Ryjencap Inc.
TSX VENTURE : RYJ.P

March 22, 2006 17:12 ET

Ryjencap Inc. Announces Qualifying Transaction

SURREY, BRITISH COLUMBIA--(CCNMatthews - March 22, 2006) -

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

Ryjencap Inc., a capital pool corporation (TSX VENTURE:RYJ.P) ("Ryjencap" or the "Corporation"), today announced details of a letter agreement signed effective March 9, 2006, with all the current shareholders of Empire Iron Works Ltd. ("Empire Iron") that sets out the general terms and conditions agreed upon among the parties for the manner in which Ryjencap intends to acquire all the issued and outstanding shares of Empire Iron (the "Transaction").

Empire Iron is a private company that is in the business of structural steel design, fabrication and installation. The company is incorporated under the laws of the Province of Manitoba and has its head office in Winnipeg. The shareholders of Empire Iron (www.empireiron.com ) are Ward Empire Group Ltd. (a private corporation wholly-owned, directly and indirectly, by Guy Nelson, Steve Lockwood and several other investors), Campbell McIntyre, Thor Gaul, Vic Becker and 398267 BC Ltd. Following an internal reorganization of the company, the principal individual shareholders of Empire Iron will be Guy Nelson, Steve Lockwood, Peter Kozicz, Joe Robertson, Campbell McIntyre and Thor Gaul. Messrs. Nelson, Kozicz and Robertson are resident in Ontario, Messrs. McIntyre and Becker are resident in Manitoba and Messrs. Lockwood and Gaul are resident in Alberta. After its reorganization, Empire Iron will have 32,500,000 shares issued and outstanding. Prior to closing of the Transaction, it is proposed that Empire Iron will issue, additional shares as follows:

a. 300,000 shares to Bretman Financial Corporation, a private Ontario corporation; and

b. Empire Iron will be undertaking a private placement through Westwind Partners Inc. to raise up to a maximum of $4,000,000 on a "best efforts" basis (the "Private Placement"), to be closed immediately prior to, or concurrently with, the completion of the Transaction.

It is expected that an estimated maximum of 9,100,000 shares will be issued pursuant to the Private Placement and, on closing of the Private Placement, Empire Iron will have an estimated maximum of 41,900,000 shares issued and outstanding. Ryjencap will acquire the Empire Iron shares by issuing a corresponding number of 41,900,000 post-consolidated common share at a deemed price of $0.55 per share to the shareholders of Empire Iron.

Ryjencap currently has 12,000,000 pre-consolidated common shares issued and outstanding and it shall, immediately prior to closing of the Transaction, consolidate its issued and outstanding common shares on the basis of one "new" common share for each four "old" common shares. Common shares and options to acquire common shares issued at the time of closing the Transaction shall be issued on a post-consolidated basis.

It is intended that the acquisition of Empire Iron will constitute the "Qualifying Transaction" of Ryjencap as such term is defined by Policy 2.4 of the TSX Venture Exchange Corporate Finance Manual. In conjunction with the Transaction, Peter Kozicz, a proposed director of the resulting issuer, shall purchase, in trust on behalf of other principals to the Transaction, 1,800,000 pre-consolidated escrowed common shares from Terry Rogers, Don Terry, Brent Atkinson, Basil Cuddihy and Mark Ferguson, the current directors of Ryjencap, for a total purchase price of $180,000. Unless otherwise indicated, references in this news release to common shares of Ryjencap shall mean common shares on a post-consolidated basis.

Ryjencap will issue stock options to acquire up to 10% of the number of common shares issued and outstanding upon completion of the Transaction, at an exercise price of $0.55. The options to be allocated to the directors, officers and employees of the resulting issuer after completion of the Transaction, will be as determined by the board of directors of the resulting issuer at that time.

Empire Iron Corporate History and Structure

- Established in Winnipeg, Manitoba in 1958 as an ornamental metal fabricator.

- In 1968, the company was awarded its first major structural steel supply and installation contract.

- In 1974, EMPIRE IRON established a wheelabrating and painting facility in its Winnipeg plant.

- In 1979, EMPIRE IRON opened an office in Edmonton, Alberta and a plant in Wabamun, Alberta.

- In 1983, the company opened an office and plant facility in Delta, British Columbia..

- In 1992, the company added a computer-programmed, fully automated beam line in Winnipeg.

- In 1994, EMPIRE IRON implemented AutoCAD LT for Windows and a plotter system, providing its clients with the convenience and ability to e-mail drawings.

- In 1999, the company acquired Hopkins Steel Works Ltd., a structural steel fabricator located in Welland, Ontario. Hopkins also has a 40 year history of steel fabrication in its Welland, Ontario location.

- In 2000, EMPIRE IRON re-established an in-house drafting system using StruCad software. Since then, the software has been changed to the X-Steel structural steel detailing system (10 licenses acquired).

