ECN Capital Corp. (TSX: ECN) (“
ECN Capital”) and
Skyline Champion Corporation (NYSE: SKY) (“
Skyline
Champion”) today announced that they have entered into a
share subscription agreement (the “
Subscription
Agreement”) pursuant to which Skyline Champion has agreed
to make an approximately C$185 million (US$138 million) equity
investment in ECN Capital on a private placement basis (the
“
Private Placement”) in exchange for 33,550,000
common shares of ECN Capital (the “
Common Shares”)
and 27,450,000 mandatory convertible preferred shares, Series E of
ECN Capital (“
Convertible Preferred Shares”). Upon
closing of the Private Placement, Skyline Champion is expected to
beneficially own an approximately 19.9% interest in ECN Capital
(assuming the conversion of all Convertible Preferred Shares).
In connection with the Private Placement, ECN
Capital and Skyline Champion will form a captive finance company
that will be 51% owned by Skyline Champion and 49% owned by Triad
Financial Services, Inc. (“Triad”), a wholly-owned
subsidiary of ECN Capital. The captive finance company will provide
a tailored retail finance loan program for customers and a new
branded floorplan offering for Skyline Champion and its affiliates
in the manufactured home finance space and will operate with
services provided by Triad.
The captive finance company is expected to
enable both companies to work more closely together to grow their
respective businesses and create value for their stakeholders.
Among other things, the captive finance company is expected to:
- drive greater
demand for product by providing broader and more attractive
financing options and services for Skyline Champion’s
customers;
- enhance Skyline
Champion’s turn-key homebuying solutions while magnifying the
benefits of their digital and direct-to-consumer strategic
investments; and
- generate
increased retail loan originations and floorplan balances, driving
growth and scale efficiencies for Triad.
"We are pleased to announce this new and
expanded partnership with Skyline Champion, a leading participant
in the North American manufactured housing sector”, said Steven
Hudson, Chief Executive Officer of ECN Capital. “This transaction
represents the culmination of the strategic review process that we
commenced earlier this year, and we are very excited by the
significant growth opportunities that the establishment of the new
captive finance company will bring to Triad. The concurrent equity
and preferred share investments in ECN Capital also represent a
strong endorsement of ECN Capital’s business model and the value of
our platform.”
“We are excited to announce this new strategic
collaboration with one of our long-standing business partners,”
said Mark Yost, Skyline Champion’s President and Chief Executive
Officer. “The partnership with Triad will help streamline the
homebuying experience for our channel partners as well as the
consumers of our homes. This will allow us to expand our
ability to offer affordable housing solutions more efficiently
while driving company-wide growth. The asset-light model of
these financing solutions combined with the strength of our balance
sheet allow us to partner with ECN Capital while continuing our
investments in our longer-term commercial and operational
initiatives. We are excited about the future and the benefits this
investment will bring to both companies’ stakeholders.”
Key Private Placement
Details
Equity Investment
Pursuant to the Subscription Agreement, Skyline
Champion has agreed acquire 33,550,000 Common Shares and 27,450,000
Convertible Preferred Shares, in each case at a price per share
equal to C$3.04(the “Share Issue Price”).
The Convertible Preferred Shares are initially
convertible on a one-for-one basis into an aggregate of 27,450,000
Common Shares based on an initial liquidation preference and
conversion price equal to the Share Issue Price, which are subject
to customary anti-dilution adjustments. The Convertible Preferred
Shares are convertible at any time at the option of Skyline
Champion, are convertible at the option of ECN Capital in
connection with a change of control of ECN Capital and will
automatically convert into Common Shares on the fifth anniversary
of closing of the Private Placement, in each case subject to a
conversion cap in the event that, as a result of any conversion,
Skyline Champion would hold in excess of 19.9% of outstanding
Common Shares.
The Convertible Preferred Shares will receive
cumulative cash dividends at a rate of 4.0% per annum on the
liquidation preference, payable semi-annually.
The holder of the Convertible Preferred Shares
will be entitled to vote on an as-converted basis for all matters
on which holders of Common Shares vote and, except as otherwise
required by law, will vote together as a single class with the
Common Shares.
The Convertible Preferred Shares will not be
transferrable other than to affiliates of Skyline Champion or with
the prior approval of the Board of Directors of ECN Capital. The
Common Shares to be acquired by Skyline Champion pursuant to the
Private Placement are subject to a two-year lock-up period, subject
to permitted transfers to affiliates of Skyline Champion.
