Alaris Equity Partners has exited Federal Resources, a Stevensville, Maryland-based provider of solutions for military personnel and first responders that was acquired by Noble. The exit generated total proceeds of $80.9 million (C$101.9 million). Alaris, a Canadian alternative equity firm, initially invested in 2015.
CALGARY, Alberta, Oct. 26, 2021 (GLOBE NEWSWIRE) — Alaris Equity Partners Income Trust (the “Trust” or “Alaris”) (TSX: AD.UN) is pleased to announce the redemption of Federal Resources (“FR”) in connection with a sale (the “FR Sale”) of FR to a third party (the “Third Party”). The FR Sale closed on October 26, 2021 and resulted in the redemption (the “FR Redemption”) of all of Alaris’ FR Units and repayment of Alaris’ outstanding loan for total proceeds of US$80.9 million (CA$101.9 million).
Alaris’ total return on its FR investment was US$75.7 million or 113% (“FR Return”) which represents an unlevered IRR of over 19% during the six-year partnership. The FR Return was generated by collecting over US$61.7 million of distributions and interest payments from FR since Alaris’ initial investment in June 2015 as well as the US$80.9 million of redemption proceeds which represents a US$13.9 million (20.7%) increase over our invested capital of US$67.0 million.
“We couldn’t be more proud of our six-year partnership with FR. They have a first-class management team that has been a pleasure to deal with throughout the lifetime of our investment. The owners of FR realized a materially better result on the FR Sale using Alaris’ preferred equity structure rather than traditional private equity, as the business experienced exceptional growth that exceeded the 6% collar on Alaris distributions in most of those six years,” said Steve King, President & CEO, Alaris. “This was also a very important transaction for Alaris in funding our continuing growth initiatives. We had been anticipating this redemption for some time and had funded our growth over the last 12 months with more debt than what we would typically hold. Today’s transaction puts us in an excellent position to accretively deploy more capital into new and current partners.”
“Alaris was the perfect partner for FR during a period of rapid growth and expansion. Alaris’ investment allowed FR to control its own destiny, providing incredible flexibility for the owners and officers to run the business while always being accessible for collaboration. Even though FR is turning the page to the next chapter in our nearly 35-year history, the redemption of Alaris is truly a bittersweet moment, as we will fondly recall the friendships we made and the partnership we enjoyed with Alaris over the past 6 years,” said Larry Gwaltney, CEO, Federal Resources.
After today’s announcements, Alaris will have approximately CA$260 million drawn on its senior credit facility (the “Facility”) and CA$140 million available for investment purposes while the total senior debt to EBITDA on a proforma basis is approximately 2.0x. Alaris estimates its Run Rate Payout Ratio to be between 65% and 70% following the FR Redemption.
The Trust, through its subsidiaries, indirectly provides alternative financing to private companies (“Partners”) in exchange for distributions with the principal objective of generating stable and predictable cash flows for payment of distributions to unitholders of the Trust. Distributions from the Partners are adjusted each year based on the percentage change of a “top line” financial performance measure such as gross margin and same-store sales and rank in priority to the owners’ common equity position.