/NOT FOR DISTRIBUTION TO THE U.S. NEWSWIRE
OR FOR DISSEMINATION IN THE UNITED
ON, Sept. 29, 2022 /CNW/ - Aegis Brands
Inc. ("Aegis" or the "Company") (TSX: AEG) is pleased
to announce that a definitive agreement (the "Definitive
Agreement") has been entered into to acquire St. Louis Bar
& Grill ® ("St.
Louis") for total consideration of $50.0 million (the "Purchase Price"),
subject to certain closing adjustments (the "Transaction").
The Purchase Price will be satisfied entirely with cash. Pursuant
to the Transaction, Aegis will acquire, indirectly, substantially
all of the assets and intellectual property of "St. Louis Bar & Grill"® brand and
St. Louis Bar and
Grill® is a Toronto
based franchised casual dining bar & grill company, operating
in 72 locations across 4 provinces. Founded in Toronto in 1992, St.
Louis is recognized for its signature wings, ribs, and
garlic dill sauce. St. Louis'
neighbourhood restaurants offer exceptionally friendly service in a
fun, casual sports bar & grill setting.
St. Louis' 2023 projected
earnings before interest, tax, depreciation and amortization
(EBITDA) of $7.6 million implies a
6.6x EBTIDA multiple. The Purchase Price and the related
transaction expenses will be funded through a draw of $30.0 million under the Company's existing Senior
Facility with CWB Financial Group and the balance will be financed
through a "best efforts" private placement of Debenture
Subscription Receipts and Common Share Subscription Receipts for
gross proceeds of $25.0 million (or
$28.8 million upon the exercise in
full of a 15.0% Over-Allotment Option) with Echelon Capital Markets
("Echelon") acting as co-lead agent and sole bookrunner, and
Canaccord Genuity Corp. acting as co-lead agent (and together with
Echelon, the "Agents") (the "Offering"). Details of
the Senior Facility and the Offering are provided below.
"Brent Poulton and his
team have done an exceptional job growing and fine-tuning this
brand over the years," said Steven
Pelton, President and CEO of Aegis. "We couldn't be happier
to welcome the brand, the employees and the franchisees of
St. Louis into Aegis. Aegis'
intent is to continue to grow the St. Louis brand across
Canada and beyond. I admire the
culture and vision of the brand and we intend to build-off what has
been created. The store-level economics and exciting growth plans
allows St. Louis to fit perfectly
into Aegis' plans to grow and create value for shareholders and we
expect this acquisition to be accretive in the first year. Mr.
Poulton built a company that focused on the fundamentals of the
restaurant business. This has resulted in a very healthy network of
franchised stores which will serve as a strong foundation upon
which to grow."
The Transaction is aligned with Aegis' long-term business
strategy to grow into the premier consolidator of Canadian food and
beverage brands. The highlights of the Transaction include the
- St. Louis Represents a Strong, Established, and Stable Brand
in the Canadian Casual Dining Space
- St. Louis brand was established in 1992 and strong brand
recognition has been built over 30 years
- Compelling customer proposition: fun, energizing, casual
atmosphere perfect for a night out with friends and sophisticated
enough to host corporate events
- Diversified footprint, with 72 franchised locations operating
across 4 provinces
- St. Louis has demonstrated a
strong degree of operational resilience; throughout the course of
the pandemic, 4 net new stores were opened
- Durable, Agile, and Forward-thinking Business
- Operations possess robust unit economics for franchisees,
generating +21% cash-on-cash returns and ~20% 4-wall EBITDA margins
(before royalty, management fees and advertising funds
- Access to dedicated business intelligence team to analyze
demographic segmentation, conduct market area analysis, and
determine traffic / competition access
- Well-developed off-premises business, with proprietary
St. Louis mobile app in use across
a wide user base
- Robust Combined Financial Profile
- Run rate same-store-sales since pandemic restrictions lifted
+1% to 2019 levels, and +38% over 2021
- Highly visible pipeline for expansion, with +50% new store
growth projected over the next 3-years
- Strong profitability and cash flow profiles, touting ~48%
corporate-level EBITDA margins (2023E) and expected approximately
$5.0 million of free cash flow
- Continued Management and Board, Supported by Management with
- Aegis' current Board and management, having extensive
experience across M&A and multi-national franchise businesses
will continue to advise and support Aegis with the growth of the
St. Louis and Bridgehead
