Enercare Inc (TSX: ECI) has closed its acquisition of Service Experts, a heating, ventilating, and air conditioning (HVAC) services and repairs specialist based in Dallas, Texas. The deal, which was announced in March, had a US$340.75 million value. U.S. private equity firm American Capital, which sold Service Experts to Enercare, said in a separate statement that it received US$244 million in proceeds, and realized 18 times its investment in the company. Toronto-based Enercare is a home and commercial services and energy solutions provider.
Enercare Completes Acquisition of Service Experts
TORONTO, ON–(Marketwired – May 11, 2016) –
Enercare Inc. (“Enercare”) (TSX: ECI) and its wholly-owned subsidiary, Enercare Solutions Inc. (“Enercare Solutions” and with Enercare, the “Company”), one of Canada’s largest home and commercial services and energy solutions companies, announced today that Enercare Solutions has completed its previously announced acquisition of SEHAC Holdings Corporation (“Service Experts”) (the “Transaction”). The Transaction was completed by way of a merger of an indirect wholly-owned subsidiary of Enercare Solutions with Service Experts.
“This is a defining acquisition for Enercare,” said John Macdonald, President and Chief Executive Officer of the Company. “North American expansion has been part of our strategic roadmap and is a natural extension to our business. Through Service Experts we emerge as a North American market leader, creating new opportunities for growth and broadening our scope from Canada to North America while driving considerable incremental value for shareholders. In 2016, we expect the acquisition of Service Experts to be 25% accretive to Normalized pro forma Distributable Cash per common share.1”
The purchase price for the Transaction was approximately US$340.75 million, excluding transaction costs, and subject to customary working capital and other adjustments. The Transaction was financed through a combination of debt and equity, including approximately US$200 million from debt facilities entered into in connection with the Transaction and a portion of the net proceeds of Enercare’s recent bought deal offering (the “Offering”) of subscription receipts (the “Subscription Receipts”).
In accordance with the terms of the agreement pursuant to which the Subscription Receipts were issued, each outstanding Subscription Receipt will be exchanged today for one common share in Enercare (the “Shares”), resulting in the issuance of 15,834,600 Shares (including 109,000 Shares to be issued to certain U.S. persons, including the Chief Executive Officer and certain other officers of Service Experts in exchange for the Subscription Receipts issued to them on a private placement basis at the same price as in the Offering (the “Concurrent Private Placement”)) and a cash payment equal to $0.14 per Subscription Receipt. The cash payment is equal to the aggregate amount of dividends per Share for which record dates occurred since the issuance of the Subscription Receipts, less any withholding taxes, if any. The Shares to be issued in exchange for the Subscription Receipts issued in the Concurrent Private Placement will be subject to a contractual hold period of six months from closing of the Offering.
Trading in the Subscription Receipts has been halted on the Toronto Stock Exchange (“TSX”) and Enercare expects that the Subscription Receipts will be delisted from the TSX after the close of markets today and that the Shares issued in exchange for the Subscription Receipts issued in the Offering will immediately commence trading on the TSX.
Enercare Solutions’ debt facilities with National Bank of Canada and The Toronto-Dominion Bank are comprised of two 4-year non-revolving, non-amortizing variable rate term credit facilities in the aggregate amount of US$200 million, which have been fully drawn for the purpose of financing the Transaction.
Cautionary Note Regarding Forward-Looking Statements
This news release contains forward-looking information within the meaning of applicable Canadian securities laws (“forward-looking statements”). Statements other than statements of historical fact contained in this news release may be forward-looking statements, including, without limitation, management’s expectations, intentions and beliefs concerning anticipated future events, results, circumstances, economic performance or expectations with respect to the Company, including the Company’s business operations, business strategy, financial condition and the statement that the Transaction is expected to be immediately accretive to 2016 Normalized pro forma Distributable Cash per common share.
Although forward-looking statements contained in this news release are based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Accordingly, readers should not place undue reliance on such forward-looking statements and assumptions as management cannot provide assurance that actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company. These forward-looking statements are subject to a number of risks and uncertainties including those described in Enercare’s management’s discussion and analysis for the year ended December 31, 2015 and its current annual information form. These forward-looking statements are subject to change as a result of new information, future events or other circumstances in which case they will only be updated by the Company where required by law. These forward-looking statements speak as of the date of this news release.
About the Company
Enercare is headquartered in Toronto, Ontario and publicly traded on the TSX (TSX: ECI). As one of Canada’s largest home and commercial services and energy solutions companies with approximately 1,000 employees, the Company provides water heaters, furnaces, air conditioners and other HVAC rental products, plumbing services, protection plans and related services to more than 1.2 million customers. Enercare is also the largest non-utility sub-meter provider, with electricity, water, thermal and gas metering contracts for condominium and apartment suites in Ontario, Alberta and elsewhere in Canada, and through its Triacta division, a premier designer and manufacturer of advanced sub-meters and sub-metering solutions.
For more information on Enercare visit www.enercare.ca. Additional information regarding Enercare and Enercare Solutions is available on SEDAR at www.sedar.com or through Enercare’s investor relations website at www.enercareinc.com or www.enercare.ca.
About Service Experts
Founded in 1996, Service Experts is a leading provider of HVAC repair, maintenance, new equipment sales and related services to residential and commercial customers in 29 states in the United States and three provinces in Canada. Headquartered in Dallas, Texas, Service Experts is one of North America’s largest heating and air conditioning companies, with 90 locations, 41 of which are located in the top 100 U.S. metropolitan areas, and approximately 2,800 employees serving approximately 2,000 homes and businesses, on average, each working day. The segments of the market served by Service Experts include: residential HVAC service and replacement; ancillary residential home services, including plumbing, indoor air quality and energy audits; commercial HVAC service, maintenance and replacement for both light commercial customers and national accounts; and HVAC installation in commercial and residential new construction.
For more information on Service Experts visit www.serviceexperts.com or www.serviceexperts.ca.
1 Excludes transaction costs and potential synergies in the Transaction and has been normalized by $19 million for 2015 and 2016 to account for timing differences in taxes paid related to the October 2014 acquisition by the Company of the Ontario home and small commercial services business of Direct Energy Marketing Limited. Normalized pro forma Distributable Cash per common share is a non-IFRS measure. Refer to the Non-IFRS Financial and Performance Measures section in Enercare’s management’s discussion and analysis for the year ended December 31, 2015.
For further information, please contact:
Chief Financial Officer
Photo courtesy of Service Experts