- Each Fund unit to be exchanged for one share of the combined
company or $37.00 in cash (subject to
proration), or the combination consideration consisting of ~67.5%
in shares in the combined company and the balance of ~32.5% in
cash
- Board of Trustees unanimously recommends unitholders vote
FOR the Arrangement Resolution
- Unitholders are encouraged to review the Management
Information Circular carefully and to submit their proxies in
advance of the deadline of October 7,
2024 at 10:00 a.m. (Vancouver Time)
- Unitholders should refer to the Management Information
Circular for information on how to make a valid election as to the
form of consideration they wish to receive and, if applicable, to
be able to make a tax deferral election
VANCOUVER, BC, Sept. 3,
2024 /CNW/ - A&W Revenue Royalties Income Fund
(TSX: AW.UN) (the "Fund") has filed and is in the process of
mailing the management information circular (the "Circular") and
related materials in connection with the upcoming special meeting
of unitholders (the "Meeting") to be held on October 8, 2024 at 10:00
a.m. (Vancouver Time). The Circular provides detailed
information regarding the proposed strategic combination (the
"Transaction") between the Fund and A&W Food Services of Canada
Inc. ("A&W Food Services") that will create a leading Canadian
publicly traded growth-focused quick service restaurant ("QSR")
company ("A&W Food Services NewCo"). At the Meeting,
unitholders will be asked to consider and, if deemed advisable,
pass a special resolution (the "Arrangement Resolution") to approve
the Transaction.
The Board of Trustees Unanimously Recommends Unitholders Vote
FOR the Arrangement Resolution
The Board of Trustees of the Fund (the "Board"), after careful
consideration of a number of factors and receiving legal, financial
and tax advice, a formal valuation and fairness opinion from TD
Securities Inc. and a fairness opinion from RBC Dominion
Securities, a member company of RBC Capital Markets, has
unanimously determined that the Transaction is in the best
interests of the Fund and fair to unitholders (other than A&W
Food Services and its affiliates) and unanimously recommends that
unitholders vote FOR the Arrangement Resolution. In making
its recommendation, the Board considered a number of factors as
described in the Circular under the heading "The Transaction –
Reasons for the Recommendation".
The Transaction offers a number of compelling benefits to
unitholders who become shareholders in A&W Food Services NewCo,
including:
- Full participation in the growth and performance of the
entire A&W business, including upside from new restaurant
openings, margin expansion due to operating leverage and economies
of scale, new concepts like Pret A Manger, and the retail root beer
business, among other valueenhancing opportunities;
- Attractive future dividends as A&W Food
Services NewCo is expected to maintain current distributions in the
form of an attractive quarterly dividend at the same annualized
rate as the current monthly distributions paid to unitholders
(currently equal to $1.92 per unit
per year);
- Attractive share price upside potential as the trading
valuation for A&W Food Services NewCo Shares is expected to be
based on A&W Food Services NewCo's business fundamentals and
operating performance (in contrast with the units, the market price
of which is primarily driven by their yield relative to interest
rates). A&W Food Services' track record of strong
operating performance relative to its global peer set, coupled with
an enhanced capital markets profile, could result in a future
public trading valuation for the A&W Food Services NewCo Shares
that is more comparable to those of other publicly traded
QSRs;
- Potential for enhanced capital markets profile as, in
contrast with the Fund, A&W Food Services NewCo's simplified
corporate structure and growth mandate will allow for greater
liquidity in the A&W Food Services NewCo Shares than the units
and is more likely to attract institutional investor interest and
research analyst coverage; and
- Affords A&W Food Services NewCo greater financial
flexibility to invest in growth opportunities and strategic
initiatives, while allowing for balance sheet optimization to
typical leverage levels observed in publicly-traded QSR peers.
