Prestige Telecom Inc.
TSX VENTURE : PR

Prestige Telecom Inc.

December 15, 2008 18:17 ET

Prestige Telecom Completes Acquisition of Radian and Concurrent Financings

MONTREAL, QUEBEC--(Marketwire - Dec. 15, 2008) - Prestige Telecom Inc. ("Prestige" or the "Company") (TSX VENTURE:PR) of Montreal, Quebec, today announces that it has completed its previously announced acquisition of all of the outstanding shares of Radian Communication Services (Canada) Limited ("Radian"), as well as certain United States assets of an affiliate of Radian (the "Acquisition"). With the completion of the Acquisition, Prestige has the capabilities to provide outsourced telecommunications infrastructure services to wireless, wireline, cable television networks and OEM companies across Canada, and believes that it is well-positioned to capitalize on the announced capital expenditure plans for new wireless networks and network build-outs of Canada's incumbents and new entrants following the Advanced Wireless Services spectrum auction.

Pursuant to the Acquisition, the aggregate purchase price for Radian was $20,234,000, plus assumed debt of $611,000, subject to adjustments. The consideration paid to the owners of Radian consisted of:

- Cash of $7,700,000;

- $6,267,000 in common shares of Prestige (the "Common Shares") at a deemed issue price of $0.25 per share, which Common Shares are subject to certain contractual escrow arrangements; and

- $6,267,000 in the form of a convertible note bearing interest at 10% per annum if paid in cash or 12% per annum if interest is paid in kind ("PIK") in the form of additional PIK convertible notes (the "Convertible Notes"), which Convertible Notes are convertible at a price of $0.31 per share for a period of three years and are subject to certain contractual escrow arrangements.

The Acquisition was funded as follows:

- The Company established a new bank credit facility (the "Credit Facility") in the authorized amount of $17.0 million with the Canadian Imperial Bank of Commerce ("CIBC");

- Prestige completed a concurrent private placement offering of 28,000,000 Common Shares at a price of $0.25 per share for aggregate gross proceeds of $7.0 million (the "Private Placement Financing");

- Prestige completed a concurrent private placement of a convertible note in the aggregate principal amount of $4.5 million having the same terms as the Convertible Notes being issued pursuant to the Acquisition (the "Convertible Note Financing"); and

- Prestige completed a brokered private placement of 8,600,000 Common Shares at a price of $0.25 per share for gross proceeds of $2,150,000 (the "Brokered Private Placement Financing"). Certain of the Common Shares issued pursuant to the Brokered Private Placement Financing were eligible and met the criteria set under the Quebec SMB Growth Stock Plan (ACCRO), which program allows eligible institutions to claim a 100% deduction on their Quebec taxes for any ACCRO eligible shares they purchase.

Prestige used a portion of the proceeds of the Credit Facility, the Private Placement Financing, the Convertible Note Financing and the Brokered Private Placement Financing to fund the cash portion of the purchase price for the Acquisition, to repay in full Prestige's previous bank credit facility, and to pay the costs of the Acquisition. The Company intends to use the balance of the proceeds for working capital and general corporate purposes.

In connection with the Acquisition, the Private Placement Financing and the Convertible Note Financing, Prestige also repaid an aggregate of $380,000 to two of its other subordinated secured lenders (the "Subordinated Lenders"), increased the interest rate on the remaining outstanding indebtedness owing to such Subordinated Lenders, and issued an aggregate of 800,000 common shares to the Subordinated Lenders at a deemed issue price of $0.25 per share as payment of fees in consideration for the further subordination by the Subordinated Lenders to the indebtedness under the Convertible Notes issued in connection with the Acquisition and the Convertible Note Financing.

"We are very pleased to complete the acquisition of Radian, which creates a telecommunications infrastructure services company with $100 million in annual sales, and a national footprint and with wireless, wireline and cable TV network expertise," said Pierre Yves Methot, Chairman and Chief Executive Officer of Prestige. "We believe that this transaction and the support of key new financial and strategic shareholders will allow Prestige as a public company, to have the critical mass required to achieve its growth and profitability objectives."

