CALGARY, Sept. 27, 2016 /CNW/ - Cervus Equipment Corporation ("Cervus" or the "Company") (TSX: CVL) today announced its intention to seek a long term sale and leaseback of approximately $50 to $60 million of real estate currently owned by the Company.
"While the majority of our dealerships are already located in leased premises, there is an opportunity to work with a long term landlord specializing in commercial real estate to capitalize on the value of our dynamic real estate portfolio," said Randy Muth, Chief Financial Officer of Cervus. "This initiative aims to further align Cervus' capital structure with our focus as an outstanding dealer of high-quality equipment brands."
Cervus expects a successful transaction to entail the land and buildings of approximately 10 dealerships with average initial lease terms of 15-20 years. After retiring mortgages associated with the properties, Cervus expects net free cash flow of approximately $25 to $30 million. Cervus considers market capitalization rates to range between 7.5% and 8.0%, which would not be expected to negatively impact earnings per share. In the short term, proceeds from a successful transaction would be used to reduce debt.
Execution of a sale and leaseback agreement remains subject to Cervus and a potential purchaser agreeing to acceptable terms, purchaser financing, purchaser due diligence, approval from Cervus' lending syndicate, and approval from Cervus' Board of Directors, among others. There can be no assurance that a transaction acceptable to Cervus will be obtained, and there can be no assurance that a transaction will be completed as proposed or at all.
About Cervus Equipment Corporation
Cervus acquires and operates authorized agricultural, construction, materials handling and transportation equipment dealerships. The Company has interests in 72 dealerships in Canada, New Zealand, and Australia. The primary equipment brands represented by Cervus include John Deere agricultural equipment; Bobcat and JCB construction equipment; Clark, Sellick and Doosan material handling equipment; and Peterbilt transportation equipment. The common shares of Cervus are listed on the Toronto Stock Exchange and trade under the symbol "CVL".
Forward Looking Information
This press release contains certain forward-looking information ("forward-looking information") within the meaning of applicable Canadian securities laws. In particular, this press release includes forward-looking information relating to the intended sale of certain real estate holdings by Cervus, including anticipated lease-back terms, anticipated net free cash after retiring mortgages, and anticipated impact on earnings per share, and anticipated impact on capital structure. Cervus believes the expectations reflected in such forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking information should not be unduly relied upon. At this time, Cervus is assuming it can reach mutually acceptable sale and leaseback terms for each of the properties with one or more purchasers and that those terms will be within the range of terms currently anticipated by Cervus. However, there can be no guarantee that any conditions precedent to the completion of a successful transaction will be satisfied to the satisfaction of either a purchaser or Cervus and several of those conditions will not be within the control of Cervus (i.e. completion of satisfactory due diligence by a purchaser, and a purchaser's ability to obtain acceptable financing). As such, there can be no assurance that the proposed transaction will be completed as proposed or at all. Further, if a transaction is completed on terms different from those currently contemplated by Cervus, the financial impact on Cervus may be materially different from those stated in this news release. Any forward-looking information is made as of the date hereof and, except as required by law. Cervus assumes no obligation to publicly update or revise such information to reflect new information, subsequent or otherwise.
The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.
SOURCE Cervus Equipment Corporation