- In 2002, the Corporation added a Peddinghaus CNC beam line to its Wabamun plant.

- Over the last decade, EMPIRE IRON has developed its IT systems to a fully integrated network connecting all its branches. The company currently uses the Sage Timberline accounting application.

- Over time, the company has developed an in-house quality assurance program that is compliant with the Canadian Institute of Steel Construction (CISC) and the American Institute of Steel Construction (AISC) standards.

- EMPIRE IRON has also developed a safety policy compliant with all Provincial regulations with Certificate of Recognition (COR) certification in all branches.

- Empire Iron has a letter agreement to acquire Ward Industrial Equipment Ltd. ("Ward"), a high quality, Canadian manufacturer of bulk material handling equipment and environmental equipment for the book value of Ward.

- Today, EMPIRE IRON designs, manufactures and erects structural steel, miscellaneous metals and plate work from plants in Edmonton, Alberta; Delta, British Columbia; and Winnipeg, Manitoba and Welland (Hopkins), and industrial equipment in Welland (Ward) out of owned and leased facilities totaling 190,000 square feet of shop space.

Empire Iron's Market

Empire Iron's sales are primarily driven by the nonresidential construction industry in Western Canada. The nonresidential construction sector is also referred to as the industrial, commercial and institutional ("ICI") sector. ICI capital spending was weak in 2002 to 2004 across Canada in general and in Western Canada in particular. The structural steel erection industry in North America declined at a 0.4% compound annual growth rate ("CAGR") between 2000 and 2004, due to the decrease in ICI capital spending caused by the recession. However, the industry has rebounded sharply in 2005 and is forecast to grow at a 4% CAGR between 2005 and 2009 as ICI construction spending picks up.

This upward ICI capital spending trend is expected to continue at an even greater rate in Western Canada. Not only is the oil and gas sectors' capital spending booming, but the potash, uranium, gold, diamond, nickel, zinc in Saskatchewan and the capital spending in northern Canada is also forecast by analysts to be very active in the future. The pulp and paper is showing signs of resuming its capital spending. Hydro Electric activity in Manitoba is increasing because of Ontario's imminent energy shortfall. The company's clients operate in various industries, including; oil and gas, infrastructure, pulp and paper and mining. However, recent economic improvements, higher employment and increased capital spending levels have contributed to a rebound in ICI construction spending. In management's view, the outlook for structural steel fabrication and erection is forecasted to be very strong for next decade in Western Canada.

Empire Iron's operations are strategically located in the four provinces in Western Canada: Alberta, British Columbia, Manitoba and Saskatchewan. The company's future prospects are dependent on the outlook for these four provinces, particularly for Alberta and British Columbia. Although the structural steel fabrication and erection industry is expanding in other regions of Canada, the major growth opportunities are in Alberta.

Empire Iron's management projects that oil sands capital expansion programs will be a significant growth driver for the company. Analysts predict that oil sands production in Alberta will increase significantly in the coming years to offset the decline in Canada's conventional crude oil production. More than $34 billion has been invested in the oil sands since the mid-1990s, and a minimum of $38 billion will be invested over the next 10 years. (a) In 2004 alone, construction investment in the oil sands jumped 82% to $2.6 billion, and another 85% rise to $4.7 billion was expected in 2005.(b)(c) In management's view, there will be a commensurate increase in the demand for concrete, structural steel, pipes, pipe fittings, valves, electrical cable, various control instruments and major equipment pieces.

(a) "Oil Sands Will Lead Canadian Growth in 2005 and Beyond," Global Insight,
May 4, 2005.

(b) Ibid.

(c) Ibid.

Empire Iron's Business

Empire Iron's operations support four service lines:

- Supply of Fabricated Steel - Structural and miscellaneous steel is supplied for mining operations, pulp mills, process plants, hydro-electric plants, as well as any and all types of industrial, institutional and commercial projects. Plate steel fabrications include bridges, hydraulic gates, stop logs, precipitators, tanks, hoppers, chutes, breeching and engineered equipment. The annual tonnage capability varies depending on the type of fabrication. The Winnipeg and Wabamun plants are equipped with wheelabrating and painting facilities to accommodate multi-coat paint systems for a variety of highly corrosive environments. In addition, the Corporation has one of the largest boring and milling machines in Western Canada, enabling Empire Iron to provide a complete service for machined products such as hydraulic gates, guides and stop logs. All fabrication is subject to an in-house quality assurance program that is compliant with CISC and AISC standards.

- Erection of Fabricated Steel - Empire Iron erects fabricated structural and plate steel for its clients from site offices staffed to accommodate the size and complexity of each project. The skilled trades people are complemented by quality assurance, safety and administrative staff who ensure each project is erected to CISC and AISC standards, and is performed in a manner fully compliant with all Provincial safety regulations.