- St. Louis' management team
(other than Brent Poulton and
Barry Poulton), with a track-record
of success and experience in a wide variety of restaurant formats
will join Aegis, expanding the depth and breadth of Aegis'
In connection with the Transaction, Aegis engaged the Agents to
conduct a "best efforts" private placement offering of subscription
receipts. Aegis is pleased to announce that is has closed the
Offering today for gross proceeds of $28.4
million, representing $3.4
million of Common Share Subscription Receipts and
$25.0 million of Debenture
The Offering consisted of: (i) up to $3.0
million or 9,259,259 common share subscription receipts
(each a "Common Share Subscription Receipt") at a price of
$0.324 per Common Share Subscription
Receipt and (ii) up to $22.0 million
in principal amount of (or 22,000) convertible debenture
subscription receipts (each a
"Debenture Subscription Receipt") at a price of
$1,000 per Debenture Subscription
Receipt, for total gross proceeds of a total of $25.0 million, subject to a 15% allotment granted
to the Agents on each of the Common Share Subscription Receipt and
Debenture Subscription Receipt private placements (the
"Over-Allotment Option"), for total maximum aggregate
proceeds of $28.8 million.
Each Common Share Subscription Receipt will entitle the holder
thereof to receive, upon the satisfaction of certain conditions,
including the completion of the Transaction, and without payment of
additional consideration or further action, one common share in the
capital of the Company (each a "Common Share").
Each Debenture Subscription Receipt will entitle the holder
thereof to receive, upon the satisfaction of certain conditions,
one $1,000 principal amount,
unsecured convertible debenture (the "Convertible
Debentures"). The Convertible Debentures shall bear interest of
11.0% per annum and shall have a maturity date of sixty (60) months
from the closing of the Offering (the "Maturity Date"). The
Convertible Debentures will be convertible at the holder's option
into Common Shares at any time prior to the close of business on
the Maturity Date at a conversion price of $0.485. The Company will use the aggregate net
proceeds from the Offering to fund a portion of the Purchase Price,
transaction related expenses and general corporate purposes.
The Common Shares, Convertible Debentures, and the Common Shares
issued upon conversion of the Convertible Debentures will be
subject to a statutory hold for a period of four months and one day
from the closing date of the Offering.
The Company has received conditional approval to list the Common
Shares, Convertible Debentures, and the Common Shares issuable upon
conversion of the Convertible Debentures, on the Toronto Stock
Upon completion of the Transaction, the Company expects to have
approximately 33.6 million Common Shares outstanding.
Certain directors, officers and holders of more than 10.0% of
the issued and outstanding Common Shares of Aegis
("Insiders") together with certain associates and affiliates
of Insiders have acquired an aggregate of $2.4 million of Common Shares Subscription
Receipts and Debenture Subscription Receipts under the Offering,
representing approximately 9.6% of the Common Shares (assuming full
exercise of the Over-allotment Option) to be issued under the
Offering and 8.2% (assuming full exercise of the Over-allotment
Option) of the Convertible Debentures to be issued under the
This news release does not constitute an offer to sell or a
solicitation of an offer to sell any of securities in the United States. The securities have not
been and will not be registered under the U.S. Securities Act or
any state securities laws and may not be offered or sold within
the United States or to U.S.
Persons unless registered under the U.S. Securities Act and
applicable state securities laws or an exemption from such
registration is available.
The Purchase Price will be partially funded through Aegis'
existing development line of credit with Canadian Western Bank
Franchise Finance (the "Senior Facility") for an aggregate
gross amount of $30.0 million. The
Senior Facility has a term of 59 months and is secured by first
ranking security interest on all assets and subsidiaries of Aegis.
The Senior Facility will bear an interest rate of prime plus an
applicable margin of 2.75% (8.20% effective rate) and will amortize
over a ten (10) year period.
The Transaction will be completed through Aegis' wholly-owned
subsidiary, SLF Operations Limited Partnership which has entered
into a Definitive Agreement with St.
Louis. The Transaction, which has been approved by the
boards of directors of Aegis and St.
