A&W REVENUE ROYALTIES INCOME FUND ADDS FIFTEEN RESTAURANTS TO ROYALTY POOL
December 16 2010 - 1:45PM
PR Newswire (Canada)
VANCOUVER, Dec. 16 /CNW/ -- TRADING SYMBOL: The Toronto Stock
Exchange - AW.UN VANCOUVER, Dec. 16 /CNW/ - A&W Revenue
Royalties Income Fund (the Fund) and A&W Food Services of
Canada Inc. (A&W Food Services) announced today that, effective
January 5, 2011, the number of A&W restaurants for which
royalties are paid to A&W Trade Marks Limited Partnership (the
Partnership) will be increased by 20 new restaurants that were
opened across Canada between October 2009 and September 2010, less
five restaurants that were permanently closed during this
period. The addition of these 15 net new restaurants brings
the total number of A&W restaurants in the Royalty Pool to 715.
This is the ninth increase in the number of restaurants in the
Royalty Pool since the inception of the Fund in 2002. Since
that time, the number of restaurants for which royalties are paid
to the Fund (through the Partnership) has increased by 130
restaurants, from 585 to 715. "We are delighted with the growth of
new A&W restaurants across Canada and in particular in Ontario,
our most important growth market in the country," said Paul
Hollands, President and Chief Executive Officer of A&W Food
Services. "Our new restaurants further strengthen our
position as Canada's second largest burger chain." The
estimated annualized sales of the 20 new A&W restaurants being
added to the Royalty Pool on January 5, 2011 are $20,160,000 and
annual sales for the five permanently closed restaurants were
$1,673,000. The net sales of $18,487,000 from the 15 net new
restaurants translate into estimated additional annual royalty
payments to the Fund of $555,000 on the basis of the royalty of 3%
of sales. The initial consideration for the estimated
additional royalty revenue is $6,859,000, calculated by discounting
the estimated additional royalties by 7.5% and dividing the result
by the yield on units of the Fund. The yield is based on the
weighted average trading price of the units of the Fund for the 20
trading days ending November 1, 2010, or $19.68. 80% of the
consideration will be paid on January 5, 2011 by issuance of
278,818 limited partnership (LP) units which will immediately be
exchanged for shares of A&W Trade Marks Inc. (Trade
Marks). These additional shares of Trade Marks are
exchangeable at the option of A&W Food Services for 278,818
units of the Fund, subject to the approval of the TSX. A final
reconciliation of the consideration and number of LP units issued
will be made in December 2011 based upon the actual annual sales of
the new restaurants. Reconciliation of January 5, 2010
Royalty Pool Amendment The actual sales of the new restaurants
added to the Royalty Pool on January 5, 2010 have now been
determined. The actual annual sales for the 23 new
restaurants added on January 5, 2010 were $25,781,000 compared to
the original estimate of $24,879,000. As a result, the
remaining 20% of the initial consideration or 83,181 LP units have
now been issued to A&W Food Services. Additional
consideration of $244,000 has also been paid to A&W Food
Services in the form of 17,004 LP units as the actual sales
exceeded the original estimate. The 83,181 LP units and additional
17,004 LP units have been exchanged for 100,185 additional shares
of Trade Marks. These additional shares of Trade Marks are
exchangeable at the option of A&W Food Services for 100,185
units of the Fund, subject to the approval of the TSX. As a result
of the additional shares of Trade Marks issued to A&W Food
Services relating to the reconciliation of the January 5, 2010
Royalty Pool Amendment, and prior to the substantial issuer bid
(described below), Food Services owns the equivalent of 6,382,901
units of the Fund representing 43.4% of the units of the Fund on a
fully-diluted basis. Substantial Issuer Bid On November 10,
2010, the Fund announced a substantial issuer bid (the Offer) to
purchase for cancellation 2,500,000 of its units, at a price of
$20.00 per unit. The Offer is made to all of the Fund's
unitholders, including Food Services who has agreed to deposit to
the Offer shares of Trade Marks exchangeable for a total of
2,500,000 units. If more than 2,500,000 units are tendered,
the Fund will purchase the units on a pro rata basis. The
Offer will remain open for acceptance until December 17, 2010
unless withdrawn or extended by the Fund. The Offer and issuer bid
circular and other related documents containing the terms of the
Offer are available on SEDAR at www.SEDAR.com. About the Fund
The Fund is a limited purpose trust established to invest in Trade
Marks, which through its interest in the Partnership, owns the
A&W trade-marks used in the A&W quick service restaurant
business in Canada. The A&W trade-marks comprise some of
the best-known brand names in the Canadian foodservice
industry. In return for licensing A&W Food Services to
use its trade-marks, Trade Marks (through the Partnership) receives
royalties equal to 3% of the sales of A&W restaurants in the
Royalty Pool. The Royalty Pool is adjusted annually to add
new restaurants, less any A&W restaurants that have permanently
closed. The Partnership pays A&W Food Services for the
additional net new restaurants in the form of an increase in the
limited partnership interest of A&W Food Services, based upon a
formula set out in the licence agreement. A&W Food
Services' additional limited partnership interest may be exchanged
for additional shares of Trade Marks which are exchangeable for
units of the Fund. These annual adjustments to the Royalty
Pool are required under the licence agreement. A&W Food
Services is the second largest quick-service hamburger restaurant
chain in Canada. Operating coast-to-coast, A&W
restaurants feature famous trade-marked menu items such as The
Burger Family, Chubby Chicken and A&W Root Beer. This release
may contain certain forward-looking statements reflecting A&W
Revenue Royalties Income Fund's current expectations in the quick
service segment of the restaurant food industry in Canada.
Investors are cautioned that all forward-looking statements involve
risks and uncertainties, including, without limitation, changes in
market, competitive developments, and potential downturns in
economic conditions generally. Additional information on these and
other potential factors that could affect the Fund's financial
results are detailed in documents filed from time to time with the
provincial securities commissions in Canada. To view this news
release in HTML formatting, please use the following URL:
http://www.newswire.ca/en/releases/archive/December2010/16/c5984.html
pDon Lesliebr/ Chief Financial Officerbr/ A&W Food Services of
Canada Inc.br/ (604) 988-2141br/ email: a
href="mailto:investorrelations@aw.ca"investorrelations@aw.ca/abr/ a
href="http://www.awincomefund.ca"www.awincomefund.ca/a/p
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