Avante Logixx Inc. (TSXV: XX) (“Avante” or the “Company”) is
pleased to announce that it has entered into an agreement dated
November 13, 2019, pursuant to which Fairfax Financial Holdings
Limited (“Fairfax”), through certain of its subsidiaries
(collectively, the “Purchasers”), will invest up to CAD $18 million
in the Company through a private placement of unsecured convertible
debentures (the “Debentures”). Avante is also pleased to announce
that it has entered into a definitive share purchase agreement
dated November 13, 2019, (the “Agreement”) to acquire all of the
outstanding shares of A.S.A.P. Secured Inc. (“ASAP”), subject to
the fulfillment or waiver of certain closing conditions.
Highlights:
- New convertible debenture facility providing up to $18.0
million from Fairfax convertible into common shares of the Company
(the “Common Shares”)
- Acquisition of ASAP for $10.5 million (subject to adjustment)
adding approximately $24.7 million in Trailing Twelve Month (“TTM”)
August 31, 2019 revenue at approximately a 7% Normalized EBITDA
margin
- Pro Forma June 30, 2019, TTM revenues of approximately $70.0
million (including ASAP), an increase of approximately 200%
- Avante will report Q2 F20 financials after hours on November
21, 2019, followed by a conference call on Friday, November 22,
2019 at 8:30 AM EST
Convertible Debentures
The Debentures will be advanced in two tranches,
the first (the “First Tranche”) to consist of 8,264 Debentures (for
gross proceeds of approximately $8,264,000) is expected to be drawn
and advanced on November 27, 2019 (the “First Tranche Closing
Date”), subject to approval from the TSX Venture Exchange, and the
second to consist of up to 9,736 Debentures (for gross proceeds of
approximately $9,736,000) drawn and advanced within nine months of
the First Tranche Closing Date at the Company’s discretion. The
second tranche, to be drawn at the Company’s option, will only be
funded upon, among other things, receipt of necessary approvals
from the TSX Venture Exchange and the Company’s shareholders
(including approval for the creation of a Control Person (as
defined in the policies of the TSX Venture Exchange)).
“We are excited to announce Fairfax as a long
term strategic financial partner, allowing Avante access to capital
while maximizing shareholder value,” said Craig Campbell, CEO of
Avante. “The patient and long term view of Fairfax, coupled with
their disciplined investment style is well aligned to our strategic
plan of building a world-class, globally relevant security
solutions provider. Fairfax and Mr. Prem Watsa are disciplined
investors and aim to achieve a high rate of return on invested
capital and build long term shareholder value. Fairfax and Mr.
Watsa’s track record speaks for itself having achieved an 18.7%
compounded annual growth rate in book value per share since
1985.”
The Debentures will mature five years from the
date of issuance thereof, bear interest at a rate of 7% per annum,
payable semi-annually in equal instalments on the last day of June
and December in each year. Each $1,000 principal amount of the
Debentures issued under the First Tranche is convertible, at the
option of the holder, into Common Shares at any time prior to the
maturity date at a conversion price of $1.56.
The Debentures are direct, unsecured obligations
of the Company, ranking subordinate to certain senior indebtedness.
The Debentures will include customary provisions, including
customary anti-dilution provisions and negative covenants,
including restrictions on the ability of the Company and its
subsidiaries to incur certain indebtedness or liens. The Company’s
obligations pursuant to the Debentures are guaranteed by each of
the Company’s wholly-owned subsidiaries.
The Purchasers will have certain participation
rights in future equity offerings to maintain its pro-rata
ownership interest in the Common Shares at the time of such
offering (the “Participation Right”). In addition, upon such time
as Fairfax and its subsidiaries beneficially own more than 10% of
the outstanding Common Shares, the Purchasers will have the right
to specify an individual to be nominated to the board of directors
of the Company.
Assuming the exercise of all of the Debentures
issued on the First Tranche, Fairfax, through its subsidiaries,
would beneficially own or control 5,297,434 of the issued and
outstanding Common Shares, representing approximately 19.99% of all
issued and outstanding Common Shares after the conversion of the
Debentures issued under the First Tranche (assuming no other
issuances of Common Shares or any adjustments to the Common Shares
issuable pursuant to the applicable anti-dilution provisions).
The Company intends to use the net proceeds of
the First Tranche for the purpose of financing the acquisition of
ASAP. If the Company proceeds with the second tranche, it intends
to use the proceeds thereof for general corporate purposes,
including for the purpose of acquisition financing.
Canaccord Genuity Corp. acted as financial
advisor to the Company in connection with the private placement of
the Debentures and will be paid an advisory fee of $100,000.
Fairfax Early Warning
Disclosure
Prior to the acquisition of the Debentures,
Fairfax and its subsidiaries do not beneficially own or control any
Common Shares. The Debentures are being acquired by Fairfax for
investment purposes, and in the future, it may discuss with
management and/or the board of directors any of the transactions
listed in clauses (a) to (k) of item 5 of Form F1 of National
Instrument 62-103 –The Early Warning System and Related Take-over
Bid and Insider Reporting Issues and it may further purchase, hold,
vote, trade, dispose or otherwise deal in the securities of the
Company, in such manner as it deems advisable to benefit from
changes in market prices of Company securities, publicly disclosed
changes in the operations of the Company, its business strategy or
prospects or from a material transaction of the Company.
