Northern Frontier Corp.
TSX VENTURE : FFF.P

September 27, 2013 18:14 ET

Northern Frontier Corp. Completes Acquisition of the NEC Group

CALGARY, ALBERTA--(Marketwired - Sept. 27, 2013) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

Northern Frontier Corp. (TSX VENTURE:FFF.P) (the "Corporation" or "Northern Frontier"), a TSX Venture Exchange (the "TSX-V") listed capital pool corporation, is pleased to announce the completion of its previously announced acquisition of the NEC Group (as defined below) and certain assets used in the operation of the NEC Group's business (the "Transaction"). The Transaction constitutes Northern Frontier's qualifying transaction for purposes of the rules of the TSX-V.

The NEC Group provides sustaining capital services to large industrial energy customers in the steam assisted gravity drainage region of northeastern Alberta. Specifically, the NEC Group provides civil services related to the construction and maintenance of roads, production pads, piping corridors, facility earthworks and infrastructure. Service demand is driven by the need of producing facilities to replace depleting production wells and pads and develop the interconnecting infrastructure to transport produced hydrocarbons to central processing locations. The NEC Group's head office and shop is located in Lac La Biche, Alberta and its field location is in Conklin, Alberta, both of which are central to the substantial industrial energy production developments in northeastern Alberta.

Chris Yellowega, newly appointed President and Chief Executive Officer of the Corporation said, "We believe that the NEC Group's proximity to client operations, localized workforce and convenient infrastructure provides an advantage in the marketplace. When clients have need of immediate response from a local provider, the NEC Group is a natural choice. We anticipate that the market in which the NEC Group operates will have opportunity for growth and that the NEC Group provides a platform to help capitalize on this opportunity."

Following the completion of the Transaction, in addition to Chris Yellowega being appointed as the President and Chief Executive Officer of the Corporation, Monty Balderston was appointed as the Executive Vice President, Chief Financial Officer and Corporate Secretary of the Corporation. Mr. Yellowega has also been appointed as a director of the Corporation. The Board of Directors of the Corporation is currently comprised of nine directors: Brad Creswell, John Jacobs, Trevor Haynes, Darin Coutu, Ted Redmond, Don Basnett, Darrell Peterson, Rob Hunt and Chris Yellowega. Summaries of the biographies for all of the directors and senior officers of the Corporation are set out in the final long form prospectus of the Corporation, dated September 4, 2013, filed in connection with the public offering of subscription receipts of the Corporation (the "Prospectus"). The Prospectus is available on the SEDAR website at www.sedar.com under the Corporation's profile.

Details of the Transaction

The Transaction consisted of the acquisition of: (i) all of the issued and outstanding shares of 794522 Alberta Ltd. and its wholly-owned subsidiary NEC Contractors (2012) Inc. (collectively, the "NEC Group"); and (ii) certain assets of CRC Open Camp & Catering Ltd. used in the business of the NEC Group (the "CRC Carve-out Assets").

The Transaction was completed pursuant to the terms of a share purchase agreement among the Corporation, the NEC Group and the shareholders of the NEC Group, and an asset purchase agreement among the Corporation and CRC Open Camp & Catering Ltd. Copies of the share purchase agreement and asset purchase agreement are available on the SEDAR website at www.sedar.com under the Corporation's profile.

The aggregate purchase price payable by the Corporation in connection with the Transaction was approximately $55.7 million, comprised of: (i) $49.7 million in cash (including closing indebtedness paid directly to creditors); (ii) $5.0 million in common shares ("Common Shares") and warrants ("Warrants") of the Corporation (1,428,571 Common Shares at a deemed price of $3.50 and 714,286 Warrants with an exercise price of $4.00 expiring 18 months after the closing date of the Transaction); and (iii) $1.0 million in a deferred cash payment (payable on March 31, 2014). The Common Shares issued to the vendors as part of the purchase price (the "Escrow Securities") are subject to the terms of an escrow agreement for a period of 18 months following the closing date of the Transaction. The Escrow Securities may be transferred to Northern Frontier in satisfaction of successful indemnity claims made by the Corporation against the vendors.

The completion of the Transaction has been conditionally accepted by the TSX-V. Final acceptance is expected to be received after completion of the required filings. Trading in the Common Shares currently remains halted until such time as the TSX-V has received the documentation required by TSX-V Policy 2.4 - Capital Pool Companies; however, it is currently expected that the Common Shares and the Warrants will commence trading on or about October 2, 2013.