- Multidiscipline Trade Construction - Empire Iron's construction services division is based out of Winnipeg, Manitoba and provides construction and maintenance service for industrial projects throughout Western Canada. Projects employing unionized ironworkers, millwrights, operating engineers, pipefitters, boilermakers, electricians and other trades people, together with technical staff support, are supervised and coordinated by experienced construction managers and completed on schedule to the client's satisfaction. The Corporation tends to target projects where multidiscipline trade construction is a part of, and complementary to, a steel fabrication and erection project.

- Industrial Equipment Manufacturing - The company has agreed to purchase 100% ownership of Ward Industrial Equipment Ltd. ("Ward") (www.wardequipment.com ) for the book value of common equity. Payment by Empire Iron will largely be financed through offsetting a note receivable of approximately $700,000 due from the current owner of Ward. This transaction is expected to close effective March 31, 2006. Ward was incorporated in 1965 and operates out of a 49,000 square foot facility in Welland Ontario. Revenue approximates $4 million per year, with operating income of $110,658 and earnings before interest, depreciation, amortization and taxes ("EBITDA") of $183,308 (year ended December 31, 2005, review engagement financial statements). Management is of the view that the product line owned by Ward can continue to be designed, engineered and manufactured in Ontario and growth in equipment sales in Western Canada can be fabricated in Empire Iron's facilities in Western Canada.



2002 2003 2004 2005
Service Revenue(1) Revenue(1) Revenue(1) Revenue (2)
------------------------------------------------------------------------
Supply of Fabricated
Steel (structural steel,
plate steel and
miscellaneous metals) $29,763 $21,112 $21,413 $43,420
% of Total 68% 53% 59% 59%
Erection of
Fabricated Steel $10,067 $11,154 $ 9,799 $18,621
% of Total 23% 28% 27% 25%
Multidiscipline Trade
Construction $ 3,939 $ 7,568 $ 5,081 $11,508
% of Total 9% 19% 14% 16%
Total $43,769 $39,834 $36,293 $73,549
------------------------------------------------------------------------
------------------------------------------------------------------------

($ in thousands) for Years Ending December 31 Source:
Empire Iron Works Ltd.
(1) audited financial statements
(2) management prepared financial statements


Empire Iron's revenue results during the 2002-2004 period mirrored the weak capital spending experienced in the ICI sector. Empire Iron's revenue doubled in 2005 compared to the prior year. This also reflected the significantly more robust ICI spending in western Canada that happened in 2005. In management's view, the increase in work experienced in 2005 and expected in the industry during the next decade may have a correspondent increase in margins as the industry operates at or near capacity. This is even more acute in Western Canada where industrial capital expenditures haven risen significantly and are forecasted to continue at a frenetic pace.

As at December 31, 2005, Empire Iron had current assets totalling $23.7 million, capital assets of $5.3 million, current liabilities of $21.8 million, long term debt of $1.5 million and Shareholder's Equity and Shareholder's Loans of $5.6 million. Revenue, operating income and EBITDA were approximately $73 million, $315,500 and $1.2 million respectively for the period ended December 31, 2005 (management prepared financial statements).

Empire Iron's Strategy

The structural steel fabrication industry is highly fragmented. The other significant fact is that of the 125 competitors that are members of the Canadian Institute of Steel Construction ("CISC"), only 24% of the estimated revenue is in western Canada and 44% is in Quebec. Empire Iron management are of the view that the current Canadian fabricating capacity is not appropriately located for the future volume of work expected over the next decade.

Empire Iron management is of the view that there is a significant opportunity to cost effectively add capacity at its existing operations in Alberta, BC and Manitoba and to selectively acquire competitors that are synergistic with Empire Iron's operations. Empire Iron management are also of the view that margins will strengthen significantly as fabricating capacity, skilled trades person capacity and project management capacity becomes strained.

Ryjencap's Directors

Messr. Terry Rogers, Mark Ferguson, Don Terry, Brent Atkinson and Basil Cuddihy, being all of the current directors of the Corporation have agreed to resign, subject to approval of the Transaction by a majority of the minority shareholders, at a special meeting of the shareholders of Ryjencap to be called to approve the Transaction. It is expected that a new board of directors will be nominated at the special meeting consisting of Mr. Guy Nelson, Campbell McIntyre, Peter Kozicz and Joe Robertson, all of Empire Iron.

