VANCOUVER, BC, Dec. 9, 2021 /CNW/ - A&W Revenue
Royalties Income Fund (the Fund) (TSX: AW.UN) and A&W Food
Services of Canada Inc. (A&W Food Services) announced today
that, effective January 5, 2022, the
number of A&W restaurants for which royalties are paid to
A&W Trade Marks Limited Partnership (the Partnership) will be
increased by 34 new restaurants that were opened across
Canada between September 4, 2020 and September 9, 2021, less 13 restaurants that were
permanently closed between November 2,
2020 and November 7, 2021 (the
Reporting Period). The addition of these 21 net new restaurants
brings the total number of A&W restaurants in the Royalty Pool
to 1,015. Since the inception of the Fund in 2002, the number of
restaurants for which royalties are paid to the Fund (through the
Partnership) has increased by 430 restaurants, from 585 to
1,015.
"We are very pleased to be adding 21 net new A&W restaurants
to the Royalty Pool," said Susan
Senecal, President and Chief Executive Officer of A&W
Food Services. "The commitment of our franchisees has been
outstanding. Despite challenges related to COVID-19 and the supply
chain that are impacting businesses around the globe, A&W Food
Services continues to successfully open new restaurants across
Canada and we are delighted
with this pace of growth, particularly in Ontario and Quebec which continue to be our most important
growth markets."
The estimated annualized sales of the 34 new A&W restaurants
being added to the Royalty Pool on January
5, 2022 are $50,688,000 and
annual sales for the 13 permanently closed restaurants were
$7,536,000. The net estimated
annualized sales of $43,152,000 from
the 21 net new restaurants translate into estimated net additional
annual royalty payments to the Fund of $1,295,000 on the basis of the royalty of 3% of
sales.
The consideration to be paid to A&W Food Services for the
estimated net additional royalty revenue is calculated in
accordance with the licence agreement and is $17,178,000, representing 80% of the
consideration payable for such net additional royalty payments,
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 calculated as the total amount of cash
distributed to unitholders of the Fund during the Reporting Period,
adjusted to reflect income tax payable by A&W Trade Marks Inc.
(Trade Marks), divided by the weighted average trading price
of the units of the Fund for the 20 trading days ending
November 1, 2021, or $38.66. This consideration will be paid on
January 5, 2022 by issuance of
444,327 limited partnership units of the Partnership (LP units),
which will immediately be exchanged for 888,654 non-voting common
shares of Trade Marks. These additional shares of Trade Marks
are exchangeable at the option of A&W Food Services for 444,327
limited voting units of the Fund, subject to the approval of the
TSX.
An amount representing 20% of the consideration payable for the
net additional royalty revenue, will be paid by issuance of
additional LP units in December 2022. The actual amount of the
consideration to be paid, and the number of LP units to be issued,
in December 2022 will be determined
based upon on the actual annual sales reported by the 34 new
restaurants.
The Fund and A&W Food Services also announced today that the
actual sales of the new restaurants added to the Royalty Pool on
January 5, 2021 have now been
determined. The actual annual sales for the 34 new restaurants
added on January 5, 2021 were
$53,842,000 compared to the original
estimate of $45,248,000. Based on
actual sales, total consideration of $20,164,000 is payable to A&W Food Services,
compared to total consideration of $16,588,000 that was initially determined based
on estimated forecasted sales. As a result of the actual restaurant
sales of the new 34 restaurants added to the pool exceeding the
original estimate, the remaining 20% of the initial consideration
of $3,318,000 has now been paid to
A&W Food Services by issuance of 116,329 LP units at a price of
$28.52 per unit and additional
consideration of $3,575,000 has also
been paid to A&W Food Services in the form of 125,354 LP units
also at a price of $28.52 per unit.
The 116,329 LP units and additional 125,354 LP units have been
exchanged for an aggregate of 483,366 non-voting common shares of
Trade Marks. These additional non-voting common shares of Trade
Marks are exchangeable at the option of A&W Food Services for
241,683 limited voting units of the Fund, subject to the approval
of the TSX.
As a result of the increase in the royalties paid to the
Partnership by A&W Food Services, Trade Marks also declared a
special dividend of $334,000 to
A&W Food Services. This amount represents the amount of
the distributions of the Fund that would have been indirectly
received by A&W Food Services had the 483,366 non-voting common
shares of Trade Marks been issued to A&W Food Services on
January 5, 2021.
After the amendment to the Royalty Pool on January 5, 2022, which will result in additional
shares of Trade Marks being issued to A&W Food Services,
A&W Food Services will receive a proportionate increase in
monthly dividends from Trade Marks, and will own the equivalent of
26.0% of the voting securities of the Fund on a fully-diluted
basis, excluding the issuance of the excess exchangeable LP units
that represent the remaining 20% of the initial consideration for
the January 5, 2022 amendment to the
Royalty Pool that are payable in December
2022. Including the issuance of the excess exchangeable LP
units that represent the remaining 20% of the initial consideration
for the January 5, 2022 amendment to
the Royalty Pool that are payable in December 2022, A&W Food Services' ownership
in the outstanding voting securities of the Fund is approximately
26.4% on a fully diluted basis.
The growth of the Royalty Pool reflects the continuing strength
and success of the A&W brand. The Fund's current
annualized distribution rate is $1.86
per unit.
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 limited voting units of the
Fund. These annual adjustments to the Royalty Pool are
required under the licence agreement and are exempt from the
prospectus and registration requirements pursuant to NI 45-106.
A&W 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®.
Forward-Looking
Statements
This release may contain certain forward-looking statements related
to: the Fund's current expectations in the quick service
segment of the restaurant food industry in Canada; the amount and
timing of the payment for the remaining consideration payable to
A&W Food Services for the net new royalty revenue from the
21 net new A&W restaurants added to the Royalty Pool; the
potential future exchange by A&W Food Services of the
non-voting common shares of Trade Marks it holds for limited voting
units of the Fund and the percentage of the Fund's voting
securities A&W Food Services would hold upon the completion of
such exchange; and the proportionate increase A&W Food Services
will receive in monthly dividends from Trade Marks. 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. The Fund assumes
no obligation to update or revise any forward-looking information,
except as required by applicable law.
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SOURCE A&W Revenue Royalties Income Fund