Not for Distribution to United States Newswire Services or for Dissemination in
the United States
Northern Frontier Corp. (TSX VENTURE:FFF.P) (the "Corporation" or "Northern
Frontier") is pleased to announce that it has entered into an amending agreement
("Amending Agreement") related to the purchase agreements announced on April 23,
2013, pursuant to which the Corporation, through its wholly-owned subsidiary,
1739365 Alberta Ltd., will acquire all of the issued and outstanding shares of
794522 Alberta Ltd. ("Numberco"), which carries on the business of the NEC Group
(defined below), and certain assets held by CRC Open Camp & Catering Ltd. (the
"CRC Carve-out Assets") that are used in the NEC Group business (together, the
"Acquisition").
Numberco, along with its wholly-owned subsidiary, NEC Contractors (2012) Inc.
("NEC", and collectively with Numberco, the "NEC Group") provides sustaining
capital services to large industrial energy customers in the steam assisted
gravity drainage ("SAGD") region of northeastern Alberta. The NEC Group's head
office and shop is located in Lac La Biche, Alberta and its field location is in
Conklin, Alberta which is central to the substantial industrial energy
production developments in the vicinity. The business focuses on the ongoing
demand for services to support operating facilities, sustaining capital
expenditures to maintain production levels of those facilities and the
development of new production capacity.
The aggregate purchase price payable in connection with the Acquisition is
approximately $56.9 million, subject to adjustment, consisting of approximately
$50.9 million in cash, $5.0 million worth of securities of the Corporation, plus
an additional deferred cash payment of $1.0 million payable March 31, 2014. The
Corporation and the NEC Group agreed to a 3.9x purchase price multiple of the
combined, pro forma adjusted earnings before interest, taxes, depreciation and
amortization ("Adjusted EBITDA") of the NEC Group's business (including the CRC
Carve-out Assets) of $12.8 million, normalized for significant capital asset
additions made by the NEC Group during fiscal 2012. In addition, the purchase
price in connection with the Acquisition is to be positively adjusted to address
capital asset additions made subsequent to the agreed purchase price date but
before the closing date of the Acquisition. The Corporation and the NEC Group
estimate this adjustment to account for approximately $7.4 million of the
aggregate purchase price.
Preliminary Prospectus
The Corporation also announces that it has filed, and received a receipt in
respect of a preliminary prospectus dated August 12, 2013 for an offering (the
"Offering") of subscription receipts ("Subscription Receipts") for aggregate
gross proceeds of a minimum of $18.0 million. Each Subscription Receipt will
entitle the holder to receive, without payment of additional consideration, one
common share of the Corporation ("Common Share") and one-half of one common
share purchase warrant. Each full purchase warrant ("Warrant") will entitle the
holder to acquire one Common Share at a price of $4.00 per share for a period of
18 months following the closing date of the Acquisition. The preliminary
prospectus is available at www.sedar.com under the Corporation's issuer profile.
This Offering updates the preliminary prospectus filed on April 23, 2013 to
reflect the first quarter financial results of the Corporation and Numberco, the
terms of the Amending Agreement and proposed Credit Facilities (defined below).
The Corporation has engaged GMP Securities L.P. and Raymond James Ltd. as
co-lead agents, together with Acumen Capital Finance Partners Limited and
Cormark Securities Inc. (the "Agents") to complete the Offering at $3.50 per
Subscription Receipt (the "Offering Price"). The Agents will receive a cash fee
equal to 6% of the gross proceeds of the Offering. The net proceeds of the
Offering will be used by the Corporation to fund a portion of the purchase price
of the Acquisition. The preliminary prospectus is subject to the receipt of
applicable regulatory approvals. The Offering will be qualified in the provinces
of Alberta, British Columbia, Saskatchewan, Manitoba and Ontario. The
Corporation will provide subsequent public disclosure regarding the Offering on
completion of marketing efforts.
The Corporation has also agreed to grant the Agents an option (the
"Over-Allotment Option") to purchase up to such number of additional
Subscription Receipts and/or Common Shares and Warrants (as applicable,
depending on when exercised) as is equal to 15% of the number of Subscription
Receipts sold under the Offering to cover over-allotments, if any, and for
market stabilization purposes. The Over-Allotment Option shall be exercisable,
in whole or in part, on the closing of the Offering and for a period of 30 days
thereafter.
