/THIS NEWS RELEASE IS NOT FOR DISTRIBUTION IN THE UNITED STATES OR FOR DISSEMINATION ON TO
UNITED STATES NEWS WIRE
SERVICES/
CALGARY,
May 21, 2014 /CNW/ - Northern
Frontier Corp. (TSX-V: FFF) (the "Corporation") today
announced that it has agreed to acquire Central Water &
Equipment Services Ltd. ("Central Water"), a leading
logistics service provider in the bulk water and fluids transfer
sector in western Canada.
Central Water's primary business is providing services for the bulk
movement of water used in the testing of large infrastructure
storage tanks and pipelines as well as dewatering and other
services for industrial sites.
The acquisition is being completed pursuant to
the terms and conditions of a share purchase agreement dated
May 20, 2014 (the "Share Purchase
Agreement") between the Corporation and Darcy Tofin, Paris
Tofin and certain affiliated entities (collectively, the
"Vendors"). The Share Purchase Agreement provides for
the acquisition by the Corporation of all of the issued and
outstanding shares of Central Water (the "Acquisition") in
exchange for aggregate consideration of approximately $31.0 million, subject to an adjustment for
current year growth capital expenditures made by Central Water,
currently estimated to be $0.3
million, which is subject to change and will be finalized on
closing (before giving effect to certain post-closing
adjustments). The consideration paid at closing of the
Acquisition will consist of a cash payment of approximately
$27.3 million and the issuance of
approximately 1,129,944 common shares in the capital of the
Corporation, with an aggregate value of approximately $4.0 million. The cash portion of the
purchase price for the Acquisition will be funded through the
completion of the Offering (as described below).
Central Water generated EBITDA (as defined below
under the heading "Advisories - Non-GAAP Measures") of
$8.5 million for the fiscal year
ended January 2, 2014, resulting in
an acquisition valuation multiple of approximately 3.7x trailing
EBITDA. The completion of the Acquisition is subject to
certain conditions, including the completion of the Note Offering
(as described below) and the approval of the TSX Venture Exchange.
The Acquisition is expected to close late in the 2nd
Quarter of 2014 and is expected to be accretive to the
Corporation's earnings per share for the remainder of fiscal
2014.
"Northern Frontier is very pleased to have the
opportunity to add Central Water to anchor our logistics services
strategy. Combining the expertise of Central Water with our other
water-based services in the SAGD market will provide an expanded
service offering to our clients and increases the diversification
of our overall business" stated Chris
Yellowega, Northern Frontier's CEO.
Acquisition Highlights
Central Water is a unique industrial service
provider with a leading position in its niche sector. The
Acquisition is expected to result in the addition of new clients in
the pipeline, storage tanks and terminals sector, a strengthened
service position for clients in the SAGD (as described below)
market and an improved market and service presence from
Manitoba to northeastern
British Columbia.
Offering of Senior Notes
Concurrent with the completion of the
Acquisition, the Corporation intends to complete a $75 million private placement offering (the
"Offering") of senior secured second lien notes (the
"Notes"), via underwriters GMP Securities L.P., BMO Capital
Markets and Acumen Capital Finance Partners Limited (the
"Underwriters"). The Notes will bear interest at a rate
determined by the Corporation, potential buyers and the
Underwriters. The Corporation intends to use the net proceeds
of the Offering to: (i) finance the cash consideration payable in
connection with the Acquisition; (ii) repay in full all borrowings
under its senior and subordinated credit facilities; (iii) finance
future capital expenditures; and (iv) for general corporate
purposes, including the payment of fees and expenses associated
with the Corporation's completion of the Acquisition, the Offering
and the amended senior credit facility.
The Offering is expected to close immediately
prior to the completion of the Acquisition. The Corporation
will issue an additional news release regarding pricing of the
Notes immediately prior to completion of the Offering, which will
more fully describe the terms of the Notes. "It is expected
that the Note Offering will provide Northern Frontier with
long-term, stable capital at a reasonable cost, which in turn will
give us additional flexibility in executing our acquisition and
growth strategies" said Monty
Balderston, Northern Frontier's CFO.
Preliminary 2014 Q1 Financial Results
The Corporation has also announced that, based
upon information currently available to management, it anticipates
first quarter of 2014 ("2014 Q1") revenue to be between
$17.5 million and $18 million,
compared to $15.0 million for the
fourth quarter of 2013 and 2014 Q1 EBITDA to be between
$3.3 million and $3.5 million,
compared to $2.1 million for the
fourth quarter of 2013. Consistent with the expectations disclosed
in the Corporation's management's discussion and analysis for the
year ended December 31, 2013,
activity levels were similar to what the Corporation's predecessor
entity, NEC Contractors, experienced for the first quarter of
2013.
