SSC Security Services Corp. To Acquire Avante Logixx Inc. REGINA, SASKATCHEWAN & TORONTO, ONTARIO, Feb. 09, 2022 (GLOBE NEWSWIRE) -- SSC Security Services Corp. (“SSC”) (TSXV: SECU) (OTCQX: SECUF), is pleased to announce that it has entered into a definitive arrangement agreement (“Arrangement Agreement”) to acquire Avante Logixx Inc. (“Avante”) (TSXV: XX) (OTC: ALXXF), a Toronto-based provider of full service, elite security solutions for high-net-worth residential customers, as well as premium security protection for leading enterprise and commercial clients across Canada, through its operating subsidiaries Avante Security Inc. (“ASI”) and Logixx Security Inc. (“LSI”), respectively.
Pursuant to the terms of the Arrangement Agreement, SSC has agreed to acquire all of the issued and outstanding common shares of Avante (“Avante Shares”) by way of a statutory plan of arrangement (“Plan of Arrangement”) under the Business Corporations Act (Ontario) (“Transaction”). Under the terms of the Plan of Arrangement, holders of Avante Shares (“Avante Shareholders”) will receive a combination of cash and common shares in the capital of SSC (“SSC Shares”), as follows: $0.52 per Avante Share in cash (“Cash Consideration”), plus 0.4155 of an SSC Share for each Avante Share held (“Share Consideration”). Based on the volume-weighted average price (“VWAP”) of the SSC Shares on the TSX Venture Exchange (“TSXV”) for the 20 trading days ending on February 8, 2022, the Share Consideration has an implied value of approximately $1.23 per Avante Share which, when added to the Cash Consideration (together, the “Consideration”), implies a total combined consideration of approximately $1.75 per Avante Share, or an aggregate equity value of approximately $37.1 million. In addition, SSC will assume approximately $9.4 million of Avante’s senior funded debt, which excludes $8.264 million of principal amount of unsecured convertible debentures held by certain subsidiaries of Fairfax Financial Holdings Limited.
CHIEF EXECUTIVE OFFICER COMMENTS ON THE TRANSACTION
Doug Emsley, Chairman, President & Chief Executive Officer of SSC, commented: “This is our third acquisition in just over a year, giving us critical mass across the country in the security business. This acquisition represents a critical step towards solidifying our position as a national player in both physical and cyber security services across Canada, coast to coast. Bringing ASI and LSI into the family of SSC security companies significantly accelerates us toward that objective, and we are excited for what the future holds.”
Craig Campbell, President & Chief Executive Officer of Avante, commented: “Given the clear alignment of mission, goals and culture between our two organizations, this transaction significantly improves our ability to drive even greater value and peace of mind for our customers, including the expanding opportunity that the cyber security platform creates. This transaction provides the combined businesses significant access to growth capital and a synergy of opportunity to grow and fulfill the growth objectives that we know are possible in this industry, further enhancing long term shareholder value.”
HIGHLIGHTS & KEY BENEFITS OF THE TRANSACTION
- Transaction creates the largest publicly-traded security company in Canada
- Brings together two highly-experienced and complementary management teams who will be able to leverage SSC’s large, liquid balance sheet and Avante’s well-established security platforms which generate substantial revenue and EBITDA
- On closing, the combined company will be an extremely well-capitalized and profitable, physical and cyber security company with critical mass and over 2,200 employees across Canada
- Together, the companies will serve some of the largest corporate and public sector enterprises in Canada, and it is expected that the combination will enable significant growth and cross-selling opportunities for both SSC’s cyber security platform, which is housed in SRG Security Resource Group Inc. (acquired by SSC in 2021), as well as for Avante’s tech-enabled monitoring and security platforms
- On a pro forma basis, the combined company would have generated approximately $117 million in annual revenue and a substantial amount of EBITDA over the trailing twelve-month period ended September 30, 2021
- The Consideration represents a 62% premium to the closing price of the Avante Shares on the TSXV as at February 8, 2022 and a 39% premium over the VWAP of the Avante Shares on the TSXV based on the 20 trading days ending on February 8, 2022 (in each case, based on the VWAP of the SSC Shares on the TSXV for the 20 trading days ending on February 8, 2022)
- The Cash Consideration allows Avante Shareholders the opportunity to crystalize some of the value of their Avante Shares while, through the Share Consideration, also maintaining the benefit of a retained interest in the combined company
- The combined company is expected to be owned approximately 70% by current holders of SSC Shares, and approximately 30% by Avante Shareholders
- Significant cost synergies are expected to be realized by eliminating the cost of maintaining both companies as separate publicly-traded entities, as well as the rationalization of duplicate overhead costs
- Avante's board of directors (“Avante Board”) formed a special committee (“Avante Special Committee”) of directors to negotiate and review the Transaction. The Avante Special Committee unanimously recommended that the Avante Board approve the Transaction and the Avante Board (with the interested director abstaining), having received the recommendation of the Avante Special Committee, unanimously approved the Transaction and unanimously recommends that Avante Shareholders vote in favour of the Transaction
