The Transaction involves the acquisition by
- A significant portfolio of high-quality residential real estate brokerages operating across
Canada ("Brokerages"), including 25 Royal LePage and Johnston & Daniel brokerages, 3 Via Capitale brokerages andProprio Direct Inc. ("Proprio Direct "), one of the leading and fastest growing virtual brokerages based inQuébec ; and Bridgemarq Real Estate Services Manager Limited (the "Manager"), resulting in the internalization of the Company's existing management services arrangements, including the retention of the employees of the Manager that have been responsible for managing Bridgemarq and the Brokerages for the past two decades, and the termination of management fee payments to Brookfield.
A special committee (the "Special Committee") of Bridgemarq's Board of Directors (the "Board"), comprised solely of independent directors, was appointed to review, consider, negotiate, evaluate and recommend the approval of the terms and conditions of the Transaction. The Special Committee retained an independent financial advisor and independent legal counsel to assist in the discharge of its mandate.
Pursuant to the definitive agreement for the Transaction (the "Definitive Agreement"), the Partnership will issue approximately 2.9 million Class B limited partnership units (the "Exchangeable Units"), subject to certain customary purchase price adjustments, to (1) acquire all of the issued and outstanding shares of the Brokerages and the Manager, and (2) settle certain management fees and distributions owing by the Partnership to Brookfield totaling approximately
At a 5-day VWAP of
In addition to simplifying the organizational structure of the Company, the Transaction will reduce the Company's financial leverage by increasing earnings and fully settling the outstanding deferred payments owed to Brookfield.
"We are pleased to announce the internalization of management and acquisition of several best-in-class brokerages, including one of the largest real estate brokerages in the country, operating in three provinces under our flagship Royal LePage brand. We are also acquiring the innovative
"The broadening of our business to include direct brokerage operations enables us to capture more revenues and adds new capabilities with which to expand our market share across
"These are exciting developments for our business which will build on our 100 years' experience in the Canadian real estate industry," said
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1 The trademarks REALTOR®, REALTORS® and the REALTOR® logo are controlled by The |
The Transaction provides a number of meaningful benefits to shareholders, including the following:
- Compelling Pro Forma Financial Metrics. The Transaction is expected to meaningfully enhance the scale of Bridgemarq and deleverage the business. Given the expected liquidity of the pro forma entity, the Company anticipates maintaining existing levels of cash dividends per share, subject to the discretion of the Board.
- Expanded Growth Opportunities. With the acquisition of the Brokerages, including the innovative
Proprio Direct virtual brokerage model operating only inQuébec , Bridgemarq adds the capability to capture future growth across a broader spectrum of the real estate industry through both organic growth and future acquisition opportunities. - Simplified Organizational Structure. The Transaction will result in a more traditional and simplified organizational model, allowing for increased efficiency of operations and focused, dedicated management as well as eliminating external management fees.
- Stronger Alignment of Interests. The simplified organizational structure creates a stronger alignment of interests among management, the Board, and shareholders. By combining owned brokerages with the Royal LePage and Via Capitale franchise networks, it also empowers the management team to respond to market dynamics more efficiently through its enhanced service offerings.
- Strengthened Franchise Network. With the expansion of business lines to include direct brokerage operations, Bridgemarq is expected to be in a better position to grow its industry-leading national network of REALTORS® and brokers in addition to diversifying its revenue streams.
If consummated, upon closing of the Transaction, the Company intends to effect several key changes to the Board and management team that are anticipated to further increase the operational effectiveness of the business while maintaining continuity of operations:
Lorraine Bell , who has been a valuable member of the Board since 2003, will succeedSpencer Enright as the independent chair of the Board.Spencer Enright , who for the past decade has been the Chief Executive Officer of the Manager, responsible for overall leadership and oversight over operations of the Brokerages, will become Chief Executive Officer of Bridgemarq and continue as a director on the Board.Phil Soper will continue his role in managing all agent and franchise relationships as the President of Bridgemarq.
The Board, acting on the unanimous recommendation of the Special Committee, has unanimously approved the Transaction and recommends that holders of Restricted Voting Shares vote in favour of the Transaction at the special meeting of shareholders to be called to approve the Transaction (the "Shareholder Meeting"). In making its recommendation, the Board considered a number of factors, including among others, the Special Committee's receipt of a fairness opinion from
The Transaction constitutes a "related party transaction" for purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"), however the Company expects to receive exemptive relief from the minority approval and formal valuation requirements of MI 61-101 in accordance with sections 5.5(a) and 5.7(a), respectively, by virtue of the fact that the value of the Transaction is less than 25.0% of the Company's market capitalization.
Under applicable
In addition to shareholder approval, the completion of the Transaction is subject to, among other things, applicable regulatory approvals, including TSX approval, and the satisfaction or waiver of certain other closing conditions customary in transactions of this nature. Subject to the satisfaction of such conditions, the Transaction is expected to close by
A copy of the fairness opinion, and the factors considered by the Special Committee as well as other relevant background information with respect to the Transaction will be included in an information circular (the "Circular") that will be filed with applicable regulatory authorities and mailed to shareholders in accordance with applicable securities laws in advance of the Shareholder Meeting. Bridgemarq expects to mail the Circular in
Blair Franklin is acting as independent financial advisor and
Bridgemarq is a leading provider of services to residential real estate brokers and a network of approximately 21,000 REALTORS®. We operate in
The Company will host a conference call on Monday, December 18, 2023, at 10 a.m. Eastern Daylight Time to discuss the Transaction.
