power plants, petrochemical facilities, and solar panel farms in North America. The Corporation also offers environmental construction and road matting services.

Additional information on NAPEC can be found in the SEDAR database (www.sedar.com) and on the Corporation's website, at www.napec.ca.

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