WesternOne Equity Income Fund

WesternOne Equity Income Fund

May 16, 2011 15:22 ET

WesternOne Equity Income Fund Enters into a Definitive Agreement to Acquire Britco's Modular Manufacturing and Leasing Business and Concurrently Announces a $75,000,000 Bought Deal Financing

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 16, 2011) -


WesternOne Equity Income Fund ("WesternOne Equity") (TSX:WEQ.UN)(TSX:WEQ.DB)(TSX:WEQ.DB.B) today announced that one of its indirect subsidiaries entered into an acquisition agreement (the "Acquisition Agreement") to acquire the assets and business of Britco Structures LLP and Britco Leasing Ltd. (together, "Britco" or the "Britco Business") for $93 million (the "Acquisition"). The Acquisition is subject to an earn-out provision whereby the current owners of the Britco Business will receive a portion of any earnings above a prescribed threshold for the 12-month period immediately following the closing of the Acquisition. The Acquisition is also subject to post-closing adjustments relating to capital expenditures and disposals and working capital.

The Britco Business is one of the largest Canadian designers and manufacturers of commercial portable and permanent modular buildings and owns one of the largest rental fleets of modular buildings in western Canada with approximately 1,200 buildings. WesternOne Equity's management expects the Acquisition to be immediately accretive to WesternOne Equity's unitholders based on its projections of annual EBITDA of $15 million for the Britco Business for the 2011 fiscal year.

"Over the past 34 years, co-founders and current owners Rick McClymont and David Taft have built the Britco Business into an industry leader in the design, manufacture and leasing of modular buildings in western Canada. We are very pleased with the added diversity in product offering and depth of senior management that this acquisition brings to us," stated Mr. Darren Latoski, CEO of WesternOne Equity. "Rick and David will remain as consultants to facilitate the transition, while Britco Executive Vice President Mike Ridley will assume the role of President of the Britco Business once the acquisition is complete."

"The addition of the Britco Business further establishes us as an integrated construction and infrastructure services provider. It gives us access to a wider customer base, including the high growth energy and mining sectors in Alberta and British Columbia, and business opportunities in other markets in North America and abroad. The economies of scale will also help improve our information technology infrastructure and leverage sales and marketing efforts," said Mr. Latoski.

Concurrently with the execution of the Acquisition Agreement, WesternOne Equity entered into an agreement with a syndicate of underwriters co-led by Dundee Securities Ltd. and National Bank Financial Inc., including Canaccord Genuity Corp., CIBC World Markets Inc., HSBC Securities (Canada) Inc., Raymond James Ltd., Macquarie Capital Markets Canada Ltd., Union Securities Ltd. and M Partners Inc. (together, the "Underwriters"), under which the Underwriters have agreed to purchase, on a bought deal basis, 75,000 Extendible Convertible Unsecured Subordinated Debentures ("Debentures") priced at $1,000 per Debenture (the "Offering"), for total gross proceeds of $75 million.

WesternOne Equity intends to use the net proceeds from the Offering towards the Acquisition. WesternOne Equity and a Canadian chartered bank have entered into a commitment letter to establish a $35 million senior secured credit facility which will be available to be used, in all or in part, to assist with the closing of the Acquisition to the extent WesternOne Equity requires.

The Debentures bear interest at an annual rate of 8% per annum payable semi-annually in arrears on June 30 and December 31 of each year. The initial maturity date will be the earlier of the closing date of the Acquisition, June 30, 2011 if the Acquisition does not close, or such date prior to June 30, 2011 if the Acquisition is terminated by WesternOne Equity (the "Initial Maturity Date"). If the closing of the Acquisition takes place on or prior to June 30, 2011 and is not terminated by WesternOne Equity then the maturity date will be automatically extended from the Initial Maturity Date to June 30, 2018. If the closing of the Acquisition does not take place on or prior to June 30, 2011, then the Debentures will mature on the Initial Maturity Date.

The Debentures will be convertible into approximately 133 WesternOne Equity units (the "Units") per $1,000 principal amount, at any time following the closing of the Acquisition, at the option of the holder, representing a conversion price of $7.50 per Unit (the "Conversion Price"). The Debentures will not be redeemable by WesternOne Equity prior to June 30, 2014. On and after June 30, 2014, and prior to June 30, 2016, the Debentures may be redeemed in whole or in part from time to time at WesternOne Equity's option, provided that the volume weighted average trading price of the Units on the Toronto Stock Exchange during the 20 consecutive trading days ending on the fifth trading day preceding the date on which the notice of the redemption is given is not less than 125% of the Conversion Price. On and after June 30, 2016 and prior to the Maturity Date, WesternOne Equity may, at its option, redeem the Debentures, in whole or in part, from time to time at par plus accrued and unpaid interest.

Closing of the Offering, which is subject to customary conditions and regulatory approvals, including approval of the Toronto Stock Exchange, is expected to occur on or about June 7, 2011. WesternOne Equity has also granted the Underwriters an over-allotment option to purchase, on the same terms, up to an additional 11,250 Debentures (the "Over-Allotment Option"). The Over-Allotment Option is exercisable, in whole or in part, by the Underwriters at any time up to 30 days after closing. The maximum amount of gross proceeds raised under the Offering is $86.25 million, should the Over-Allotment Option be exercised in full.

The Debentures issued under the Offering will be offered by way of a short-form prospectus to be filed with securities regulatory authorities in each of the provinces in Canada except Quebec.

These securities have not been, and will not be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an application exemption from the registration requirements of such Act.

