Skyline Champion to Make C$185 Million
Strategic Investment in ECN Capital
ECN Capital and Skyline Champion to
Establish New Captive Finance Company
ECN Capital Corp. (TSX: ECN) (“ECN Capital”) and Skyline
Champion Corporation (NYSE: SKY) (“Skyline Champion”) today
announced that they have entered into a share subscription
agreement (the “Subscription Agreement”) pursuant to which
Skyline Champion has agreed to make an approximately C$185 million
(US$138 million) equity investment in ECN Capital on a private
placement basis (the “Private Placement”) in exchange for
33,550,000 common shares of ECN Capital (the “Common
Shares”) and 27,450,000 mandatory convertible preferred shares,
Series E of ECN Capital (“Convertible Preferred Shares”).
Upon closing of the Private Placement, Skyline Champion is expected
to beneficially own an approximately 19.9% interest in ECN Capital
(assuming the conversion of all Convertible Preferred Shares).
In connection with the Private Placement, ECN Capital and
Skyline Champion will form a captive finance company that will be
51% owned by Skyline Champion and 49% owned by Triad Financial
Services, Inc. (“Triad”), a wholly-owned subsidiary of ECN
Capital. The captive finance company will provide a tailored retail
finance loan program for customers and a new branded floorplan
offering for Skyline Champion and its affiliates in the
manufactured home finance space and will operate with services
provided by Triad.
The captive finance company is expected to enable both companies
to work more closely together to grow their respective businesses
and create value for their stakeholders. Among other things, the
captive finance company is expected to:
- drive greater demand for product by providing broader and more
attractive financing options and services for Skyline Champion’s
customers;
- enhance Skyline Champion’s turn-key homebuying solutions while
magnifying the benefits of their digital and direct-to-consumer
strategic investments; and
- generate increased retail loan originations and floorplan
balances, driving growth and scale efficiencies for Triad.
"We are pleased to announce this new and expanded partnership
with Skyline Champion, a leading participant in the North American
manufactured housing sector,” said Steven Hudson, Chief Executive
Officer of ECN Capital. “This transaction represents the
culmination of the strategic review process that we commenced
earlier this year, and we are very excited by the significant
growth opportunities that the establishment of the new captive
finance company will bring to Triad. The concurrent equity and
preferred share investments in ECN Capital also represent a strong
endorsement of ECN Capital’s business model and the value of our
platform.”
“We are excited to announce this new strategic collaboration
with one of our long-standing business partners,” said Mark Yost,
Skyline Champion’s President and Chief Executive Officer. “The
partnership with Triad will help streamline the homebuying
experience for our channel partners as well as the consumers of our
homes. This will allow us to expand our ability to offer affordable
housing solutions more efficiently while driving company-wide
growth. The asset-light model of these financing solutions combined
with the strength of our balance sheet allow us to partner with ECN
Capital while continuing our investments in our longer-term
commercial and operational initiatives. We are excited about the
future and the benefits this investment will bring to both
companies’ stakeholders.”
Key Private Placement Details
Equity Investment
Pursuant to the Subscription Agreement, Skyline Champion has
agreed acquire 33,550,000 Common Shares and 27,450,000 Convertible
Preferred Shares, in each case at a price per share equal to C$3.04
(the “Share Issue Price”).
The Convertible Preferred Shares are initially convertible on a
one-for-one basis into an aggregate of 27,450,000 Common Shares
based on an initial liquidation preference and conversion price
equal to the Share Issue Price, which are subject to customary
anti-dilution adjustments. The Convertible Preferred Shares are
convertible at any time at the option of Skyline Champion, are
convertible at the option of ECN Capital in connection with a
change of control of ECN Capital and will automatically convert
into Common Shares on the fifth anniversary of closing of the
Private Placement, in each case subject to a conversion cap in the
event that, as a result of any conversion, Skyline Champion would
hold in excess of 19.9% of outstanding Common Shares.
The Convertible Preferred Shares will receive cumulative cash
dividends at a rate of 4.0% per annum on the liquidation
preference, payable semi-annually.
The holder of the Convertible Preferred Shares will be entitled
to vote on an as-converted basis for all matters on which holders
of Common Shares vote and, except as otherwise required by law,
will vote together as a single class with the Common Shares.
The Convertible Preferred Shares will not be transferrable other
than to affiliates of Skyline Champion or with the prior approval
of the Board of Directors of ECN Capital. The Common Shares to be
acquired by Skyline Champion pursuant to the Private Placement are
subject to a two-year lock-up period, subject to permitted
transfers to affiliates of Skyline Champion.