- Certain Avante Shareholders, as well as each of the directors and officers of Avante who hold Avante Shares, and who, as of February 8, 2022, collectively hold approximately 17% of the Avante Shares, have entered into voting support agreements (“Support Agreements”) with SSC pursuant to which they have agreed to vote their Avante Shares in favour of the shareholder resolution approving the Transaction
- Both the Avante Board and Avante Special Committee received an opinion from one of its financial advisors, Canaccord Genuity Corp. (“Canaccord Genuity”), that, as of the date of such opinion and subject to the assumptions, limitations and qualifications set out in such opinion, and such other matters as Canaccord Genuity considered relevant, the Consideration to be received pursuant to the Transaction is fair, from a financial point of view, to the Avante Shareholders (other than any interested parties in accordance with MI 61-101)
- SSC's board of directors (“SSC Board”) unanimously approved the Transaction
TERMS OF THE ARRANGEMENT AGREEMENT
The Transaction will be effected by way of a statutory plan of arrangement under the Business Corporations Act (Ontario). The implementation of the Plan of Arrangement will be subject to Avante Shareholder approval at a special meeting of Avante Shareholders (“Special Meeting”), which is expected to be held in the second calendar quarter of 2022. The Transaction is subject to the approval of (i) at least 66 2/3% of the votes cast by Avante Shareholders at the Special Meeting; (ii) the TSXV; (iii) the Ontario Superior Court of Justice; and is also subject to certain other closing conditions customary to a Transaction of this nature. Assuming all of the requisite court, shareholder and other approvals are received, SSC and Avante expect the Transaction to be completed during the second calendar quarter of 2022.
SPECIAL COMMITTEE AND RESPECTIVE BOARDS OF DIRECTORS’ RECOMMENDATIONS
The Avante Special Committee unanimously recommended that the Avante Board approve the Transaction and the Avante Board (with the interested director abstaining), having received the recommendation of the Avante Special Committee, unanimously approved the Transaction and unanimously recommends that Avante Shareholders vote in favour of the Transaction.
The SSC Board unanimously approved the Transaction.
Avante and SSC have provided representations and warranties customary for a transaction of this nature, as well as customary interim period covenants regarding the operation of their respective businesses in the ordinary course. In addition, the Arrangement Agreement includes customary deal protection provisions, including that Avante has agreed not to solicit or initiate any discussion regarding any other business combination, subject to customary “fiduciary out” rights. Avante has also granted SSC a right-to-match any superior proposal and will pay a termination fee of $1.8 million to SSC if the Arrangement Agreement is terminated in certain circumstances, including if Avante recommends or approves an acquisition proposal or enters into an agreement with respect to a superior proposal. Avante has also agreed to make an expense reimbursement payment to SSC if the Arrangement Agreement is terminated in certain circumstances.
The Transaction is not subject to a financing condition. The Cash Consideration will be funded from SSC’s current cash balance on closing of the Transaction.
Upon closing of the Transaction, Avante will become a wholly-owned subsidiary of SSC, with plans to transition ASI and LSI to directly-owned, independent subsidiaries of SSC. ASI and LSI will continue to operate as is, providing high-quality security and peace of mind to their customers.
In recognition of the extensive security industry experience and contacts of Craig Campbell, Avante’s CEO, Craig has been invited to join the SSC Board upon closing of the Transaction. The SSC Board will increase in number from five directors to six.
SSC plans to maintain its quarterly dividend of $0.03 per SSC Share (which equates to $0.12 annualized). On a pro forma basis, SSC’s dividend payout ratio as a percentage of trailing twelve-month Adjusted EBITDA*, for the period ended September 30, 2021, is estimated to improve from approximately 80% to under 50%.
ADVISORS
Canaccord Genuity Corp. and Imperial Capital, LLC acted as financial advisors, and Norton Rose Fulbright Canada LLP acted as legal advisor, to Avante. Canaccord Genuity Corp. provided a fairness opinion to both the Avante Board and Avante Special Committee.
McKercher LLP acted as legal advisor to SSC.
ABOUT SSC
SSC Security Services Corp. (TSXV: SECU) (OTCQX: SECUF) is a leading provider of physical and cyber security services to corporate and public sector clients across Canada. For more information, please visit www.securityservicescorp.ca.
ABOUT AVANTE LOGIXX
Avante Logixx Inc. (TSXV: XX) (OTCPK: ALXXF) is a Toronto based provider of high-end security services. We acquire, manage and build industry leading businesses which provide specialized, mission-critical solutions that address the needs of our customers. Our businesses continuously develop innovative solutions that enable our customers to achieve their objectives. With an experienced team and a proven track record of solid growth, we are taking steps to establish a broad portfolio of security businesses to provide our customers and shareholders with exceptional returns. For more information, please visit www.avantelogixx.com.
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