All figures reported above with respect to the
2014 Q1 are preliminary and are subject to change and adjustment as
the Corporation's 2014 Q1 financial results are finalized.
Accordingly, investors are cautioned not to place undue reliance on
the foregoing guidance. The Corporation is issuing
preliminary results in order to enable it to disclose such
information in connection with the Offering of Notes described
above, and the Corporation does not intend to provide preliminary
results in the future. The preliminary results provided in
this news release constitute forward-looking statements within the
meaning of applicable securities laws, are based on a number of
assumptions and are subject to a number of risks and uncertainties.
Actual results may differ materially. Please see the section below
entitled "Advisories - Cautionary Statement Regarding
Forward-looking Information".
Release of 2014 Q1 Financial Results
The Corporation has scheduled to release its
first quarter 2014 financial results on Friday, May 30, 2014 at 9:30 a.m. Calgary / 11:30
a.m. Toronto Time. The call will feature remarks by
Chris Yellowega, President and CEO
and Monty Balderston, Executive Vice
President and CFO regarding the financial results.
Conference dial-in instructions are as
follows:
Toronto:
416-764-8677
North America: 888-390-0549
Conference ID: 92900775
A replay of the call will be available for one
week after the event until 11:59 p.m.
EST on June 6, 2014. To access
the archived conference call, please dial 888-390-054 and enter
passcode 900775.
Advisories
Securities Law Matters
This news release does not constitute an offer
to sell or the solicitation of an offer to buy any security and
shall not constitute an offer, solicitation or sale of any
securities in any jurisdiction in which such offering, solicitation
or sale would be unlawful. The Notes have not been and will not be
qualified for distribution to the public under applicable Canadian
securities laws and, accordingly, any offer and sale of the Notes
in Canada will be made on a basis
which is exempt from the prospectus and dealer registration
requirements of such securities laws. The Notes will be offered and
sold in Canada on a private
placement basis only to "accredited investors" pursuant to certain
prospectus exemptions. The Notes may be offered and sold in
the United States only to
qualified institutional buyers in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "U.S.
Securities Act") and outside the
United States in reliance on Regulation S under the U.S.
Securities Act. The Notes have not been and will not be registered
under the U.S. Securities Act, any state securities laws or the
laws of any other jurisdiction, and may not be offered or sold in
the U.S. absent registration or an applicable exemption from such
registration requirements.
Non-GAAP Measure
EBITDA, which is defined by the Corporation as
earnings before finance costs, taxes, depreciation and
amortization, gain/loss on disposal of property and equipment and
share-based compensation, is a non-GAAP measure that does not have
a standardized meaning prescribed by GAAP. Therefore, this
financial measure may not be comparable to similar measures
presented by other issuers. Investors are cautioned that this
measure should not be construed as an alternative to profit or cash
flow from operating activities determined in accordance with GAAP
as an indicator of the Corporation's performance. The Corporation's
management believes that EBITDA is a useful supplemental measure as
it provides an indication of the results generated by the principal
business activities prior to consideration of how these activities
are financed or how the results are taxed in various
jurisdictions.
The Corporation's 2014 Q1 unaudited condensed
interim consolidated financial statements and notes and its 2014 Q1
management's discussion and analysis are currently expected to be
available and filed under the Corporation's profile on SEDAR at
www.sedar.com on about May 29,
2014.
Cautionary Statement Regarding
Forward-looking Statements
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
forward-looking statements include, among other things, statements
in respect of:
- completion of the Acquisition and the Offering;
- use of net proceeds from the Offering;
- terms of the Notes;
- anticipated benefits of completing the Acquisition and the
Offering; and
- anticipated financial results for the three month period ended
March 31, 2014.
These statements are only predictions and are
based upon 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, 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. The Corporation
has no obligation to update any forward-looking statements set out
in this news release, except as required by applicable law.
About Northern Frontier Corp.
Northern Frontier's strategic objective is to
create a large industrial and environmental services business
through a buy and build growth strategy. Currently, the Corporation
provides civil construction and excavation services to the
industrial industry, primarily in the in situ oil sands
region south of Fort McMurray,
Alberta. Through providing these services to large
industrial customers in the steam assisted gravity drainage
("SAGD") region of northeastern Alberta, the Corporation 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 Acquisition of Central Water will complement
and expand upon the Corporation's current service offerings.
The Corporation's common shares and common share
purchase warrants are listed on the TSX Venture Exchange under the
trading symbol "FFF" and "FFF.WT", respectively. For more
information on the Corporation, investors should review the
Corporation's continuous disclosure filings that are available
under the Corporation's profile 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.
SOURCE Northern Frontier Corp.