An early warning report will be filed by Fairfax
in accordance with applicable securities laws and will be available
on SEDAR at www.sedar.com or may be obtained directly from
Fairfax upon request at 416-367-4941 (Attention: John Varnell) or
at Fairfax Financial Holdings Limited, 95 Wellington Street West,
Suite 800, Toronto, Ontario M5J 2N7.
Acquisition of ASAP
The Company has entered into the Agreement to
acquire the outstanding shares of ASAP from AFIMAC Canada Inc.
(“AFIMAC”) and Dalton First Financial Inc. (“DFF”), subject to
certain closing conditions. ASAP and Darrell Parsons, the Chairman
and controlling shareholder of DFF and AFIMAC, are also parties to
the Agreement.
“I am very pleased to welcome ASAP and its team
to Logixx Security Inc. (“Logixx”), a platform company of Avante
Logixx,” said Craig Campbell, CEO of Avante. “This acquisition is
strategic to achieving our overall vision and provides us a
national platform to target large, national accounts where security
is mission-critical. The integration of ASAP into Logixx gives
Avante pro-forma trailing twelve-month revenue of approximately $70
million and the ability to compete on a national level. ASAP’s
management team will also be joining us, including the President,
Han Koren. Han is a seasoned veteran in the security industry. Han
has global experience as well as experience leading the Canadian
operations of a global security group. Han is expected to lead
Logixx once ASAP has been fully integrated. We are confident that
ASAP will be a great addition to the Avante platform as we continue
to execute on our strategic vision.”
ASAP is a national provider of physical security
services, based in Milton, Ontario, with a focus on industrial and
national account security solutions. ASAP has operations across the
country and is licensed in eight provinces, allowing Logixx to
leverage its current customer base to provide services nationally.
ASAP has been an industry leader since 2005 and employs
approximately 800 team members across the country. ASAP generated
total revenue of approximately $24.7 million in the past twelve
months for the period ending August 31, 2019, and realized a
normalized EBITDA margin of approximately 7%.
“Over the course of several years, ASAP has
built a strong foundation of superior client service providing
high-quality security support,” said Darrell Parsons, Chairman and
Founder. “We are more than confident that Avante Logixx will
continue to support ASAP clients with the same impeccable
service.”
“We celebrate an important milestone today for
ASAP as we formally join the Avante Logixx team,” said Han Koren,
President of ASAP. “United under the Avante umbrella, we will draw
on our years of experience and continue to deliver outstanding
security solutions to our customers, changing how the industry does
business, and continue to grow our business.”
“The combined operations have a large and
diversified client base that represents a tremendous opportunity
for revenue synergies, as a result of a broader set of services and
solutions to offer coupled with our increased geographic
capability” said Craig Campbell. “We intend to migrate many of our
existing customers and new prospects into our managed services
division, thereby migrating single service customers into
multiservice bundles. A number of cost synergies will also be
achieved in the first 12 months.”
Pursuant to the Agreement, the total
consideration to be paid by Avante to purchase all of the issued
and outstanding shares of ASAP is $10,500,000 (subject to a
post-closing working capital adjustment and holdback in accordance
with the Agreement) on a cash free and debt free basis. The Company
will use a mix of cash on hand, a promissory note in favour of DFF
and AFIMAC, and proceeds from its Debenture financing to fund the
acquisition.
The transaction is expected to close on or about December 1,
2019, subject to the fulfilment or waiver of certain closing
conditions customary for a transaction of this nature.
No advisory fees are payable or to be paid by the Company in
connection with the acquisition of ASAP.
Quarterly Financial Release
The Company will release financial results for the period ended
September 30, 2019, after hours on Thursday November 21, 2019, and
a news release to be disseminated at that time with an earnings
call to be held at 8:30 AM EST on Friday, November 22, 2019.
CONFERENCE CALL
Dial in details are as follows: Local:
(+1)
416-764-8658
Toll Free: (+1)
888-886-7786
Conference ID: 94859484
Playback details below, available until December 16,
2019:Local: (+1)
416-764-8692
Toll Free: (+1)
877-674-7070
Playback Pin: 859484 #
This news release shall not constitute
an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of the securities described herein in any
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. This news release does
not constitute an offer of securities for sale in the United
States. The securities described herein have not been, nor will
they be, registered under the United States Securities Act of 1933,
as amended, and such securities may not be offered or sold within
the United States absent registration under U.S. federal and state
securities laws or an applicable exemption from such U.S.
registration requirements.
About Avante Logixx Inc.
Avante Logixx Inc. (TSXV: XX) is a Toronto based
provider of high-end security services. We acquire, manage, and
build industry-leading businesses that provide specialized,
mission-critical solutions that address the needs of our customers.
