StorageVault Announces Proposed $51mm Asset Acquisition
December 06, 2014
STORAGEVAULT CANADA INC. (“StorageVault”) (SVI-TSX-V) announced today that it has entered into an asset purchase agreement dated December 2, 2014 (the “Purchase Agreement”), with Access Self Storage Inc. (“Access”) and Cubeit Portable Storage Canada Inc. (“Cubeit”), collectively referred to as (the “Vendors”), pursuant to which StorageVault has agreed to purchase all of the portable storage assets and business of Cubeit and certain of the self-storage assets and business of Access (the “Purchased Assets”) for an aggregate purchase price of $51,275,000, subject to customary adjustments (the “Proposed Acquisition”). The Vendors are not related parties to StorageVault.
Proposed Purchased Assets
Pursuant to the terms of the Purchase Agreement, the Proposed Acquisition will occur in two tranches.
Upon the closing of the first tranche of the Purchased Assets (the “First Tranche”), StorageVault will acquire four self-storage locations with an aggregate of approximately 1,500 rental units with approximately 133,000 square feet of rentable self-storage space and the entire Cubeit portable storage business and the rights to operate such business in Canada. The Cubeit business currently operates out of 8 locations and includes 1,254 portable storage container units.
Upon the closing of the second tranche of the Purchased Assets (the “Second Tranche”), StorageVault will acquire five self-storage locations with an aggregate of approximately 2,500 rental units with approximately 250,000 square feet of rentable self-storage space.
Purchase Price and Payment
The purchase price for the First Tranche is $25,575,000, subject to adjustments, including dollar for dollar adjustments if the appraised value of the Purchased Assets is more or less than the purchase price. For the First Tranche, the sum of $8,951,250 shall be paid by the issuance of 23,555,921 common shares of StorageVault (“Common Shares”) at a deemed price of $0.38 per Common Share. Subject to availability of financing on commercially reasonable terms, the balance of the purchase price for the First Tranche will be paid in cash, or by the assumption of mortgages on certain of the Purchased Assets (“Mortgage Assumptions”) or by Vendor take-back loans on certain of the Purchased Assets (“Vendor Take-Back Loans”), or, subject to certain Common Share ownership restrictions for the Vendors to ensure that the Proposed Acquisition does not result in a reverse takeover (the “Share Ownership Restrictions”), additional Common Shares issued at a deemed price of $0.38 per Common Share, or by a combination of any or all of the above. Closing of the First Tranche is expected to occur on or about March 10, 2015 (the “First Closing Date”).
The purchase price for the Second Tranche is $25,700,000, subject to adjustments, including dollar for dollar adjustments if the appraised value of the Purchased Assets is more or less than the purchase price. For the Second Tranche, the sum of $8,995,000 shall be paid by the issuance of 23,671,053 Common Shares at a deemed price of $0.38 per Common Share subject to the Share Ownership Restrictions. If the Share Ownership Restrictions will be exceeded, the number of issued Common Shares will be reduced accordingly, and the corresponding Second Tranche Common Share shortfall in the purchase price, as well as the remainder of the purchase price for the Second Tranche, will be, subject to availability of financing on commercially reasonable terms, paid in cash, or by Mortgage Assumptions or by Vendor Take-Back Loans. In addition, subject to the ability to issue Common Shares under the Share Ownership Restrictions, a portion of the balance of the purchase price for the Second Tranche may be satisfied by the issuance of additional Common Shares issued at a deemed price of $0.38 per Common Share. Closing of the Second Tranche is expected to occur no later than October 1, 2015 but may occur on an earlier date upon the agreement of the parties (the “Second Closing Date”).
A combination of any or all of the above forms of payment may be used to satisfy the balance of the purchase price for the First Tranche and the Second Tranche and the determination of the form of payment of the remainder of the purchase price as stated above is at the discretion of StorageVault acting reasonably.
Material Conditions Precedent to the Proposed Acquisition
The obligations of StorageVault and the Vendors to complete the Proposed Acquisition is subject to initial due diligence conditions and board of director approval of the Proposed Acquisition which must be satisfied on or before February 2, 2015. The closing of the Proposed Acquisition is also subject to the satisfaction of other customary closing conditions precedent prior to the First Closing Date and Second Closing Date, as applicable, as set forth in the Purchase Agreement, including, but not limited to: TSXV acceptance, satisfactory due diligence, creditor approval, shareholder consent, completion and approval of a five-year business plan detailing the Vendors’ and StorageVault’s objectives and goals for StorageVault for the next five years (the “Five-Year Business Plan”), and the approval of the Second Tranche by an acquisition committee made up of individuals the majority of which are unrelated to the Vendors (the “Acquisition Committee”).