To access the call by telephone, please dial 1-888-664-6383 or 416-764-8650.
To access the call online, please visit https://app.webinar.net/ov52aAQaRBq.
Please connect approximately ten minutes prior to the beginning of the call to ensure participation.
A recording of the conference call will be available in the Investor Centre section of the Company's website by Wednesday, December 20, 2023, where you can also find a copy of the management presentation discussed on the call (the "Presentation").
The Transaction is expected to improve the Company's leverage profile and contribute to higher EBITDA.
($CAD millions) | 2022 Actual | 2022 Pro |
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| |
Debt: EBITDA Ratio | 2.4 | 1.9 | 2.6 | 2.3 | |
EBITDA : Interest Ratio | 9.3 | 12.6 | 8.5 | 9.6 | |
EBITDA | 27.7 | 35.4 | 25.6 | 28.8 |
The pro forma financial information referred to in this press release, which gives effect to the Transaction as if it had closed on
The pro forma financial information has been derived from, and should be read in conjunction with: (i) the audited consolidated financial statements of the Company for the year ended
This news release makes reference to EBITDA, which is a non-GAAP financial measure and does not have any standardized meaning under International Financial Reporting Standards and, accordingly, may not be comparable to similar measures used by other companies. EBITDA is defined as operating income before deducting write-off of intangible assets, depreciation and amortization and interest expense and is a useful supplemental measure of performance as it provides investors an indication of the amount of cash flow generated by the Company (or the Brokerages or the Manager) before considering financing costs, income taxes and other investment and working capital requirements. Please see below for a reconciliation of EBITDA to its most directly comparable financial measure:
($CAD millions) | 2022 Actual | 2022 Pro |
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| ||
Operating Earnings | 17.4 | 18.5 | 15.5 | 12.3 | ||
Depreciation and Amortization | 7.2 | 13.1 | 6.9 | 12.4 | ||
Write-Off of Intangible Assets | 0.1 | 0.2 | 0.2 | 0.2 | ||
Interest Expense | 3.0 | 3.6 | 3.0 | 3.9 | ||
EBITDA | 27.7 | 35.4 | 25.6 | 28.8 | ||
This news release contains forward-looking information and other "forward-looking statements", including, without limitation, statements with respect to the Transaction, including the anticipated benefits of the Transaction; the economic and strategic impact of the Transaction; the expected timeline for mailing the Circular and holding the Shareholder Meeting; the satisfaction of the conditions to closing the Transaction and the timing thereof; and the intended changes to the Company's Board and management team. Words such as "continues", "appear", "until", "may", "expect", "could", "will", "intend" and other expressions that are predictions of or could indicate future events and trends and that do not relate to historical matters identify forward-looking statements.
Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those indicated in the forward-looking statements include: any resurgence of COVID-19 (including any impact of COVID-19 on the economy and the Company's business), changes in the supply or demand of houses for sale in
Brookfield, together with the persons and entities which are directly or indirectly controlled by it, beneficially owns or exercises control or direction over 315,000 Restricted Voting Shares (representing approximately 3.3% of the Restricted Voting Shares on a non-diluted basis and 2.5% of the Restricted Voting Shares on a fully-diluted basis, assuming the exchange of all outstanding Exchangeable Units) and 3,327,667 Exchangeable Units (representing approximately 26.0% of the Restricted Voting Shares on a fully-diluted basis, assuming the exchange of all Exchangeable Units). Such securities, in the aggregate represent approximately 28.4% of the Restricted Voting Shares on a fully-diluted basis, assuming the exchange of all Exchangeable Units.
After taking into account the additional approximately 2,902,854 Exchangeable Units to be issued by the Partnership in consideration for the Transaction (representing approximately 22.7% of the Restricted Voting Shares on a fully-diluted basis, assuming the exchange of all Exchangeable Units), Brookfield will, together with the persons and entities which are directly or indirectly controlled by it, beneficially own or exercise control or direction over, 315,000 Restricted Voting Shares (representing approximately 3.3% of the Restricted Voting Shares on a non-diluted basis and 2.0% of the Restricted Voting Shares on a fully-diluted basis, assuming the exchange of all outstanding Exchangeable Units) and approximately 6,230,521 Exchangeable Units (representing approximately 39.7% of the Restricted Voting Shares on a fully-diluted basis, assuming the exchange of all Exchangeable Units). Such securities, in the aggregate would represent approximately 41.7% of the Restricted Voting Shares on a fully-diluted basis, assuming the exchange of all Exchangeable Units.
The above calculations are based on 9,483,850 Restricted Voting Shares and 3,327,667 Exchangeable Units being issued and outstanding (calculated on a non-diluted basis) immediately prior to the Transaction and 9,483,850 Restricted Voting Shares and 6,230,521 Exchangeable Units being issued and outstanding (calculated on a non-diluted basis) following the Transaction.
Brookfield's direct and indirect holdings of Restricted Voting Shares and Exchangeable Units are being held for investment purposes and such holdings may be increased or decreased as considered appropriate in light of investment criteria, market conditions and other factors and in accordance with the provisions of applicable securities legislation.
This news release is being issued under the early warning provisions of Canadian securities legislation. A copy of the Early Warning Report to be filed by Brookfield in connection with the transactions described above will be available on SEDAR+ (www.sedarplus.ca) under the Company's issuer profile.
The head office of the Company is located at
To obtain a copy of the Early Warning Report filed under National Instrument 62-103, please contact:
| Anne-Elise Cugliari Allegritti Director of Investor Relations info@bridgemarq.com Tel: 647-229-6626
|
SOURCE
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