While the Convertible Preferred Shares will not be listed on any
stock exchange, ECN Capital has applied for conditional approval
for the listing of the underlying Common Shares on the TSX. ECN
Capital has also applied for conditional approval from the TSX for
the listing of the Common Shares to be acquired by Skyline Champion
pursuant to the Private Placement.
ECN Capital intends to use the net proceeds of the Private
Placement for general corporate purposes.
Investor Rights Agreement
Pursuant to an investor rights agreement to be entered into on
closing of the Private Placement (the “Investor Rights
Agreement”), Skyline Champion will have the right to nominate
one director to serve on the Board of Directors of ECN Capital. On
closing, ECN Capital intends to appoint Mark Yost, President and
Chief Executive Officer of Skyline Champion, to the Board of
Directors of ECN Capital.
The Investor Rights Agreement will also provide for, among other
things, customary piggy-pack registration rights, pre-emptive
rights, standstill and voting support obligations. In addition, in
light of the strategic partnership between ECN Capital and Skyline
Champion, consisting of the Private Placement and the captive
finance company, ECN Capital will also agree pursuant to the
Investor Rights Agreement that for a two-year period from closing
of the Private Placement: (i) unanimous approval of the Board of
Directors of ECN Capital will be required in order to market the
sale of Triad, pursue any material acquisitions or dispositions
outside of the ordinary course (subject to certain agreed upon
dispositions) or pay any dividends in excess of ECN Capital’s
current quarterly dividends on its Common Shares and existing
preferred shares and dividends on the Convertible Preferred Shares;
and (ii) Skyline Champion will have a right to match in connection
with unsolicited offers to acquire ECN Capital or Triad.
Conditions to Closing
The Private Placement is anticipated to close in September 2023,
subject to certain customary closing conditions including the
receipt of conditional approval from the TSX and the expiration of
the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
Conference Call and Webcast Information:
ECN Capital will be hosting an analyst briefing to discuss its
financial statements and management discussion and analysis for the
three-month period ended June 30, 2023 and its strategic
relationship with Skyline Champion commencing at 6:30 p.m. Eastern
Time on August 14, 2023. The call can be accessed as follows:
Webcast
https://services.choruscall.ca/links/ecncapitalcorp2023q2.html
Toll-free dial in
North America 1-800-319-4610
International 1-416-915-3239
Presentation slides
http://ecncapitalcorp.com/investors/presentations
A telephone replay of ECN Capital’s conference call may also be
accessed until September 14, 2023 by dialing 1-800-319-6413 and
entering the passcode 0363#.
Skyline Champion management will host a conference call
tomorrow, August 15, 2023, at 9:00 a.m. Eastern Time, to discuss
this transaction.
Investors and other interested parties can listen to a webcast
of the live conference call by logging onto the Investor Relations
section of Skyline Champion’s website at skylinechampion.com. The
online replay will be available on the same website immediately
following the call.
The conference call can also be accessed by dialing (877)
407-4018 (domestic) or (201) 689-8471 (international). A telephonic
replay will be available approximately two hours after the call by
dialing (844) 512-2921, or for international callers, (412)
317-6671. The passcode for the live call and the replay is
13740713. The replay will be available until 11:59 P.M. Eastern
Time on August 29, 2023.
Additional Information
ECN Capital intends to file a material change report in
connection with the transactions contemplated by this news release,
which will be available under ECN Capital’s profile on SEDAR+ at
www.sedarplus.ca. In connection therewith, a copy of the
Subscription Agreement and the exhibits thereto, including the form
of Investor Rights Agreement and share terms for the Convertible
Preferred Shares (the “Share Terms”), will be filed with the
applicable Canadian securities regulators on SEDAR+ at
www.sedarplus.ca. The above descriptions of the terms and
conditions of the Subscription Agreement, Investor Rights Agreement
and Share Terms are expressly qualified in their entirety by the
full text of the as filed documents.
Advisors
CIBC Capital Markets, BMO Capital Markets and Goldman Sachs are
serving as financial advisors to ECN Capital and Blake, Cassels
& Graydon LLP, Cravath, Swaine & Moore LLP and McGlinchey
Stafford PLLC are serving as legal counsel.
Jefferies LLC is serving as financial advisor to Skyline
Champion, and King & Spalding LLP and McCarthy Tetrault LLP are
serving as legal counsel.
About ECN Capital Corp.