While the Convertible Preferred Shares will not
be listed on any stock exchange, ECN Capital has applied for
conditional approval for the listing of the underlying Common
Shares on the TSX. ECN Capital has also applied for conditional
approval from the TSX for the listing of the Common Shares to be
acquired by Skyline Champion pursuant to the Private Placement.
ECN Capital intends to use the net proceeds of
the Private Placement for general corporate purposes.
Investor Rights Agreement
Pursuant to an investor rights agreement to be
entered into on closing of the Private Placement (the
“Investor Rights Agreement”), Skyline Champion
will have the right to nominate one director to serve on the Board
of Directors of ECN Capital. On closing, ECN Capital intends to
appoint Mark Yost, President and Chief Executive Officer of Skyline
Champion, to the Board of Directors of ECN Capital.
The Investor Rights Agreement will also provide
for, among other things, customary piggy-pack registration rights,
pre-emptive rights, standstill and voting support obligations. In
addition, in light of the strategic partnership between ECN Capital
and Skyline Champion, consisting of the Private Placement and the
captive finance company, ECN Capital will also agree pursuant to
the Investor Rights Agreement that for a two-year period from
closing of the Private Placement: (i) unanimous approval of the
Board of Directors of ECN Capital will be required in order to
market the sale of Triad, pursue any material acquisitions or
dispositions outside of the ordinary course (subject to certain
agreed upon dispositions) or pay any dividends in excess of ECN
Capital’s current quarterly dividends on its Common Shares and
existing preferred shares and dividends on the Convertible
Preferred Shares; and (ii) Skyline Champion will have a right to
match in connection with unsolicited offers to acquire ECN Capital
or Triad.
Conditions to Closing
The Private Placement is anticipated to close in
September 2023, subject to certain customary closing conditions
including the receipt of conditional approval from the TSX and the
expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Conference Call and Webcast
Information:
ECN Capital will be hosting an analyst briefing
to discuss its financial statements and management discussion and
analysis for the three-month period ended June 30, 2023 and its
strategic relationship with Skyline Champion commencing at 6:30
p.m. Eastern Time on August 14, 2023. The call can be accessed as
follows:
Webcast |
https://services.choruscall.ca/links/ecncapitalcorp2023q2.html |
Toll-free dial in |
North America 1-800-319-4610International 1-416-915-3239 |
Presentation slides |
http://ecncapitalcorp.com/investors/presentations |
A telephone replay of ECN Capital’s conference
call may also be accessed until September 14, 2023 by dialing
1-800-319-6413 and entering the passcode 0363#.
Skyline Champion management will host a
conference call tomorrow, August 15, 2023, at 9:00 a.m. Eastern
Time, to discuss this transaction.
Investors and other interested parties can
listen to a webcast of the live conference call by logging onto the
Investor Relations section of Skyline Champion’s website at
skylinechampion.com. The online replay will be available on the
same website immediately following the call.
The conference call can also be accessed by
dialing (877) 407-4018 (domestic) or (201) 689-8471
(international). A telephonic replay will be available
approximately two hours after the call by dialing (844) 512-2921,
or for international callers, (412) 317-6671. The passcode for the
live call and the replay is 13740713. The replay will be available
until 11:59 P.M. Eastern Time on August 29, 2023.
Additional Information
ECN Capital intends to file a material change
report in connection with the transactions contemplated by this
news release, which will be available under ECN Capital’s profile
on SEDAR+ at www.sedarplus.ca. In connection therewith, a copy of
the Subscription Agreement and the exhibits thereto, including the
form of Investor Rights Agreement and share terms for the
Convertible Preferred Shares (the “Share Terms”),
will be filed with the applicable Canadian securities regulators on
SEDAR+ at www.sedarplus.ca. The above descriptions of the terms and
conditions of the Subscription Agreement, Investor Rights Agreement
and Share Terms are expressly qualified in their entirety by the
full text of the as filed documents.
Advisors
CIBC Capital Markets, BMO Capital Markets and
Goldman Sachs are serving as financial advisors to ECN Capital and
Blake, Cassels & Graydon LLP, Cravath, Swaine & Moore LLP
and McGlinchey Stafford PLLC are serving as legal counsel.
Jefferies LLC is serving as financial advisor to
Skyline Champion, and King & Spalding LLP and McCarthy Tetrault
LLP are serving as legal counsel.
About ECN Capital Corp.
