CLOSING OF THE LABSTAT REPURCHASE Labstat and its affiliates closed the sale of their business to a third party earlier today. In connection with the Labstat sale, the Labstat repurchase and repayment of debt owed to Alaris by Labstat also closed today, resulting in Alaris receiving gross proceeds of $69.5-million. Alaris achieved a total return on its Labstat units of approximately $57.0-million, or 121 per cent, as well as an internal rate of return (IRR) of approximately 19 per cent over the six-year investment. Such returns are derived by collecting all contractually owed distributions from Labstat over the life of the investment, as well as getting a premium above Alaris's cost of its Labstat units.
The $69.5-million of gross proceeds Alaris received from the Labstat repurchase and Labstat debt repayment consists of the following: (i) $65.5-million for the Labstat units (Alaris originally paid $47.2-million for the Labstat units), which is inclusive of a premium of $4.3-million in respect of previously unpaid distributions; and (ii) $4.0-million of proceeds from the Labstat debt repayment, representing the repayment of $3.7-million of principal and $300,000 of accrued interest owing on a loan agreement Alaris had with Labstat. Alaris had previously not assigned any value on its balance sheet to the collection of the $4.3-million of unpaid distributions; therefore, it will result in an increase to book value following the Labstat repurchase for the second quarter period ending June 30, 2018.
"Labstat has been extremely fortunate to have had Alaris as a partner through interesting times, providing both support and advice when needed while giving management full rein to implement decisions," said William (Bill) Rickert, founder, Labstat.
The Labstat gross proceeds will be used to reduce Alaris's debt outstanding, leaving the corporation with approximately $82.0-million drawn at June 25, 2018, and approximately $218.0-million available to use for investment purposes. The after-tax impact of the Labstat repurchase on Alaris's net cash from operations is a net reduction of approximately nine cents per share after accounting for the decrease in distributions from Labstat, as well as the interest savings through debt reduction.