The Transaction
The Transaction is structured as a statutory plan of arrangement
under the Canada Business Corporations Act ("CBCA"),
pursuant to which A&W Food Services will be amalgamated with
certain of its holding companies to form A&W Food Services
NewCo as a corporation existing under the CBCA, and will acquire
all the units of the Fund for common shares of A&W Food
Services NewCo ("A&W Food Services NewCo Shares") or cash, as
the case may be. Under the terms of the Transaction, each
unitholder can elect to receive in exchange for each unit:
- $37.00 in cash (representing a
premium of 30% to the closing trading price of the units on the
Toronto Stock Exchange ("TSX") of $28.54 on July 19,
2024, the last trading day prior to the public announcement
of the Transaction) (the "Cash Consideration");
- one A&W Food Services NewCo Share (the "Share
Consideration"); or
- a combination of 32.54277% of the Cash Consideration (being
$12.040825) and 67.45723% of the
Share Consideration (being 0.6745723 of an A&W Food Services
NewCo Share).
The elections of unitholders to receive Cash Consideration or
Share Consideration will be subject to proration in the event that
unitholders elect, in the aggregate, to receive more or less than
$175.6 million in cash consideration,
such that in all cases, a total of 4,746,582 units will be
purchased for cash at $37.00 per
unit, representing approximately 32.5% of the outstanding units as
of July 19, 2024. Unitholders
electing Combination Consideration will not be subject to further
proration.
In addition, unitholders will be entitled to receive a
distribution in an amount per unit equal to $1.92 multiplied by a fraction, the numerator of
which is the number of days between (a) the payment date of the
last monthly distribution in respect of the units for which the
payment date occurs prior to the closing of the Transaction and (b)
the closing date of the Transaction, and the denominator of which
is 365, so that, in effect, unitholders receive the monthly
distribution for the month in which the closing of the Transaction
occurs, prorated for the number of days up to closing of the
Transaction.
Receipt of Interim Order
On August 29, 2024, the
Ontario Superior Court of Justice (Commercial List) granted an
interim order authorizing various matters in connection with the
Transaction, including the holding of the Meeting and the mailing
of the Circular.
Meeting and Circular
The Meeting will be held at Suite 300, 171 West Esplanade,
North Vancouver, British Columbia,
V7M 3K9 on October 8, 2024 at
10:00 a.m. (Vancouver Time).
Unitholders have the option of listening to the Meeting via
teleconference at 1-437-781-4585 (Canada) or 1-617-675-4444 (United States), PIN 724 785 712 1793#.
Unitholders listening to the Meeting via teleconference will not be
permitted to vote, ask questions or otherwise participate at the
Meeting.
Registered unitholders as of the record date, August 27, 2024, are entitled to receive notice
of and vote at the Meeting. If a registered unitholder cannot
attend the Meeting, they can exercise their right to vote by
signing and returning the form of proxy in accordance with the
directions on the form. Proxies must be submitted no later than
10:00 a.m. (Vancouver Time) on
October 7, 2024. Beneficial
unitholders that hold their units through an intermediary, such as
a broker or investment dealer, should carefully follow the
instructions of their intermediaries to ensure that their units are
voted at the Meeting in accordance with their
instructions.
In order for the Transaction to become effective, the
Arrangement Resolution must be approved by at least (a) two thirds
(66 2/3%) of the votes cast by unitholders (including for this
purpose holders of limited voting units and exchangeable securities
of the Fund) present in person or represented by proxy at the
Meeting, and (b) a simple majority of the votes cast by unitholders
present in person or represented by proxy at the Meeting, excluding
the votes of A&W Food Services and any other unitholders whose
votes are required to be excluded for the purposes of "minority
approval" under Multilateral Instrument 61-101 – Protection of
Minority Security Holders in Special Transactions.
The Circular provides important information and unitholders are
urged to read the Circular and related materials carefully and in
their entirety, and, if assistance is required, unitholders are
urged to consult their financial, legal, tax or other professional
advisors. The Circular and related materials are being mailed to
unitholders in compliance with applicable laws, the Fund's
declaration of trust and the interim order. The Circular and
related materials are available on the SEDAR+ profile of the Fund
at www.sedarplus.ca and have been made available on the Fund's
website at
https://awincomefund.ca/investors/special-meeting2024.
