Avante Logixx Inc, a Toronto-based provider of high-end security services, has secured up to $18 million from Fairfax Financial in a private placement. Also, Avante has agreed to acquire Milton, Ontario-based ASAP, a provider of physical security services, for $10.5 million. Canaccord Genuity Corp. acted as financial adviser to Avante on the private placement.
TORONTO, Nov. 14, 2019 (GLOBE NEWSWIRE) — Avante Logixx Inc. (TSXV: XX) (“Avante” or the “Company”) is pleased to announce that it has entered into an agreement dated November 13, 2019, pursuant to which Fairfax Financial Holdings Limited (“Fairfax”), through certain of its subsidiaries (collectively, the “Purchasers”), will invest up to CAD $18 million in the Company through a private placement of unsecured convertible debentures (the “Debentures”). Avante is also pleased to announce that it has entered into a definitive share purchase agreement dated November 13, 2019, (the “Agreement”) to acquire all of the outstanding shares of A.S.A.P. Secured Inc. (“ASAP”), subject to the fulfillment or waiver of certain closing conditions.
New convertible debenture facility providing up to $18.0 million from Fairfax convertible into common shares of the Company (the “Common Shares”)
Acquisition of ASAP for $10.5 million (subject to adjustment) adding approximately $24.7 million in Trailing Twelve Month (“TTM”) August 31, 2019 revenue at approximately a 7% Normalized EBITDA margin
Pro Forma June 30, 2019, TTM revenues of approximately $70.0 million (including ASAP), an increase of approximately 200%
Avante will report Q2 F20 financials after hours on November 21, 2019, followed by a conference call on Friday, November 22, 2019 at 8:30 AM EST
The Debentures will be advanced in two tranches, the first (the “First Tranche”) to consist of 8,264 Debentures (for gross proceeds of approximately $8,264,000) is expected to be drawn and advanced on November 27, 2019 (the “First Tranche Closing Date”), subject to approval from the TSX Venture Exchange, and the second to consist of up to 9,736 Debentures (for gross proceeds of approximately $9,736,000) drawn and advanced within nine months of the First Tranche Closing Date at the Company’s discretion. The second tranche, to be drawn at the Company’s option, will only be funded upon, among other things, receipt of necessary approvals from the TSX Venture Exchange and the Company’s shareholders (including approval for the creation of a Control Person (as defined in the policies of the TSX Venture Exchange)).
“We are excited to announce Fairfax as a long term strategic financial partner, allowing Avante access to capital while maximizing shareholder value,” said Craig Campbell, CEO of Avante. “The patient and long term view of Fairfax, coupled with their disciplined investment style is well aligned to our strategic plan of building a world-class, globally relevant security solutions provider. Fairfax and Mr. Prem Watsa are disciplined investors and aim to achieve a high rate of return on invested capital and build long term shareholder value. Fairfax and Mr. Watsa’s track record speaks for itself having achieved an 18.7% compounded annual growth rate in book value per share since 1985.”
The Debentures will mature five years from the date of issuance thereof, bear interest at a rate of 7% per annum, payable semi-annually in equal instalments on the last day of June and December in each year. Each $1,000 principal amount of the Debentures issued under the First Tranche is convertible, at the option of the holder, into Common Shares at any time prior to the maturity date at a conversion price of $1.56.
The Debentures are direct, unsecured obligations of the Company, ranking subordinate to certain senior indebtedness. The Debentures will include customary provisions, including customary anti-dilution provisions and negative covenants, including restrictions on the ability of the Company and its subsidiaries to incur certain indebtedness or liens. The Company’s obligations pursuant to the Debentures are guaranteed by each of the Company’s wholly-owned subsidiaries.
The Purchasers will have certain participation rights in future equity offerings to maintain its pro-rata ownership interest in the Common Shares at the time of such offering (the “Participation Right”). In addition, upon such time as Fairfax and its subsidiaries beneficially own more than 10% of the outstanding Common Shares, the Purchasers will have the right to specify an individual to be nominated to the board of directors of the Company.
Assuming the exercise of all of the Debentures issued on the First Tranche, Fairfax, through its subsidiaries, would beneficially own or control 5,297,434 of the issued and outstanding Common Shares, representing approximately 19.99% of all issued and outstanding Common Shares after the conversion of the Debentures issued under the First Tranche (assuming no other issuances of Common Shares or any adjustments to the Common Shares issuable pursuant to the applicable anti-dilution provisions).
The Company intends to use the net proceeds of the First Tranche for the purpose of financing the acquisition of ASAP. If the Company proceeds with the second tranche, it intends to use the proceeds thereof for general corporate purposes, including for the purpose of acquisition financing.
Canaccord Genuity Corp. acted as financial advisor to the Company in connection with the private placement of the Debentures and will be paid an advisory fee of $100,000.
Fairfax Early Warning Disclosure
Prior to the acquisition of the Debentures, Fairfax and its subsidiaries do not beneficially own or control any Common Shares. The Debentures are being acquired by Fairfax for investment purposes, and in the future, it may discuss with management and/or the board of directors any of the transactions listed in clauses (a) to (k) of item 5 of Form F1 of National Instrument 62-103 –The Early Warning System and Related Take-over Bid and Insider Reporting Issues and it may further purchase, hold, vote, trade, dispose or otherwise deal in the securities of the Company, in such manner as it deems advisable to benefit from changes in market prices of Company securities, publicly disclosed changes in the operations of the Company, its business strategy or prospects or from a material transaction of the Company.