With managed assets of US$4.7 billion, ECN
Capital Corp. (TSX: ECN) is a leading provider of business services
to North American based banks, credit unions, life insurance
companies, pension funds and institutional investors (collectively
our “Partners”). ECN Capital originates, manages
and advises on credit assets on behalf of its Partners,
specifically consumer (manufactured housing and recreational
vehicle and marine) loans and commercial (inventory finance or
floorplan) loans. Our Partners are seeking high quality assets to
match with their deposits, term insurance or other liabilities.
These services are offered through two operating segments: (i)
Manufactured Housing Finance, and (ii) Recreational Vehicles and
Marine Finance.
About Skyline Champion
Skyline Champion Corporation (NYSE: SKY) is a
leading producer of factory-built housing in North America and
employs approximately 7,600 people. With more than 70 years of
homebuilding experience and 44 manufacturing facilities throughout
the United States and western Canada, Skyline Champion is well
positioned with an innovative portfolio of manufactured and modular
homes, ADUs, park-models and modular buildings for the
single-family, multi-family, and hospitality sectors.
In addition to its core home building business,
Skyline Champion provides construction services to install and
set-up factory-built homes, operates a factory-direct retail
business with 31 retail locations across the United States, and
operates Star Fleet Trucking, providing transportation services to
the manufactured housing and other industries from several dispatch
locations across the United States.
Skyline Champion builds homes under some of the
most well-known brand names in the factory-built housing industry
including Skyline Homes, Champion Home Builders, Genesis Homes,
Athens Park Models, Dutch Housing, Atlantic Homes, Excel Homes,
Homes of Merit, New Era, Redman Homes, ScotBilt Homes, Shore Park,
Silvercrest, Titan Homes in the U.S. and Moduline and SRI Homes in
western Canada.
Forward-Looking Statements
This press release includes “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995 and “forward-looking information” within the
meaning of applicable Canadian securities laws (collectively, the
“forward-looking statements”). Such statements are based on the
current expectations and views of future events of ECN Capital’s
and Skyline Champion’s management. In some cases the
forward-looking statements can be identified by words or phrases
such as “will”, “expect”, “anticipate”, “intend”, “potential”,
“estimate”, “believe” or the negative of these terms, or other
similar expressions intended to identify forward-looking
statements. Forward-looking statements in this press release
include those relating to the Private Placement and the
establishment of the captive finance company, including the
anticipating timing of closing of the Private Placement, the
expected use of proceeds of the Private Placement, the expected
appointment of Mark Yost to the Board of Directors of ECN Capital
and the anticipated benefits of the Private Placement and the
captive finance company to ECN Capital and Skyline Champion,
including the provision of more attractive financing options for
Skyline Champion’s customers, driving greater demand for Skyline
Champion’s products and generating increased originations and
balances for Triad. The forward-looking statements discussed in
this release may not occur and could differ materially as a result
of known and unknown risk factors and uncertainties affecting ECN
Capital and Skyline Champion, including risks regarding expected
timing of the closing of the Private Placement and launch of the
captive finance company, the market’s acceptance of the captive
finance company’s retail finance program and branded floorplan
offering, the parties’ plans, strategies and objectives and other
factors beyond the control of ECN Capital and Skyline Champion.
Forward-looking statements are not guarantees of future performance
and involve known and unknown risks, uncertainties and other
factors which may cause ECN Capital’s and Skyline Champion’s actual
results, performance or achievements to be materially different
from those expressed or implied by the forward-looking statements
contained herein. Accordingly, readers should not place undue
reliance on such forward-looking statements. A discussion of the
material risks and assumptions associated with ECN Capital’s
business can be found in ECN Capital’s Management Discussion and
Analysis for the three and six months ended June 30, 2023 and
Annual Information Form dated March 30, 2023 which can be accessed
at www.sedarplus.ca. A discussion of the material risks and
assumptions associated with Skyline Champion’s business can be
found in Skyline Champion’s Annual Report on Form 10-K for the
fiscal year ended April 1, 2023 previously filed with the
Securities and Exchange Commission (“SEC”), as well as in Skyline
Champion’s Quarterly Reports on Form 10-Q, and Current Reports on
Form 8-K, filed with or furnished to the SEC. Accordingly, readers
should not place undue reliance on any forward-looking statements
or information. Except as required by applicable securities laws,
forward-looking statements speak only as of the date on which they
are made and ECN Capital and Skyline Champion do not undertake any
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events,
or otherwise.
Contact
John Wimsatt
561-389-2334jwimsatt@ecncapitalcorp.com
Kevin Doherty
248-614-8211investorrelations@championhomes.com
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