Credit Facilities
In connection with the Acquisition, the Corporation has entered into a term
sheet with a Canadian chartered bank with respect to a senior credit facility
(the "Credit Facility"). If the Corporation raised the minimum offering amount,
the Corporation expects to establish the Credit Facility on or prior to the
closing of the Acquisition and utilize $21.5 million of the Credit Facility to
fund a portion of the purchase price of the Acquisition. The Credit Facility is
expected to consist of: (i) a $15.0 million committed revolving extendible
credit facility; (ii) a $20.0 million committed revolving reducing extendible
term loan; (iii) a treasury risk management facility subject to a limit of $1.0
million; and (iv) corporate MasterCard for up to $0.5 million. The term sheet
with respect to the Credit Facility contains customary conditions precedent to
the lender entering into the Credit Facility.
In addition, the Corporation has entered into a term sheet with a Canadian
financial institution with respect to a $12.0 million 5-year term subordinated
credit facility (the "Subordinated Facility", collectively with the Credit
Facility, the "Credit Facilities") which is expected to be available in a single
draw on the closing of the Acquisition and will be used to fund a portion of the
purchase price of the Acquisition. The term sheet with respect to the
Subordinated Facility contains customary conditions precedent to the lender
entering into the Subordinated Facility.
Any net proceeds raised by the Corporation in connection with the Offering above
the minimum Offering of $18.0 million may be used by the Corporation to fund a
larger portion of the purchase price of the Acquisition. In that event, the
Corporation would reduce, at their discretion, the amounts drawn under the
Credit Facilities in order to fund a portion of the purchase price.
NEC Group Financial Summary
The following Exhibit 1.1 has been prepared by the NEC Group management and
includes specific financial statement balances from the unaudited condensed
interim consolidated financial statements of Numberco for the three months ended
March 31, 2013 and audited consolidated financial statements of Numberco for the
twelve months ended December 31, 2012, the five months ended December 31, 2011,
the twelve months ended July 31, 2011 and twelve months ended July 31, 2010
which were prepared in accordance with Canadian generally accepted accounting
principles which are International Financial Reporting Standards ("IFRS") for
the Corporation. The following financial information includes the accounts of
both Numberco and NEC provided that NEC was incorporated on December 23, 2011,
and financial statements prior to this date only represent the accounts of
Numberco.
Exhibit 1.1
Three
Months Five Months
Ended Mar Year Ended Ended Year Ended Year Ended
31, Dec 31, Dec 31, Jul 31, Jul 31,
$Cdn. 2013 2012 2011 2011 2010
---------------- ----------- ----------- ----------- ----------- -----------
Revenue 18,979,226 42,596,121 13,923,892 29,115,138 13,693,485
Gross profit 4,889,672 8,894,432 2,845,287 6,081,606 1,827,655
Net profit
(loss) 1,948,338 1,637,169 715,075 1,906,860 (1,053,876)
Total Assets 35,611,043 23,664,002 17,080,787 12,551,202 7,544,533
Total
Liabilities 30,828,788 20,830,085 15,884,039 12,069,529 8,969,740
The following Exhibit 1.2 has been prepared by Northern Frontier to provide
additional disclosure of non-GAAP measures. The pro forma Adjusted EBITDA
reflects the combined performance of the NEC Group and CRC Carve-out Assets for
the respective periods presented.
Exhibit 1.2
Three Five
Months Months
Ended Mar Year Ended Ended Year Ended Year Ended
31, Dec 31, Dec 31, Jul 31, Jul 31,
$Cdn. 2013 2012 2011 2011 2010
---------------- ----------- ----------- ----------- ----------- -----------
Pro forma
Adjusted EBITDA 5,585,414 11,161,367 3,165,627 7,516,219 2,688,776
% of revenue 29.4% 26.2% 22.7% 25.8% 19.6%
Regulatory Matters
Trading in the Common Shares will remain halted until such time as the TSX
Venture Exchange (the "Exchange") has received the documentation required by
Policy 2.4 - Capital Pool Companies.
