Proceeds of $47 Million will be Redeployed to Reduce Debt
TSX Symbol: SQP
MISSISSAUGA, ON, May 20, 2014 /CNW/ - Strongco Corporation (TSX:SQP) announced today its plans to monetize several real estate holdings through sale and leaseback transactions, in line with the company's strategy of not committing capital to real estate assets over the long term. The anticipated gross proceeds from these transactions will be approximately $47 million, which will be used by Strongco to reduce debt.
The proposed transactions involve three different purchasers and five properties. Separate Purchase and Sale agreements have been signed for the two recently constructed branches in Fort McMurray, Alberta and Saint Augustin-de-Desmaures, Quebec. The Quebec agreement also includes branches in Val D'Or and Moncton, New Brunswick. A Letter of Intent with a third purchaser has been agreed to for the sale and leaseback of Strongco's main branch and head office in Mississauga, Ontario. All proposed transactions are subject to due diligence and normal commercial conditions. It is anticipated that the Fort McMurray and the Mississauga transactions may be completed by June 30 and the remaining transaction by July 31, 2014.
"As with the sale and leaseback of our Acheson, Alberta facility last year, it has always been our strategic intent to sell the new branches we built and not tie up capital in real estate," said Bob Dryburgh, President and Chief Executive Officer of Strongco. "With respect to the other existing branches, market values have increased substantially and we believe this is an opportune time to crystallize those gains and deploy the capital more efficiently in the business."
The properties in Mississauga, Val D'Or and Moncton have been owned by Strongco for some time, and the current market value of these properties substantially exceeds the carrying value. An overall profit of approximately $9 million, before taxes, is anticipated.
"A key focus for management is to improve Strongco's debt by reducing operating inventory levels," added Dryburgh. "The real estate transactions announced today further management's goal to strengthen the company's balance sheet and efficiently deploy capital."
About Strongco Corporation
Strongco Corporation is a major multiline mobile equipment dealer with operations across Canada and in the United States, operating through Chadwick-BaRoss, Inc. Strongco sells, rents and services equipment used in diverse sectors such as construction, infrastructure, mining, oil and gas, utilities, municipalities, waste management and forestry. The Company has approximately 750 employees serving customers from 27 branches in Canada and five in the United States. Strongco represents leading equipment manufacturers with globally recognized brands, including Volvo Construction Equipment, Case Construction, Manitowoc Crane, including National and Grove, Terex Cedarapids, Terex Finlay, Ponsse, Fassi, Allied Construction, Taylor, ESCO, Dressta, Sennebogen, Jekko, Takeuchi, Link-Belt and Kawasaki. Strongco is listed on the Toronto Stock Exchange under the symbol SQP.
This news release contains "forward-looking" statements within the meaning of applicable securities legislation which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Strongco or industry results, to be materially different from any future results, events, expectations, performance or achievements expressed or implied by such forward-looking statements. All such forward-looking statements are made pursuant to the "safe harbour" provisions of applicable Canadian securities legislation. Forward-looking statements typically contain words or phrases such as "may", "outlook", "objective", "intend", "estimate", "anticipate", "should", "could", "would", "will", "expect", "believe", "plan" and other similar terminology suggesting future outcomes or events. This news release contains forward-looking statements relating to the expected trading of common shares of Strongco on the TSX, and such statements are based upon the expectations of management.
SOURCE: Strongco Corporation