Other Terms and Conditions of the Purchase Agreement
Pursuant to the Purchase Agreement, the Vendors and StorageVault have agreed that: in conjunction with the closing of the First Tranche, the board of directors of StorageVault will be reconstituted and shall be composed of Alan Simpson, one nominee of PFM Capital Inc. and three nominees of the Vendors; if the Purchase Agreement is terminated with respect to the Second Tranche, the board of directors of StorageVault will be reconstituted and shall be composed of Alan Simpson, three nominees of PFM Capital Inc. and one nominee of the Vendors; the Vendors shall on or before the First Closing date, have received an assignment from Detteson Management Inc. of the existing management agreement entered into between StorageVault and Detteson Management Inc. dated May 1, 2011, as amended, and as required to be further amended as a result of the Proposed Acquisition (Detteson Management Inc. is wholly owned by Alan Simpson, the CEO of StorageVault and Glenn Fradette, the CFO of StorageVault); and the Vendors shall nominate Steven Scott as Chief Executive Officer and Iqbal Khan as Chief Financial Officer in replacement of Alan Simpson and Glenn Fradette, respectively. Alan Simpson will continue as Executive Vice-Chairman of StorageVault and Glenn Fradette will assist with transition for a minimum period of six (6) months after the First Closing Date.
In addition, it is a condition that the Vendors shall on or before the First Closing Date have completed the purchase of all of the issued and outstanding shares in the capital of Canadian PUPS Franchises Inc., which is the master franchisor of StorageVault’s PUPS portable storage business. Also, it is a condition that Saskworks Venture Fund Inc., Apex Investment Limited Partnership, Alan Simpson, Glenn Fradette and Detteson Management Inc., major shareholders of StorageVault, shall on or before the First Closing date, have entered into a right of first negotiation agreement providing that under certain conditions the sale of their Common Shares of StorageVault shall include a right of first negotiation with the Vendors in respect of any proposed sale of such Common Shares.
In certain limited circumstances, termination of the Purchase Agreement may occur if the appraisal values of the Purchased Assets in either tranche are greater than or less than the purchase price by specified margins. In the event of termination in such cases, StorageVault may be required to pay to the Vendors, or the Vendors may be required to pay to StorageVault, a termination fee of $750,000.
Five-Year Business Plan, Acquisition Committee and Potential Future Acquisitions of Access Assets
The Five-Year Business Plan discussed above has been established with the goal of enhancing the possibility that future acquisitions (“Future Access Acquisitions”) by StorageVault of assets owned by Access (other than the First Tranche or the Second Tranche) may occur in order to grow the business and operations of StorageVault. Due to the related party nature of such Future Access Acquisitions and because of the reconstitution of the StorageVault board on the First Closing Date to include a majority of Access nominee directors, StorageVault has established the Acquisition Committee and the Acquisition Committee Mandate. The purpose of the Acquisition Committee and the Acquisition Committee Mandate is to ensure that Future Access Acquisitions are free from any related party influences. In general, the intent of the Acquisition Committee Mandate is to require Acquisition Committee approval before StorageVault is able to proceed with a Future Access Acquisition. In addition, it is a condition to the Proposed Acquisition that the Acquisition Committee must approve the purchase of the Second Tranche. Alan Simpson, the current CEO of StorageVault, shall chair the Acquisition Committee. There is no requirement, term or condition whatsoever in the Purchase Agreement, the Five-Year Business Plan or the Proposed Acquisition that any Future Access Acquisitions must occur. There are no agreements, letters of intent or term sheets whatsoever with respect to a Future Access Acquisition. There is no guarantee that any Future Access Acquisitions will occur, and it is possible that no Future Access Acquisitions will occur despite the creation of the Five-Year Business Plan.
Trading in StorageVault’s Common Shares on the TSXV is halted and will remain halted until the documentation required by the TSXV in relation to the Proposed Acquisition has been reviewed and accepted by the TSXV.