Blackmont Capital Inc. ("Blackmont" or the "Agent") was retained by Prestige to act as financial advisor in connection with the Acquisition, and as agent of Prestige for the Brokered Private Placement Financing. In connection with the Brokered Private Placement Financing, the Agent was paid a cash commission of 8%, was reimbursed for its expenses, and was issued agent's compensation options to purchase up to 8% of the Common Shares issued under the Brokered Private Placement Financing. The Agent was also paid a cash advisory fee of 4.5% of the aggregate gross proceeds of the Private Placement Financing.

The Acquisition of Radian, the Private Placement Financing, Convertible Note Financing, and Brokered Private Placement Financing, have each received the conditional approval of the TSX Venture Exchange Inc. (the "TSX Venture") and are subject to its final approval, which Prestige expects to receive next week after certain filings are completed.

Novare Holding Inc. (the "Major Investor"), an arm's length private company controlled by Guy Laliberte, President of the Major Investor and founder of the largest private entertainment producer in Canada, acquired 18,000,000 Common Shares pursuant to the Private Placement Financing as well as a Convertible Note in the aggregate principal amount of $4.5 million pursuant to the Convertible Note Financing.

"I have chosen to privately invest in this Canadian company during these difficult financial times because I believe that we need to ensure a solid future for entrepreneurs and Canadian assets," said Mr. Laliberte. "I also believe that Prestige Telecom has an interesting growth potential."

In connection with the closing of the transactions, Robert Blain, a nominee of the Major Investor, and Andre Brosseau, a nominee of the Subordinated Lenders, have joined the Board of Directors of Prestige. Brian W. McFadden has resigned as a Director to make room on the Board for Mr. Blain and Mr. Brosseau.

Mr. Blain, age 52, is the Principal Vice-President and Chief Financial Officer of the largest private entertainment producer in Canada having joined such organization in 1994. Mr. Blain studied at the Ecole des Hautes Etudes Commerciales (HEC Montreal). In 1979, he obtained a Bachelor of Arts in Business Administration with a major in Accounting. Mr. Blain has been a member of the Ordre des comptables agrees du Quebec since 1981, and, in January 2000, he was awarded the title of Fellow of the Institute of Chartered Accountants. Mr. Blain began his career in 1979 as audit manager at Samson Belair Deloitte & Touche in Montreal.

Mr. Brosseau, age 46, is the President and Head of Capital Markets for Blackmont, having joined in October 2007. Mr. Brosseau was most recently Deputy Chairman and President of Loewen, Ondaatje, McCutcheon ("LOM"). Prior to LOM, Mr. Brosseau spent 12 years at CIBC World Markets and was Managing Director, Co-Head of Global Cash Equities. Mr. Brosseau received a Masters Degree in Political Science from Universite de Montreal in 1987. Mr. Brosseau has been a member of the Board of Aptilon Corporation since 2006, a member of the Board of KTV Inc. since 2006, and the Chairman of the Board of The Company Theatre, a non-profit organization, since 2005.

About Prestige Telecom Inc.

Prestige is a leading provider of network engineering, materials furnishing, installation and support services (commonly referred to as EF&I services) required to construct, operate and maintain wireline, wireless and cable television networks. Prestige assists telecommunications original equipment manufacturers and service providers to engineer, install and upgrade their infrastructures to support enhanced voice, high speed data and video services.

In Canada, Prestige operates eight service locations based in Montreal, Quebec; Mississauga and Markham, Ontario, Surrey, British Columbia, Calgary and Edmonton, Alberta, Bedford, Nova Scotia and St-John, New Brunswick and has 400 professional and technical personnel.

Forward Looking Statements

This press release contains certain forward-looking statements with respect to the Company. Such forward-looking statements are dependent upon a certain number of factors and are subject to risks and uncertainties. Actual results may differ from those expected. The information contained in this press release is dated December 15, 2008, the date on which the Directors approved the press release. Management does not assume any obligation to update or revise any forward-looking statements, whether as a result of new information or future events, except when required by the regulatory authorities.

Note to readers: Complete unaudited consolidated financial statements and Management's Discussion & Analysis of Financial Position and Operating Results were posted on SEDAR and are available at www.sedar.com.

The TSX Venture Exchange Inc. has not passed on the merits of the Acquisition and accepts no responsibility for the adequacy or the accuracy of this press release.

Contact Information

  • Prestige Telecom Inc.
    Pierre Yves Methot
    Chairman and Chief Executive Officer
    (514) 457-4488, Ext. 277
    Email: pymethot@prestige-tel.com