Completion of the Acquisition is subject to a number of conditions including,
but not limited to, Exchange acceptance and, if applicable pursuant to the
requirements of the Exchange, majority of the minority shareholder approval.
Where applicable, the Acquisition cannot close until the required shareholder
approval is obtained. There can be no assurance that the Acquisition will be
completed as proposed or at all.
Investors are cautioned that, except as disclosed in the preliminary prospectus
of the Corporation, any information released or received with respect to the
Acquisition may not be accurate or complete and should not be relied upon.
Trading in the securities of a capital pool company should be considered highly
speculative.
The Exchange has in no way passed upon the merits of the Acquisition and has
neither approved nor disapproved the contents of this news release.
Non-GAAP Measures
Adjusted EBITDA
"Adjusted EBITDA" is defined as earnings before interest, taxes, depreciation
and amortization and other specific expenses and exclusive of the charges paid
to CRC for the rental of the CRC Carve-out Assets net of associated costs
incurred by CRC related to these assets. Adjusted EBITDA is a supplemental
non-GAAP financial measure that is not recognized under IFRS and does not have a
standardized meaning prescribed by IFRS. Adjusted EBITDA should not be
considered as an alternative to, or more meaningful than, net profit and
comprehensive income or cash flows from operating activities as determined in
accordance with IFRS or as an indicator of operating performance or liquidity.
Management believes that Adjusted EBITDA is a useful supplemental measure as it
provides an indication of the results generated by the principal business
activities after considering CRC's related party relationship with the NEC Group
and prior to consideration of how these activities are financed or how the
results are taxed in various jurisdictions. The computations of Adjusted EBITDA
may not be comparable to other similarly titled measures of other companies, and
accordingly Adjusted EBITDA may not be comparable to measures used by other
companies.
Forward Looking Information
This news release includes certain statements that constitute forward-looking
statements under applicable securities legislation. All statements other than
statements of historical fact are forward-looking statements. In some cases,
forward-looking statements can be identified by terminology such as "may",
"will", "should", "expect", "plan", "anticipate", "believe", "estimate",
"predict", "potential", "continue", or the negative of these terms or other
comparable terminology. These statements are made as of the date of this news
release and the Corporation does not undertake to publicly update these
forward-looking statements except in accordance with applicable securities laws.
These forward-looking statements include, among other things:
-- completion of the Acquisition and the Offering;
-- anticipated use of net proceeds from the Offering;
-- the availability of the Credit Facilities, and the amounts drawn under
the Credit Facilities;
-- anticipated benefits of completing the Acquisition and the Offering; and
-- terms and conditions of the Acquisition.
These statements are only predictions and are based on current expectations,
estimates, projections and assumptions, which the Corporation believes are
reasonable but which may prove to be incorrect and therefore such
forward-looking statements should not be unduly relied upon. In making such
forward-looking statements, assumptions have been made regarding, among other
things, industry activity, marketability of the services of the NEC Group, the
state of financial markets, business conditions, continued availability of
capital and financing, future oil and natural gas prices and the ability of the
Corporation to obtain necessary regulatory approvals. Although the Corporation
believes the expectations expressed in such forward-looking statements are based
on reasonable assumptions, such statements are not guarantees of future
performance and actual results or developments may differ materially from those
in the forward-looking statements.
By its nature, forward-looking information involves numerous assumptions, known
and unknown risks and uncertainties, both general and specific, that contribute
to the possibility that the predictions, forecasts, projections and other
forward-looking statements will not occur. These risks and uncertainties
include: the possibility that the parties will not proceed with the Acquisition
and the Offering, that the ultimate terms of the Acquisition and the Offering
will differ from those that are currently contemplated, that the Acquisition and
Offering will not be successfully completed for any reason (including the
failure to obtain the required approvals from regulatory authorities) and
regulatory changes. Investors are cautioned that forward-looking statements are
not guarantees of future performance and actual results or developments may
differ materially from those projected in the forward-looking statements. For
more information on the Corporation, investors should review the Corporation's
continuous disclosure filings that are available at www.sedar.com.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term
is defined in policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Northern Frontier Corp.
Bradford N. Creswell
President and Director
(206) 689-5685
(206) 204-1710 (FAX)
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