Zedcor to sell rentals segment for $11.3-million ZEDCOR INC. ENTERS INTO AGREEMENT TO SELL RENTALS SEGMENT ASSETS FOR $11.3 MILLION
Zedcor Inc. has entered into an agreement with a privately held company, controlled and owned by Maynbridge Capital Inc., to sell the assets of the company's rentals segment for cash proceeds of $11.3 million (the "Transaction").
Transaction Details:
In addition to the $11.3 million of cash proceeds, Zedcor will receive:
a bonus payment of 35% for each dollar of earnings before interest, taxes, depreciation and amortization ("EBITDA") above an annual threshold summarized in the table below which will be calculated on the first, second, and third anniversary dates of the closing of the transaction;
a management fee in the amount of $25,000 per month for up to 36 months in exchange for the use of the Zedcor brand and assistance with management of the Rentals Assets pursuant to a management services agreement;
an additional $25,000 per month for the first 20 months for use of certain Zedcor facilities.
Annual Bonus Payment Thresholds
Anniversary Date Threshold
First anniversary date of closing $3,003,585
Second anniversary date of closing $3,241,853
Third anniversary date of closing $3,267,691
This sale of the Rentals Assets, which is not subject to any financial conditions, will allow Zedcor to reduce the leverage on its balance sheet, deploy additional capital and focus on expanding its Security & Surveillance business which is seeing increased revenues and customer demand. "The cash proceeds from the sale will be used to reduce high interest indebtedness and put the Company's leverage ratio below two times debt to EBITDA which is in line with conventional lending requirements. It will also provide Zedcor with greater flexibility to expand our Security & Surveillance business across North America," said Todd Ziniuk, President and CEO.
The Company's Board of Directors formed a special committee of independent directors (the "Special Committee") to:review and evaluate the terms of the Transaction;obtain and supervise the preparation of a fairness opinion; and to make a recommendation to the Company's Board of Directors in respect of the Transaction.
The Special Committee retained Paradigm Capital Inc. to provide an opinion as to the fairness of the consideration being offered under the Transaction from a financial point of view.
Based on the fairness opinion received, along with other work completed by the Special Committee, the Special Committee unanimously recommended to the Company's Board of Directors that the Transaction be approved. The voting members of the Company's Board of Directors (with interested director Dean Shillington abstaining), after receiving the unanimous recommendation of the Special Committee, have unanimously determined that the consideration to be received for the Rentals Assets is fair, from a financial point of view, and that it is in the best interests of Zedcor and have unanimously approved the Transaction and have resolved to recommend that the shareholders of Zedcor approve the Transaction.
The Transaction, which is expected to close on or around June 30, 2021, is subject to approval by the TSX Venture Exchange, approval of a majority of the Company's disinterested shareholders, which is anticipated to be received via written consent, and other customary closing conditions. The Company's management and Board of Directors, other than Mr. Shillington, currently hold 30.24% of outstanding common shares and have committed as shareholders to approve the Transaction.