Uni-Select Inc. has announced the completion of a private placement offering of C$125 million principal amount of convertible senior subordinated unsecured debentures and the conclusion of its strategic review.
Birch Hill Equity Partners Management Inc., as shareholder and lead investor in the offering, subscribed for C$75 million principal amount of Debentures. The remaining C$50 million was purchased by institutional investors following a private marketing approach.
“With this investment, a group which includes some of our largest shareholders are demonstrating their confidence in our team, our strategy, and the direction we’re taking to drive long-term value, as we continue to yield tangible cost savings and sustainable profitability improvement from our Performance Improvement Plan,” said Brent Windom, President and Chief Executive Officer of Uni-Select Inc. and President and Chief Operating Officer, Canadian Automotive Group.
Uni-Select intends to use the net proceeds from the Offering to reduce borrowings under its senior debt credit facility and to pursue strategic growth opportunities and cost reduction initiatives.
RBC Capital Markets and BMO Capital Markets acted as co-agents and bookrunners on the Offering and National Bank Financial Markets acted as financial advisor to Birch Hill.
Conclusion of the Strategic Review Process
In September 2018, the Uni-Select announced that its Board of Directors had formed a Special Committee of independent members of the Board to oversee a review of strategic alternatives with the goal of maximizing value for shareholders.
Through this process, which included the review and evaluation of a number of alternatives, the Board has determined that modifying the capital structure with this financing and positioning the corporation to pursue identified growth opportunities and cost reduction initiatives is the best alternative for maximizing value for shareholders.
Convertible Debentures Financing Details
The Debentures are being offered at a price of C$1,000 per C$1,000 principal amount of Debenture and will bear interest at a rate of 6.0% per annum, payable semi-annually in arrears on June 18 and December 18 commencing on June 18, 2020. The Debentures will mature on December 18, 2026 and will be convertible at the holder’s option into common shares of the Corporation (“Common Shares”) at a conversion price of C$13.57 per Common Share (the “Conversion Price”), representing a conversion rate of 73.69 Common Shares per C$1,000 principal amount of Debentures.
Uni-Select has granted Birch Hill certain governance rights in connection with its investment, including the right to designate two nominees on the board of directors, a pre-emptive right to maintain its pro rata ownership, and customary registration rights.
Appointment of Directors
Uni-Select is pleased to announce the appointment of David G. Samuel and Matthew B. Kunica as directors of the Corporation effective January 1, 2020.
Samuel joined Birch Hill in 2005. He is Chairman of Groupe Distinction Inc. and serves on the boards of directors of Cozzini Bros, Inc. and Softchoice Corp. Prior to joining Birch Hill, Mr. Samuel had over 15 years of experience in private equity, operations, consulting and investment banking. Mr. Samuel’s experience includes serving as President, Rogers Cable (High Speed Internet Access) and working at McKinsey & Company and Morgan Stanley.
Kunica joined Birch Hill in 2003 and currently serves on the Boards of CCM Hockey, HomeEquity Bank and Bio Agri Mix. He has played a key role in Birch Hill’s investments in a diverse cross section of companies. Prior to joining Birch Hill, Mr. Kunica worked in the investment banking groups of both Credit Suisse First Boston and BMO Nesbitt Burns in Toronto.
Effective January 1, 2020, the Board of Directors of the Corporation will be composed of nine members and one vacancy which is expected to be used to add a new member and increase diversity before the next annual shareholder meeting.
“I wish to take this opportunity to thank David Bibby, Jeff Hall, George Heath, Dennis Welvaert and Michael Wright for their invaluable contributions to Uni-Select,” said Michelle Cormier, Chair of the Board of the Corporation. They will be leaving the Board effective January 1, 2020.
Impairment Loss on a Portion of the Goodwill
While Uni-Select is taking meaningful action to confront a series of headwinds in Europe, due to market softness and uncertainties surrounding Brexit, the corporation reports that it will be recording a non-recurring, non-cash goodwill impairment charge between US$45 million and US$50 million, related to a portion of the goodwill of its operations in the U.K. This impairment will be reflected in the Corporation’s upcoming Q4 and year-end financial statements