Mr. Guy Nelson, age 50, has been the President and principal of Nelson Advisors Inc. ("NAI") since 1996. NAI is a private company providing consulting advice to companies that a significant or controlling equity investment is held. The principal companies that Mr. Nelson advises are involved in steel fabrication, manufacturing, construction and agricultural processing. He is also a director of Producers Oilfield Services Inc., an energy services company based in Western Canada, which is listed on the Toronto Stock Exchange. Mr. Nelson has also served on the board of directors of Venquest Capital Inc. (2004 to 2005), a capital pool company listed on the TSX Venture Exchange, Mullen Transportation Ltd. (1994 to 2004), an energy services which is listed on the Toronto Stock Exchange and Bracknell Corporation (1991 to 1997), an infrastructure support services company, which was listed on the Toronto Stock Exchange. Mr. Nelson holds an MBA from the Richard Ivey School of Business (University of Western Ontario) and a Bachelor of Commerce degree from the University of Alberta.

Mr. Campbell McIntyre, C.A., age 58, was Empire Iron's CFO and director between 1976 and 1995 and was promoted to President in 1996. He has been instrumental in overseeing the profitable growth of Empire Iron from a small miscellaneous fabricator of ornamental steel in Winnipeg generating less than $10 million in sales in 1976 to a multi-facetted fabricator and erector of steel products in six profit centres, generating $73 million in sales out of 190,000 square feet of leased and owned facilities. Prior to being hired by Empire Iron, Mr. McIntyre was in public practice as a chartered accountant and one of his clients was Empire Iron. He was at Kelm, Neufeld, Gateson & Co. as an employee, associate and partner from 1968 to 1976. Mr. McIntyre has been active in a variety of community service organizations in Winnipeg over the years.

Mr. Peter Kozicz, age 45, will become an independent director of Empire Iron after the Transaction. Mr. Kozicz has been the President of Arlea Corporation ("Arlea") since 2001. Arlea is a private company that provides consulting advice to companies and makes equity investments. The principal companies that Mr. Kozicz currently advises are involved in agricultural processing, fresh produce processing and a wireless data company. From April 1997 to May 2001, he was the President, Chief Executive Officer and a director of Mad Catz Interactive Inc., a public company listed on the Toronto Stock Exchange that designed, developed and manufactured accessories for video game consoles and PC gaming systems. Mr. Kozicz was the Secretary and a director of Canadian Public Venture Equities I Inc., a capital pool corporation listed on TSX Venture Exchange that completed its Qualifying Transaction and is now Allen-Vanguard Corporation, from July 2003 to November 2003. Mr. Kozicz was the Chief Financial Officer, Secretary and a director of Canadian Public Venture Capital I Inc., a capital pool corporation listed on the TSX Venture Exchange, that completed its Qualifying Transaction and is now Exeltech Aerospace Inc., from March 2003 to June 2004. Mr. Kozicz is also currently a trustee of Dominion Citrus Income Fund, a public income trust listed on the Toronto Stock Exchange. Mr. Kozicz holds an MBA and a Bachelor of Science degree in civil engineering from Queen's University.

Mr. Joe Robertson, age 46, will become an independent director of Empire Iron after the Transaction. Mr. Robertson is currently Chairman of Henry Schein Ash Arcona Inc. ("HSA"). HSA is the leader in the Canadian dental supply industry. Mr. Robertson was the President of HSA and its predecessor company between 1989 and 2005. He acquired the predecessor company to HSA in 1989 and grew the business from 5 employees and $1 million in revenue to $250 million in revenue, 950 employees and 13 branches across Canada. Henry Schein acquired the predecessor company in 1998. Prior to being at HSA, Mr. Robertson was a Vice President of Lincoln Capital Corporation from 1987 to 1989, a merchant bank publicly listed on the Toronto Stock Exchange. Mr. Robertson held several positions in Toronto and New York while he was at the Mercantile Bank of Canada between 1982 and 1985. Mr. Robertson has an MBA from Harvard and a Bachelor of Commerce from Carleton University.

The parties to this proposed Transaction are at arm's length to one another. Completion of the Transaction is subject to a number of conditions, including but not limited to, completion of financing, TSX Venture Exchange acceptance and majority of the minority shareholders approval. The Transaction cannot close until the required shareholder approval is obtained. There can be no assurances that the Transaction will be completed as proposed or at all. Shareholders will also be asked to consider and approve a change of auditors, a change of the name of the Corporation to "Empire Industries Ltd.", and other corporate matters. Ryjencap management anticipate being able to mail an information circular in relation to the various matters requiring shareholder approval before the end of April for a meeting expected to be held before the end of May.

The Corporation has also made application to the TSX Venture Exchange for an exemption from the requirement for a sponsor for the Transaction. Trading in the common shares of the Corporation will remain halted until a decision whether or not to grant this application has been made by the TSX Venture Exchange. A waiver of the sponsorship requirements should not be construed as any assurance with respect to the merits of the Transaction.

Investors are cautioned that, except as disclosed in the management information circular to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool Corporation should be considered highly speculative.


The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Ryjencap Inc.
    Mr. Terry Rogers
    (604) 531-8113