Completion of the Proposed Acquisition is subject to a number of conditions as disclosed above and as set forth in the Purchase Agreement, including, but not limited to, TSXV Acceptance, satisfactory due diligence, board of director approval, creditor approval, shareholder consent and Acquisition Committee Approval. There can be no assurance that the Proposed Acquisition will be completed as proposed or at all. The TSXV has in no way passed upon the merits of the Proposed Acquisition and has neither approved nor disapproved the contents of this press release.
About Access Self Storage Inc. and Cubeit Portable Storage Canada Inc.
Access and Cubeit have been in the storage business for over 16 years and own and operate 60 stores representing over 4 million square feet of fixed storage space and over 1,250 portable storage units. Access is the fastest growing storage company in Canada and is the largest Canadian owned operator with stores in Alberta, Manitoba, Ontario, Quebec and Nova Scotia. The portable storage business operates under the Cubeit banner and is the 3rd largest in Canada with operations in British Columbia, Alberta, Ontario, Quebec and Nova Scotia.
About StorageVault Canada Inc.
StorageVault currently owns and operates Trans Can Mini-Stor in Regina, Kenaston Self Storage in Winnipeg, B&B Self Storage in Cambridge, Parksville Mini Storage in the Regional District of Nanaimo, Space Place Self Storage in Calgary, Airport Road Self Storage in London and Canadian PUPS in Saskatoon and Edmonton. Trans Can Mini-Stor, Kenaston Self Storage, B&B Mini Storage, Parksville Mini Storage and Space Place Self Storage are fixed unit storage facilities operating in conjunction with Canadian PUPS portable storage franchises at each location. StorageVault operates Canadian PUPS Portable Storage in Saskatoon and Edmonton as stand-alone portable storage franchises. StorageVault intends to continue to grow its business through the acquisition of additional self-storage properties, and organically as master franchisee through the development of Canadian PUPS portable storage facilities in Canada.
For further information, contact Mr. Alan Simpson:
3603 Selinger Crescent
Regina, Saskatchewan S4V 2H7 Tel: (306) 536-3771
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Forward-Looking Information: This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. All statements, other than statements of historical fact, included herein is forward-looking information. Generally, forward-looking information may be identified by the use of forward-looking terminology such as “plans”, “ expects” or “does not expect”, “proposed”, “is expected”, “budgets”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases, or by the use of words or phrases which state that certain actions, events or results may, could, would, or might occur or be achieved. In particular, this press release contains forward-looking information in relation to: the Proposed Acquisition; the business and assets of the Vendors and the Purchased Assets; the properties that will be acquired pursuant to the Proposed Acquisition; the timing for completion of the Proposed Acquisition; the Five-Year Business Plan and the completion of Future Access Acquisitions; the appointment of directors and officers in connection with the Proposed Acquisition; potential financing structures for the Proposed Acquisition and the availability of financing for the Proposed Acquisition; and the growth, goals, objectives and milestones of StorageVault. This forward-looking information reflects StorageVault’s current beliefs and is based on information currently available to StorageVault and on assumptions StorageVault believes are reasonable. These assumptions include, but are not limited to: the completion of satisfactory due diligence by all parties in relation to the Proposed Acquisition; the satisfactory fulfilment of all terms and conditions contained in the Purchase Agreement; the receipt of all required approvals including regulatory, TSXV, third party, creditor, director and shareholder approvals; market acceptance of the Proposed Acquisition; and acceptable financing to complete the Proposed Acquisition, including Assumed Mortgages and Vendor Take-Back Loans. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of StorageVault to be materially different from those expressed or implied by such forward-looking information. Such risks and other factors may include, but are not limited to: general business, economic, competitive, political and social uncertainties; general capital market conditions and market prices for securities; delay or failure to receive board or regulatory approvals; the actual results of future operations; competition; changes in legislation, including environmental legislation, affecting StorageVault; the timing and availability of external financing on acceptable terms; conclusions of economic evaluations; and lack of qualified, skilled labour or loss of key individuals. A description of additional assumptions used to develop such forward-looking information and a description of additional risk factors that may cause actual results to differ materially from forward-looking information can be found in StorageVault’s disclosure documents on the SEDAR website at www.sedar.com. Although StorageVault has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking information. Readers are cautioned that the foregoing list of factors is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement. The forward-looking statements contained in this press release represent the expectations of StorageVault as of the date of this press release and, accordingly, are subject to change after such date. However, StorageVault expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable securities law.