With managed assets of US$4.7 billion, ECN Capital Corp. (TSX:
ECN) is a leading provider of business services to North American
based banks, credit unions, life insurance companies, pension funds
and institutional investors (collectively our “Partners”).
ECN Capital originates, manages and advises on credit assets on
behalf of its Partners, specifically consumer (manufactured housing
and recreational vehicle and marine) loans and commercial
(inventory finance or floorplan) loans. Our Partners are seeking
high quality assets to match with their deposits, term insurance or
other liabilities. These services are offered through two operating
segments: (i) Manufactured Housing Finance, and (ii) Recreational
Vehicles and Marine Finance.
About Skyline Champion
Skyline Champion Corporation (NYSE: SKY) is a leading producer
of factory-built housing in North America and employs approximately
7,600 people. With more than 70 years of homebuilding experience
and 44 manufacturing facilities throughout the United States and
western Canada, Skyline Champion is well positioned with an
innovative portfolio of manufactured and modular homes, ADUs,
park-models and modular buildings for the single-family,
multi-family, and hospitality sectors.
In addition to its core home building business, Skyline Champion
provides construction services to install and set-up factory-built
homes, operates a factory-direct retail business with 31 retail
locations across the United States, and operates Star Fleet
Trucking, providing transportation services to the manufactured
housing and other industries from several dispatch locations across
the United States.
Skyline Champion builds homes under some of the most well-known
brand names in the factory-built housing industry including Skyline
Homes, Champion Home Builders, Genesis Homes, Athens Park Models,
Dutch Housing, Atlantic Homes, Excel Homes, Homes of Merit, New
Era, Redman Homes, ScotBilt Homes, Shore Park, Silvercrest, Titan
Homes in the U.S. and Moduline and SRI Homes in western Canada.
Forward-Looking Statements
This press release includes “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995
and “forward-looking information” within the meaning of applicable
Canadian securities laws (collectively, the “forward-looking
statements”). Such statements are based on the current expectations
and views of future events of ECN Capital’s and Skyline Champion’s
management. In some cases the forward-looking statements can be
identified by words or phrases such as “will”, “expect”,
“anticipate”, “intend”, “potential”, “estimate”, “believe” or the
negative of these terms, or other similar expressions intended to
identify forward-looking statements. Forward-looking statements in
this press release include those relating to the Private Placement
and the establishment of the captive finance company, including the
anticipating timing of closing of the Private Placement, the
expected use of proceeds of the Private Placement, the expected
appointment of Mark Yost to the Board of Directors of ECN Capital
and the anticipated benefits of the Private Placement and the
captive finance company to ECN Capital and Skyline Champion,
including the provision of more attractive financing options for
Skyline Champion’s customers, driving greater demand for Skyline
Champion’s products and generating increased originations and
balances for Triad. The forward-looking statements discussed in
this release may not occur and could differ materially as a result
of known and unknown risk factors and uncertainties affecting ECN
Capital and Skyline Champion, including risks regarding expected
timing of the closing of the Private Placement and launch of the
captive finance company, the market’s acceptance of the captive
finance company’s retail finance program and branded floorplan
offering, the parties’ plans, strategies and objectives and other
factors beyond the control of ECN Capital and Skyline Champion.
Forward-looking statements are not guarantees of future performance
and involve known and unknown risks, uncertainties and other
factors which may cause ECN Capital’s and Skyline Champion’s actual
results, performance or achievements to be materially different
from those expressed or implied by the forward-looking statements
contained herein. Accordingly, readers should not place undue
reliance on such forward-looking statements. A discussion of the
material risks and assumptions associated with ECN Capital’s
business can be found in ECN Capital’s Management Discussion and
Analysis for the three and six months ended June 30, 2023 and
Annual Information Form dated March 30, 2023 which can be accessed
at www.sedarplus.ca. A discussion of the material risks and
assumptions associated with Skyline Champion’s business can be
found in Skyline Champion’s Annual Report on Form 10-K for the
fiscal year ended April 1, 2023 previously filed with the
Securities and Exchange Commission (“SEC”), as well as in Skyline
Champion’s Quarterly Reports on Form 10-Q, and Current Reports on
Form 8-K, filed with or furnished to the SEC. Accordingly, readers
should not place undue reliance on any forward-looking statements
or information. Except as required by applicable securities laws,
forward-looking statements speak only as of the date on which they
are made and ECN Capital and Skyline Champion do not undertake any
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events,
or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230814926132/en/
John Wimsatt 561-389-2334 jwimsatt@ecncapitalcorp.com Kevin
Doherty 248-614-8211 investorrelations@championhomes.com
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