Unitholder Election
To make a valid election (a) as to the form of consideration
they wish to receive under the Transaction and, if applicable, (b)
to be able to receive any A&W Food Services NewCo Shares on a
wholly or partially taxdeferred basis for Canadian federal income
tax purposes, unitholders must sign and return the letter of
transmittal and election form and make a valid election thereunder
and return it with accompanying certificate(s) or direct
registration statements(s) representing their units to the
depositary for the Transaction prior to 5:00
p.m. (Vancouver Time) on October 4,
2024 (the "Election Deadline"). Unitholders that hold their
units through an intermediary, such as a broker or investment
dealer, will not receive a letter of transmittal and election form
and should contact their intermediary for instructions and
assistance and carefully follow any instructions provided by such
intermediary. If a unitholder does not make proper election
prior to the Election Deadline, they will be deemed to have made an
election to receive the Share Consideration in respect of each unit
held, or, only to the extent of any deemed election to receive Cash
Consideration as a result of proration (as further described in the
Circular), the Cash Consideration, and will not be eligible to
receive any Share Consideration on a tax-deferred basis. See
"Procedure for Exchange of Units, Elections and Payment of
Consideration" of the Circular for more
information.
Transaction Conditions and Timing
The Transaction is expected to close in October of this year and
is subject to customary closing conditions, including court
approval, TSX approval and approval of the unitholders. Clearance
under the Competition Act (Canada) was obtained on August 2, 2024. A&W Food Services NewCo has
applied to have the A&W Food Services NewCo Shares listed on
the TSX. Listing is subject to the approval of the TSX in
accordance with its original listing requirements. The TSX has not
conditionally approved A&W Food Services NewCo's listing
application and there is no assurance that the TSX will do
so.
A&W Food Services NewCo Equity Incentive
Plan
Subject to the approval of the Arrangement Resolution, at the
Meeting, unitholders will also be asked to consider and, if deemed
advisable, pass an ordinary resolution (the "Equity Incentive Plan
Resolution") to approve the equity incentive plan of A&W Food
Services NewCo (the "Equity Incentive Plan") to be effective
following closing of the Transaction. In order for the Equity
Incentive Plan to become effective, the Equity Incentive Plan
Resolution must be approved by a simple majority of the votes cast
by unitholders (including for this purpose holders of limited
voting units and exchangeable securities of the Fund) present in
person or represented by proxy at the Meeting. The Board
unanimously recommends that Unitholders vote FOR the Equity
Incentive Plan Resolution.
Questions and Assistance
Unitholders who have questions about the information contained
in the Circular or with respect to the procedures for voting or
completing their letter of transmittal and election form can
contact the Fund's proxy solicitation agent, Laurel Hill Advisory
Group by telephone at 1-877-452- 7184 (North American Toll Free) or
1-416- 304-0211 (Outside North America), or by email at
assistance@laurelhill.com.
About A&W Revenue Royalties Income Fund
A&W Revenue Royalties Income Fund is a limited purpose trust
established to invest in Trade Marks, which through its interest in
the A&W Trade Marks Limited Partnership (the "Partnership"),
owns the A&W trademarks used in the A&W QSR business in
Canada. The A&W trade-marks
comprise some of the best-known brand names in the Canadian
foodservice industry. In return for licensing A&W Food Services
to use its trade-marks, Trade Marks (through the Partnership) is
entitled to royalties equal to 3% of the gross sales reported by
A&W restaurants in the Royalty Pool.
The Royalty Pool is adjusted annually to reflect gross sales
from new A&W restaurants added to the Royalty Pool, net of the
gross sales of any A&W restaurants in the Royalty Pool that
have permanently closed. Additional LP units are issued to A&W
Food Services to reflect the annual adjustment. A&W Food
Services' additional LP units are exchanged for additional common
shares of Trade Marks which are exchangeable for Trust Units. The
22nd annual adjustment to the Royalty Pool took place on
January 5, 2024 at which time the
number of restaurants in the Royalty Pool increased from 1,037 to
1,047.