This press release shall not constitute an offer to sell or a solicitation of any offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

Non-IFRS Measures

References in this press release to "EBITDA" are to earnings before interest, income taxes, depreciation, amortization, accretion, gains/losses on financial derivatives relating to changes in the fair market value of the fixed interest rate swap, foreign exchange gains/losses, and write-down of fleet assets, intangible assets, goodwill and non-recurring items. EBITDA is a measure used by many investors to compare issuers on the basis of ability to generate cash flow from operations. EBITDA is not an earnings measure recognized by International Financial Reporting Standards ("IFRS"), does not have standardized meanings prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other issuers. WesternOne Equity's management believes that EBITDA is an important supplemental measure in evaluating WesternOne Equity's performance and in determining whether to invest in its units.

Readers of this information are cautioned that EBITDA should not be construed as an alternative to: (i) net income or loss determined in accordance with IFRS as an indicator of WesternOne Equity's performance; or (ii) cash flows from operating, investing and financing activities as measures of WesternOne Equity's liquidity and cash flows. WesternOne Equity's method of calculating EBITDA may differ from the methods used by other issuers and, accordingly, WesternOne Equity's EBITDA may not be comparable to similar measures presented by other issuers.

Forward-Looking Statements

Certain statements in this press release may constitute "forward-looking" information that involves known and unknown risks, uncertainties and other factors, and it may cause actual results, performance or achievements or industry results, to be materially different from any future results, performance or achievements or industry results expressed or implied by such forward-looking information. Forward-looking information is identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will", "would", and similar terms and phrases, including references to assumptions. Such information includes, without limitation, statements with respect to: the expected EBITDA of the Britco Business for the 2011 fiscal year; the anticipated closing of the Acquisition and the Offering; the anticipated use of net proceeds of the Offering; the entering into of a new credit facility; and the benefits that may accrue to WesternOne Equity and its unitholders as a result of the Acquisition. Actual events or results may differ materially.

Forward-looking information contained in this press release is based on certain key expectations and assumptions made by WesternOne Equity, including, without limitation, expectations and assumptions respecting: stability of the economy in western Canada; growth in the energy and mining sectors in Alberta and British Columbia; no material adverse changes to the Britco Business; growth in demand for the products and services of the Britco Business; ability to successfully integrate the Britco Business; satisfaction of all conditions of closing with respect to the Acquisition; satisfactory timing and receipt of regulatory approval with respect to the Offering; satisfaction of all conditions with respect to utilization of a new credit facility; and WesternOne Equity's ability to offer an expanded range of products and services from all of its businesses to a wider customer base as a result of the Acquisition. Although the forward-looking information contained in this press release is based upon what the WesternOne Equity's management believes to be reasonable assumptions, WesternOne Equity cannot assure investors that actual results will be consistent with such information.

Forward-looking information reflects current expectations of WesternOne Equity's management regarding future events and operating performance as of the date of this press release. Such information involves significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward looking information including without limitation: failure to close the Acquisition and the Offering; potential undisclosed liabilities associated with the Acquisition; failure to realize the benefits of the Acquisition; decreased demand for products and services of the Britco Business; industry and economic related risk; credit facilities risk; interest rate fluctuations; political and social uncertainties; regulatory risk; and reliance on key personnel. Readers are cautioned that the foregoing list is not exhaustive. For additional information with respect to risks and uncertainties, see "Risk Factors" in WesternOne Equity's Annual Information Form dated March 31, 2011, which is available on SEDAR (www.sedar.com).

To the extent any forward-looking information in this news release constitutes future-oriented financial information or financial outlooks, within the meaning of securities laws, such information is being provided to demonstrate the potential benefits of the Acquisition and readers are cautioned that this information may not be appropriate for any other purpose. Future-oriented financial information and financial outlooks, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to the risks set out above.

The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. Forward-looking information reflects management's current beliefs and is based on information currently available to WesternOne Equity. The forward-looking information is made as of the date of this press release and WesternOne Equity assumes no obligation to update or revise such information to reflect new events or circumstances, except as may be required by applicable law.

About WesternOne Equity

WesternOne Equity seeks to acquire businesses in the sector of construction and infrastructure services in order to generate stable and growing distributions to its unitholders as well as to achieve overall capital appreciation.

Additional information about WesternOne Equity is available at www.weq.ca or www.sedar.com.

About Britco

Britco was established by Rick McClymont and David Taft in 1977. With two large production facilities located in Agassiz and Penticton, BC, Britco is the one of the largest manufacturers of commercial modular buildings in Canada. Britco also has one of the largest lease fleets of temporary offices, construction site trailers and storage containers in western Canada. Britco employs over 300 people and is headquartered in Langley, BC with branch offices in Nanaimo and Kelowna and a sales office in Calgary, Alberta. Britco is ranked among British Columbia's top-ten construction-related companies and has a customer base that ranges from the commercial, residential, government and infrastructure sectors, to the resource, energy and mining industries in Alberta and British Columbia.

Britco designs and manufactures a wide variety of portable and permanent modular buildings, including work force accommodations, motels, seniors housing, office complexes, day care facilities, classrooms, construction site buildings and sales centres. Britco also provides design, project management, site preparation and delivery and installation services.
Britco has received BC's Exporter of the Year award for its international projects and the Ernst & Young Entrepreneur Of The Year® award for best manufacturing company in the Pacific Region. Britco was also an Official Supplier of the Vancouver 2010 Olympic and Paralympic Winter Games.

Additional information about Britco is available at www.britco.com.


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