Louis, is subject to the receipt of all required approvals,
as applicable, all as outlined in the Definitive Agreement (a copy
of which will be filed to SEDAR under Aegis' profile at
In light of the participation by Insiders, the number of Common
Shares issuable under the Offering, the deemed discount to the
market price under the applicable rules of the TSX and the pricing
of the securities prior to the announcement of the Transaction, the
approval of Aegis' shareholders (the "Shareholders") to the
Offering is required in accordance with the applicable rules of the
TSX. As participation by Insiders is considered to be a "related
party transaction" as defined in applicable securities laws, the
approval of a majority of disinterested Shareholders, excluding
existing Shareholders who are Insiders or associates and affiliates
of Insiders, will also be required.
Aegis will seek the required approval of disinterested
Shareholders holding greater than 50% of the Common Shares
represented in person or by proxy at a special meeting of
Shareholders (the "Special Meeting") called for the purpose
of approving the Offering in addition to any other required
The Special Meeting is anticipated to be held in
November 2022. A notice of meeting and management information
circular are anticipated to be delivered to Shareholders in
The Transaction is expected to close during the fourth quarter
Ewing Morris & Co. Investment
Partners Ltd. ("EMI") has entered into subscription
agreements pursuant to which it has committed to purchase
$4.5 million in Debenture
Subscription Receipts as part of the Offering. To ensure that there
will not be a material effect on the control of Aegis, the terms of
the indenture governing the Convertible Debentures will confirm
that no holder of a Convertible Debenture shall have the right to
exercise conversion rights if such a conversion would cause the
holder to beneficially own or control Common Shares representing
more than 19.9% of the total number of outstanding Common Shares at
the time of any such conversion.
Additionally, Aegis and EMI have agreed that EMI shall have the
right, but not the obligation, to designate one individual for
nomination to the board of directors of Aegis at each annual
meeting of the Shareholders or any special meeting at which all
directors are to be elected.
"As providers of growth capital, we are delighted to support
Aegis in completing this acquisition. We are confident that
Steve and his team will be great shepherds of the St. Louis franchise and continue its growth
towards becoming a truly iconic Canadian brand" said Anthony Hammill, Chairman of Ewing Morris.
Echelon Capital Markets is acting as financial advisor, and
Stewart McKelvey is acting as legal
advisor to Aegis in connection with the Transaction and the
Dale & Lessmann LLP is acting as legal advisor to
St. Louis in connection with the
About Aegis Brands Inc.
Aegis currently owns and operates Bridgehead Coffee. The
Company's vision is to build a portfolio of amazing brands that can
grow and flourish with access to Aegis' resources and expertise.
The Company is committed to letting each brand operate
independently while providing shared expertise to help them thrive.
For more information, please visit aegisbrands.ca.
Certain information contained in this news release are not
statements of historical fact and are "forward-looking"
statements. Forward-looking statements relate to future
events or future performance and reflect management's expectations
or beliefs regarding future events and include, but are not limited
to, statements regarding the Company's expectations with respect to
the issuance of the Subscription Receipts, completion of the
Acquisition and the use of proceeds from the Offering.
In certain cases, forward-looking statements can be
identified by the use of words such as "plans", "expects" or "does
not expect", "is expected", "outlook", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not
anticipate", or "believes", or variations of such words and phrases
or statements that certain actions, events or results "may",
"could", "would", "might" or "will be taken", "occur" or "be
achieved" or the negative of these terms or comparable terminology.
By their very nature forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
In making the forward-looking statements in this news
release, the Company has applied certain factors and assumptions
that are based on information currently available to the Company as
well as the Company's current beliefs and assumptions. These
factors as well as the risk factors detailed from time to time in
the Company's interim and annual financial statements and
management's discussion and analysis of those statements, all of
which are filed and available for review on SEDAR at www.sedar.com.
Although the Company has attempted to identify important factors
that could cause actual actions, events or results to differ
materially from those described in forward-looking statements,
there may be other factors that cause actions, events or results
not to be as anticipated, estimated or intended, many of which are
beyond the Company's ability to control or predict. There can be no
assurance that forward-looking statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking
statements and all forward-looking statements in this news release
are qualified by these cautionary statements.
The forward-looking statements in this press release are made
as of the date it was issued and Aegis does not undertake any
obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by applicable
SOURCE Aegis Brands Inc.