Financing the Transaction

The cash portion of the purchase price of the Transaction was funded by: (i) the previously-completed public offering of 5,231,950 subscription receipts (the "Subscription Receipts") at a price of $3.50 per Subscription Receipt for total gross proceeds of approximately $18.3 million; and (ii) a credit facility and subordinated credit facility led by certain Canadian financial institutions, as further described below.

Subscription Receipt Offering

On September 12, 2013, the Corporation completed the public offering of the Subscription Receipts. On the completion of the Transaction, each Subscription Receipt was automatically converted into one Common Share and one-half of one Warrant. Each full Warrant entitles the holder to acquire one Common Share at a price of $4.00 per share for a period of 18 months following the closing date of the Transaction. The Corporation engaged GMP Securities L.P. and Raymond James Ltd. as co-lead agents, together with Acumen Capital Finance Partners Limited and Cormark Securities Inc., to act as agents for the offering and granted the Agents an option to purchase up to such number of additional Subscription Receipts and/or Common Shares and Warrants (as applicable, depending on when exercised) as is equal to 15% of the number of Subscription Receipts sold under the offering to cover over-allotments, if any, and for market stabilization purposes. The unexercised portion of the over-allotment option is exercisable, in whole or in part, until October 12, 2013.

After giving effect to the Transaction (including the issuance of Common Shares and Warrants to the vendors) and the conversion of the publicly-issued Subscription Receipts into Common Shares and Warrants, there are 7,579,054 Common Shares issued and outstanding (on a non-diluted basis), and 3,330,261 Warrants and 157,902 options to purchase Common Shares outstanding. In addition, 498,000 options to purchase Common Shares are intended to be granted once the Common Shares commence trading and the market establishes a price on which such options can be granted.

Credit Facilities

Concurrently with the closing of the Transaction, the Corporation established a senior credit facility (the "Credit Facility") with a Canadian chartered bank, and has utilized $22.5 million of the Credit Facility to fund a portion of the purchase price of the Transaction and for general working capital purposes. The Credit Facility consists of: (i) a $15.0 million committed revolving extendible credit facility; (ii) a $25.0 million committed revolving reducing extendible term loan; (iii) a $2.0 million committed term loan; (iv) a treasury risk management facility subject to a limit of $1.0 million; and (v) a corporate MasterCard for up to $0.5 million.

In addition, the Corporation has established a $12.0 million five-year term subordinated credit facility (the "Subordinated Facility", and collectively with the Credit Facility, the "Credit Facilities") with a Canadian financial institution and Claryn Equities Inc., a company controlled by Trevor Haynes, a director of the Corporation, as lenders. The Subordinated Credit Facility has also been utilized to fund a portion of the purchase price of the Transaction. Claryn Equities Inc.'s participation in the Subordinated Facility is in the amount of $1.0 million and is on terms identical to the terms applicable to Canadian financial institution as co-lender.

Forward Looking Information

This news release includes statements that constitute forward-looking statements under applicable securities legislation. All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue". These statements are made as of the date of this news release and the Corporation does not undertake to publicly update them except in accordance with applicable securities laws. These forward-looking statements include trading of the Common Shares and Warrants on the TSX-V and the timing thereof; final TSX-V approval in respect of the Transaction; and anticipated growth in the industry in which the NEC Group operates.

These statements are based on certain assumptions including, but not limited to, the receipt of applicable regulatory approvals and the terms applicable thereto, the supply and demand for oilfield services and industry activity levels, the Corporation's ability to obtain qualified staff and equipment in a timely and cost-efficient manner, the ability of the Corporation to successfully execute on its growth strategies, stable currency valuations, and a sufficiently stable global financial and economic environment. Although the Corporation believes the assumptions relied upon are reasonable, such forward-looking statements are not guarantees of future outcome and should not be unduly relied upon.

By their nature, forward-looking statements involve numerous risks that the predictions, forecasts or projections will not occur. These risks include adverse developments in general economic, political, market and business conditions in Canada and elsewhere, a decrease in the demand for oilfield services, commodity price volatility, fluctuations in currency exchange rates, increased competition, the inability to access capital or qualified personnel, adverse actions by governmental authorities, including regulatory, environmental and taxation policies and other changes, many of which are beyond the control of the Corporation. For more information on the Corporation, investors should review the Corporation's continuous disclosure filings that are available at www.sedar.com under the Corporation's profile.

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

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