Canadian alternative equity firm Alaris Royalty Corp has wrapped up its repurchase of units in Labstat International ULC, a Kitchener, Ontario-based analytical laboratory specializing in testing of nicotine-containing products. The repurchase and repayment of debt owed to Alaris by the company resulted from Labstat’s sale this week to U.S. private equity firm Warburg Pincus. No financial terms were released. Alaris, which originally invested in 2012, said it received proceeds of $69.5 million with the exit, a total return on its Labstat units of about $57 million, and an internal rate of return of about 19 percent. Founded in 1976 by Executive Chairman William Rickert, Labstat was before 2012 backed by Huron Capital.
Alaris Royalty Corp. Announces the Closing of the Labstat Repurchase
CALGARY, Alberta, June 25, 2018 (GLOBE NEWSWIRE) — Alaris Royalty Corp. (“Alaris” or the “Corporation”) (TSX:AD) is providing an update regarding the proposed repurchase (the “Labstat Repurchase”) of Alaris’ units (the “Labstat Units”) in Labstat International LP (“Labstat”), which was previously disclosed on May 17, 2018.
Labstat and its affiliates have closed the sale of their business (the “Labstat Sale”) to a third party earlier today. In connection with the Labstat Sale, the Labstat Repurchase and repayment of debt owed to Alaris by Labstat (the “Labstat Debt Repayment”) also closed today, resulting in Alaris receiving gross proceeds of $69.5 million (the “Gross Proceeds”). Alaris achieved a total return on its Labstat Units of approximately $57.0 million, or 121% as well as an internal rate of return (“IRR”) of approximately 19% over the 6 year investment. Such returns are derived by successfully collecting all contractually owed distributions from Labstat over the life of the investment as well as getting a premium above Alaris’ cost of its Labstat Units.
The $69.5 million of Gross Proceeds Alaris received from the Labstat Repurchase and Labstat Debt Repayment consist of the following: (i) $65.5 million for the Labstat Units (Alaris originally paid $47.2 million for the Labstat Units), which is inclusive of a premium of $4.3 million in respect of previously unpaid distributions (the “Unpaid Distributions”); and (ii) $4.0 million of proceeds from the Labstat Debt Repayment representing the repayment of $3.7 million of principal and $0.3 million of accrued interest owing on a loan agreement Alaris had with Labstat. Alaris had previously not assigned any value on its balance sheet to the collection of the $4.3 million of Unpaid Distributions therefore it will result in an increase to book value following the Labstat Repurchase for the Q2 period ending June 30, 2018.
“Labstat has been extremely fortunate to have had Alaris as a partner through interesting times; providing both support and advice when needed while giving management full rein to implement decisions,” said William (Bill) Rickert, Founder, Labstat.
The Labstat Gross Proceeds will be used to reduce Alaris’ debt outstanding leaving the Corporation with approximately $82.0 million drawn at June 25, 2018 and approximately $218.0 million available to use for investment purposes. The after tax impact of the Labstat Repurchase on Alaris’ net cash from operations is a net reduction of approximately $0.09 per share after accounting for the decrease in distributions from Labstat as well as the interest savings through debt reduction.
ABOUT THE CORPORATION:
Alaris provides alternative financing to the Partners in exchange for distributions with the principal objective of generating stable and predictable cash flows for dividend payments to its shareholders. 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.
For further information please contact:
Vice President, Investments and Investor Relations
Alaris Royalty Corp.
P: (403) 221-7305