Trade Marks' dividends to A&W Food Services and the Fund and
the Fund's distributions to unitholders are based on 3% of top-line
revenues of the A&W restaurants in the Royalty Pool, less cash
expenses including interest, general and administrative expenses
and current income taxes of Trade Marks.
About A&W Food Services
A&W is a leading QSR and the second largest burger chain in
Canada with a 68-year history of
service excellence, menu innovation and value creation. Operating
coast-to-coast and serving over 197 million guests annually,
A&W restaurants feature famous trade-marked menu items such as
The Burger Family®, Chubby Chicken® and A&W Root Beer®.
® trademark of A&W Trade Marks Limited Partnership, used
under license.
Forward-looking Information:
Certain statements in this press release contain forward-looking
information within the meaning of applicable securities laws in
Canada. The forward-looking
information in this press release includes, but is not limited to:
expectations relating to the timing and completion of the
Transaction; expectations regarding the Meeting; the listing of the
A&W Food Services NewCo Shares on the TSX; the expected
benefits of the Transaction, including, without limitation,
expectations with respect to A&W Food Services NewCo's
potential for growth and capital appreciation, share price upside,
balance sheet optimization, and value creation and enhanced
liquidity and profile in the capital markets (including increased
institutional investor interest and research analyst coverage); and
expectations that distributions will be maintained in the form of
dividends by A&W Food Services NewCo and the annualized rate of
those future dividends. The words "expects", "plans", "will", and
similar expressions are often intended to identify forward-looking
information, although not all forward-looking information contains
these identifying words.
This forward-looking information is based on a number of
assumptions that, while considered reasonable as of the date such
statements are made, are subject to known and unknown risks,
uncertainties and other factors that may cause the actual results
to be materially different from those expressed or implied by such
forward-looking information. Such assumptions include, but are not
limited to: the Fund's ability to obtain unitholder approval, TSX
approval and court approval and consummate the Transaction on the
terms and conditions and timing currently contemplated; that
A&W Food Services NewCo will be successful in executing its
business strategies and pursuing its growth opportunities, and
that, coupled with its simplified corporate structure and growth
mandate, will attract significantly more institutional investor
interest and research coverage; there are no material changes in
competition; the continued availability of experienced management
and other key personnel and hourly employees; and that there are no
material changes in the QSR burger market, including as a result of
changes in consumer taste or health concerns, a disease outbreak or
economic conditions (including inflation, interest rates and
unemployment levels).
Inherent in forward-looking information are risks and
uncertainties beyond management's or the Fund's or A&W Food
Services' ability to predict or control that may cause actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by the forward-looking information. The forward-looking
information in this press release is subject to, among others, the
specific risks and uncertainties relating to the Transaction and
the A&W Food Services NewCo Shares set out in the Circular
under "Risk Factors" and the risk factors relating to the business
of A&W Food Services NewCo set out in the Circular under
"Information Concerning A&W Food Services NewCo After Giving
Effect to the Transaction", in addition to the other information
contained, or incorporated by reference, in the Circular. Readers
are cautioned that the risk factors referred to above are not
exhaustive and additional risks and uncertainties, including those
currently unknown or considered immaterial to Fund may also
adversely effect the Transaction, the A&W Food Services NewCo
Shares or A&W Food Services NewCo following completion of the
Transaction. There can be no assurance that forward-looking
information contained in this press release 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
information.
The forward-looking information contained in this press release
is based on the beliefs of the Fund and A&W Food Services'
management as well as on assumptions which such management believes
to be reasonable based on information available at the date hereof
and is subject to change after such date. All forward-looking
information in this press release is qualified in its entirety by
this cautionary statement and, except as required by law, the Fund
and A&W Food Services undertake no obligation to revise or
update any forward-looking information as a result of new
information, future events or otherwise after the date hereof.
SOURCE A&W Revenue Royalties Income Fund