Our businesses continuously develop innovative solutions that
enable our customers to achieve their objectives. With an
experienced team and a proven track record of solid growth, we are
taking steps to establish a broad portfolio of security businesses
to provide our customers and shareholders with exceptional returns.
Please visit our website at www.avantelogixx.com and consider
joining our investor email list.
Avante Logixx Inc.Craig
CampbellCEO1959 Leslie Street Toronto, Ontario M3B 2M3(416)
923-6984craig@avantelogixx.com
About Fairfax Financial Holdings
Limited
Fairfax Financial Holdings Limited (TSX: FFH and
FFH.U) is a holding company which, through its subsidiaries, is
engaged in property and casualty insurance and reinsurance and the
associated investment management. For further information about
Fairfax, please contact: John Varnell, Vice President, Corporate
Development at (416) 367-4941.
Forward-Looking Information
All statements in this press release, other than
statements of historical fact, may constitute “forward-looking
information” with respect to Avante within the meaning of
applicable securities laws. Forward-looking information is often,
but not always, identified by the use of words such as “seek”,
“anticipate”, “plan”, “continue”, “planned”, “expect”, “project”,
“predict”, “potential”, “targeting”, “intends”, “believe”,
“potential”, and similar expressions, or describes a “goal”, or a
variation of such words and phrases or state that certain actions,
events or results “may”, “should”, “could”, “would”, “might” or
“will” be taken, occur or be achieved. This forward-looking
information includes statements with respect to, among other
things, discussions of future plans and forecasts and statements as
to management’s expectations and intentions with respect to the
company’s acquisition of ASAP and the expected timing for the
closing of the Agreement, the expected financial impact of this
acquisition, the expected timing of the First Tranche Closing Date
and the intended use of the net proceeds of the Debenture
financing, and whether the Company will complete the sale of the
second tranche of the Debentures.
Forward-looking information is subject to a
variety of known and unknown risks, uncertainties and other factors
that could cause actual events or results to differ from those
expressed or implied by the forward-looking information, including,
without limitation, the ability to obtain the consents and
approvals and fulfill the conditions required for closing
(including the receipt of necessary approvals from the TSX Venture
Exchange and the Company’s shareholders for the second tranche of
the Debentures), the company realizing on the anticipated value of
the acquisition of ASAP, the company maintaining its projected
growth, the company’s ability to execute on its strategic vision,
the ability of the company to identify revenue and cost synergies,
general economic conditions or conditions in the financial markets
and the risks identified in Avante’s Management Discussion &
Analysis, Annual Information Form and other continuous disclosure.
This list is not exhaustive of the factors that may affect any of
Avante’s forward-looking information. In connection with the
forward-looking statements contained in this and subsequent press
releases, Avante has made certain assumptions about its business
and the industry in which it operates, including that no
significant events occur outside of Avante’s normal course of
business, assumptions about trends in manpower and technology
costs, assumptions made about the business of ASAP, and assumptions
about the company’s ability to leverage Avante’s and ASAP’s
collective customer bases and networks. Although management
believes that the assumptions inherent in the forward-looking
statements are reasonable as of the date the statements are made,
forward-looking statements are not guaranteeing future performance
and, accordingly, undue reliance should not be put on such
statements due to the inherent uncertainty of the statements.
Avante’s forward-looking information is based on the beliefs,
expectations, and opinions of management on the date the statements
are made, and Avante does not assume any obligation to update
forward-looking information, whether as a result of new
information, future events or otherwise, other than as required by
applicable law. For the reasons set forth above, readers should
not place undue reliance on forward-looking information.
Non-IFRS Financial Measures
This press release includes certain measures
that have not been prepared in accordance with IFRS such as EBITDA,
Normalized EBITDA. These non-IFRS measures are not recognized under
IFRS and, accordingly, users are cautioned that these measures
should not be construed as alternatives to net income determined in
accordance with IFRS. The non-IFRS measures presented are unlikely
to be comparable to similar measures presented by other
issuers. References to pro forma revenue include revenue for
Avante and ASAP from July 1, 2018 to June 30, 2019 inclusive of
revenues from July 1, 2018 to the date of Closing for the three
companies acquired during Fiscal 2019.
References to EBITDA are to net income before
interest, taxes, depreciation, and amortization. References to
Normalized EBITDA are to net income before interest, taxes,
depreciation, amortization of intangibles, share-based payments,
acquisition, integration and / or reorganization costs, other
normalizing adjustments related to the acquisition. Neither EBITDA
nor Normalized EBITDA is an earnings measure recognized by
International Financial Reporting Standards (“IFRS”) and does not
have a standardized meaning prescribed by IFRS. Management believes
that Normalized EBITDA is an appropriate measure in evaluating
Avante’s performance. Readers are cautioned that neither EBITDA nor
Normalized EBITDA should be construed as an alternative to net
income (as determined under IFRS), as an indicator of financial
performance or to cash flow from operating activities (as
determined under IFRS) or as a measure of liquidity and cash flow.
Avante’s method of calculating Normalized EBITDA may differ from
methods used by other issuers and, accordingly, Avante’s Normalized
EBITDA may not be comparable to similar measures used by other
issuers.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
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