Diversified Royalty Corp. (TSX: DIV; DIV.DB and DIV.DB.A) (the
“
Corporation” or “
DIV”) is
pleased to announce that it has closed its previously announced
bought deal public offering of $52,500,000 aggregate principal
amount of 6.00% convertible unsecured subordinated debentures (the
“
Debentures”) at a price of $1,000 per Debenture
(the “
Offering”). The Offering is fully described
in DIV’s prospectus supplement dated March 23, 2022 to DIV’s short
form base shelf prospectus dated May 11, 2021 (together, the
“
Prospectus”), which are available on SEDAR at
www.sedar.com. DIV has also granted the underwriters an
overallotment option to purchase up to an additional $7.875 million
aggregate principal amount of Debentures exercisable in whole or in
part for a period of 30 days following closing of the Offering to
cover over-allotments, if any, and for market stabilization
purposes.
The Offering was conducted by a syndicate of
underwriters led by CIBC Capital Markets, National Bank Financial
Inc. and Scotiabank that included, BMO Capital Markets, Cormark
Securities Inc., Canaccord Genuity Corp., iA Private Wealth Inc.
and PI Financial Corp.
As described in the Prospectus, DIV intends to
use the net proceeds of the Offering, together with cash on hand
and other sources of funds, which may include third party debt
financing, to fully redeem DIV’s outstanding convertible unsecured
subordinated debentures due on December 31, 2022 (the “2022
Debentures”), prior to December 31, 2022. On March 31,
2022, DIV intends to issue a notice (the “Notice”)
of partial redemption to the registered holder of the 2022
Debentures to redeem an aggregate principal amount of $52.5 million
of Debentures. As set out in the Notice, the redemption date of the
2022 Debentures will be on May 4, 2022 (the “Redemption
Date”). The 2022 Debentures to be redeemed on the
Redemption Date will be redeemable for an amount equal to their
principal amount plus accrued and unpaid interest up to, but
excluding, the Redemption Date.
The Debentures mature June 30, 2027 and bear
interest at an annual rate of 6.00% payable semi-annually in
arrears on the last day of June and December in each year,
commencing June 30, 2022. At the holder’s option, the Debentures
may be converted into common shares of the Corporation
(“Common Shares”) at any time prior to the close
of business on the earlier of the last business day immediately
preceding June 30, 2027 and the date fixed for redemption. The
conversion price is $4.05 per Common Share (the “Conversion
Price”), subject to adjustment in certain circumstances in
accordance with the terms of the trust indenture governing the
Debentures dated November 7, 2017 (the “Trust
Indenture”) and the supplemental indenture dated March 30,
2022 (the “Supplemental Indenture” and, together
with the Trust Indenture, the “Indenture”)
collectively governing the Debentures, copies of which be available
on SEDAR at www.sedar.com.
The Debentures are not redeemable prior to June
30, 2025, except upon the satisfaction of certain conditions after
a Change of Control (as defined in the Indenture) has occurred. On
and after June 30, 2025 and prior to June 30, 2026, the Debentures
may be redeemed in whole or in part from time to time at DIV’s
option, provided that the volume weighted average trading price of
the Common Shares on the Toronto Stock Exchange (the
“TSX”) during the 20 consecutive trading days
ending on the fifth trading day preceding the date on which the
notice of the redemption is given is not less than 125% of the
Conversion Price. On or after June 30, 2026 and prior to the
maturity date, DIV may, at its option, redeem the Debentures, in
whole or in part, from time to time at par plus accrued and unpaid
interest. The first interest payment will include interest accrued
from and including the closing date to, but excluding, June 30,
2022, and will be approximately $15.00 per $1,000 principal amount
of Debentures.
The Debentures sold pursuant to the Offering
have been listed on the Toronto Stock Exchange under the trading
symbol DIV.DB.A.
This news release does not constitute an offer
of securities for sale in the United States. The securities being
offered have not been, nor will they be, registered under the U.S.
Securities Act, and such securities may not be offered or sold
within the United States absent U.S. registration or an applicable
exemption from U.S. registration requirements.
About Diversified Royalty Corp.
DIV is a multi-royalty corporation, engaged in
the business of acquiring top-line royalties from well-managed
multi-location businesses and franchisors in North America. DIV’s
objective is to acquire predictable, growing royalty streams from a
diverse group of multi-location businesses and franchisors.