An early warning report will be filed by Fairfax in accordance with applicable securities laws and will be available on SEDAR at www.sedar.com or may be obtained directly from Fairfax upon request at 416-367-4941 (Attention: John Varnell) or at Fairfax Financial Holdings Limited, 95 Wellington Street West, Suite 800, Toronto, Ontario M5J 2N7.
Acquisition of ASAP
The Company has entered into the Agreement to acquire the outstanding shares of ASAP from AFIMAC Canada Inc. (“AFIMAC”) and Dalton First Financial Inc. (“DFF”), subject to certain closing conditions. ASAP and Darrell Parsons, the Chairman and controlling shareholder of DFF and AFIMAC, are also parties to the Agreement.
“I am very pleased to welcome ASAP and its team to Logixx Security Inc. (“Logixx”), a platform company of Avante Logixx,” said Craig Campbell, CEO of Avante. “This acquisition is strategic to achieving our overall vision and provides us a national platform to target large, national accounts where security is mission-critical. The integration of ASAP into Logixx gives Avante pro-forma trailing twelve-month revenue of approximately $70 million and the ability to compete on a national level. ASAP’s management team will also be joining us, including the President, Han Koren. Han is a seasoned veteran in the security industry. Han has global experience as well as experience leading the Canadian operations of a global security group. Han is expected to lead Logixx once ASAP has been fully integrated. We are confident that ASAP will be a great addition to the Avante platform as we continue to execute on our strategic vision.”
ASAP is a national provider of physical security services, based in Milton, Ontario, with a focus on industrial and national account security solutions. ASAP has operations across the country and is licensed in eight provinces, allowing Logixx to leverage its current customer base to provide services nationally. ASAP has been an industry leader since 2005 and employs approximately 800 team members across the country. ASAP generated total revenue of approximately $24.7 million in the past twelve months for the period ending August 31, 2019, and realized a normalized EBITDA margin of approximately 7%.
“Over the course of several years, ASAP has built a strong foundation of superior client service providing high-quality security support,” said Darrell Parsons, Chairman and Founder. “We are more than confident that Avante Logixx will continue to support ASAP clients with the same impeccable service.”
“We celebrate an important milestone today for ASAP as we formally join the Avante Logixx team,” said Han Koren, President of ASAP. “United under the Avante umbrella, we will draw on our years of experience and continue to deliver outstanding security solutions to our customers, changing how the industry does business, and continue to grow our business.”
“The combined operations have a large and diversified client base that represents a tremendous opportunity for revenue synergies, as a result of a broader set of services and solutions to offer coupled with our increased geographic capability” said Craig Campbell. “We intend to migrate many of our existing customers and new prospects into our managed services division, thereby migrating single service customers into multiservice bundles. A number of cost synergies will also be achieved in the first 12 months.”
Pursuant to the Agreement, the total consideration to be paid by Avante to purchase all of the issued and outstanding shares of ASAP is $10,500,000 (subject to a post-closing working capital adjustment and holdback in accordance with the Agreement) on a cash free and debt free basis. The Company will use a mix of cash on hand, a promissory note in favour of DFF and AFIMAC, and proceeds from its Debenture financing to fund the acquisition.
The transaction is expected to close on or about December 1, 2019, subject to the fulfilment or waiver of certain closing conditions customary for a transaction of this nature.
No advisory fees are payable or to be paid by the Company in connection with the acquisition of ASAP.
Quarterly Financial Release
The Company will release financial results for the period ended September 30, 2019, after hours on Thursday November 21, 2019, and a news release to be disseminated at that time with an earnings call to be held at 8:30 AM EST on Friday, November 22, 2019.
Dial in details are as follows:
Local: (+1) 416-764-8658 Toll Free: (+1) 888-886-7786 Conference ID: 94859484
Playback details below, available until December 16, 2019:
Local: (+1) 416-764-8692 Toll Free: (+1) 877-674-7070 Playback Pin: 859484 #
This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities described herein in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. This news release does not constitute an offer of securities for sale in the United States. The securities described herein have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and such securities may not be offered or sold within the United States absent registration under U.S. federal and state securities laws or an applicable exemption from such U.S. registration requirements.
About Avante Logixx Inc.
Avante Logixx Inc. (TSXV: XX) is a Toronto based provider of high-end security services. We acquire, manage, and build industry-leading businesses that provide specialized, mission-critical solutions that address the needs of our customers. Our businesses continuously develop innovative solutions that enable our customers to achieve their objectives. With an experienced team and a proven track record of solid growth, we are taking steps to establish a broad portfolio of security businesses to provide our customers and shareholders with exceptional returns. Please visit our website at www.avantelogixx.com and consider joining our investor email list.
About Fairfax Financial Holdings Limited
Fairfax Financial Holdings Limited (TSX: FFH and FFH.U) is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and the associated investment management. For further information about Fairfax, please contact: John Varnell, Vice President, Corporate Development at (416) 367-4941.