DIV currently owns the Mr. Lube, AIR MILES®,
Sutton, Mr. Mikes, Nurse Next Door and Oxford Learning Centres
trademarks. Mr. Lube is the leading quick lube service business in
Canada, with locations across Canada. AIR MILES® is Canada’s
largest coalition loyalty program with approximately two-thirds of
Canadian households actively participating in the AIR MILES®
Program. Sutton is among the leading residential real estate
brokerage franchisor businesses in Canada. Mr. Mikes currently
operates casual steakhouse restaurants primarily in western
Canadian communities. Nurse Next Door is one of North America’s
fastest growing home care providers with locations across Canada
and the United States as well as in Australia. Oxford Learning
Centres is one of Canada’s leading franchised supplemental
education services in Canada and the United States.
DIV intends to increase cash flow per share by
making accretive royalty purchases and through the growth of
purchased royalties. DIV expects to pay a predictable and stable
dividend to shareholders and increase the dividend as cash flow per
share increases allow.
Forward Looking Statements
Certain statements contained in this news
release may constitute forward-looking statements which involve
known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements. The use of any of the words “anticipate”, “continue”,
“estimate”, “expect”, “intend”, “may”, “will”, ”project”, “should”,
“believe”, “confident”, “plan” and “intends” and similar
expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain these
identifying words. Specifically, forward-looking statements in this
news release include, but are not limited to, statements made in
relation to: the intended use of proceeds of the Offering; the
ability of DIV to source the funds needed to fully redeem the 2022
Debentures; the intended redemption of DIV’s outstanding
convertible unsecured subordinated debentures and the timing
thereof; DIV’s expectation of increasing cash flow per share by
making accretive royalty purchases and through the growth of
purchased royalties; and DIV’s intention to pay dividends to
shareholders and increase the dividend as cash flow per share
increases allow. These statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or
events, performance, or achievements of DIV to differ materially
from those anticipated or implied by such forward-looking
information, including, without limitation, the ongoing conflict
between Russia and Ukraine and any actions taken by other countries
in response thereto, such as sanctions or export controls. DIV
believes that the expectations reflected in the forward-looking
information included in this news release are reasonable but no
assurance can be given that these expectations will prove to be
correct. In particular there can be no assurance that: the actual
use of proceeds will be consistent with current expectations; DIV
will be able to source the funds needed to fully redeem the 2022
Debentures; DIV will be able to make monthly dividend payments to
the holders of its common shares; or DIV will achieve any of its
corporate objectives. Given these uncertainties, readers are
cautioned that forward-looking information included in this news
release are not guarantees of future performance, and such
forward-looking information should not be unduly relied upon. More
information about the risks and uncertainties affecting DIV’s
business and the businesses of its royalty partners can be found in
the “Risk Factors” section of its Annual Information Form dated
March 10, 2022 and in its most recent Management’s Discussion and
Analysis, copies of each of which are available under DIV’s profile
on SEDAR at www.sedar.com.
In formulating the forward-looking information
contained herein, management has assumed that DIV will generate
sufficient cash flows from its royalties to service its debt and
pay dividends to shareholders; DIV will be able to source the funds
needed to redeem the 2022 Debentures, in full or in part, as
anticipated using cash on hand or, if necessary, obtaining
additional funds through new credit facilities or by amending its
existing credit facilities; the impacts of COVID-19 on DIV and its
royalty partners will be consistent with DIV’s expectations and the
expectations of management of each of its royalty partners, both in
extent and duration; DIV and its royalty partners will be able to
reasonably manage the impacts of the COVID-19 outbreak on their
respective businesses and will continue substantially in the
ordinary course, including without limitation with respect to
general industry conditions, general levels of economic activity
and regulations. These assumptions, although considered reasonable
by management at the time of preparation, may prove to be
incorrect.
All of the forward-looking statements made in
this news release are qualified by these cautionary statements and
other cautionary statements or factors contained herein, and there
can be no assurance that the actual results or developments will be
realized or, even if substantially realized, that they will have
the expected consequences to, or effects on, DIV. The
forward-looking information included in this news release is
presented as of the date of this news release and DIV assumes no
obligation to publicly update or revise such information to reflect
new events or circumstances, except as may be required by
applicable law.
THE TORONTO
STOCK EXCHANGE
HAS NOT REVIEWED
AND DOES NOT
ACCEPT RESPONSIBILITY
FOR THE ADEQUACY
OR THE ACCURACY
OF THIS
RELEASE.
Additional Information
Additional information relating to the
Corporation and other public filings, is available on SEDAR at
www.sedar.com.
Contact:Sean Morrison, President and Chief
Executive OfficerDiversified Royalty Corp.(604) 235-3146
Greg Gutmanis, Chief Financial Officer and VP
AcquisitionsDiversified Royalty Corp.(604)
235-3146https://www.sec.gov/edgar.shtml
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