This news was posted this morning by TD AMERITRADE under BIHC. Any one know what the relationship would be with BIHC?
TIA
JT
Prime Restaurants Royalty Income Fund Announces Agreement in Principle to Combine With Prime Restaurants of Canada Inc. and PRC Trademarks Inc. and Convert to a Corporation
9:45a ET February 16, 2010 (Market Wire)
Prime Restaurants Royalty Income Fund (TSX: EAT.UN) (the "Fund") announced today that the Fund has reached an agreement in principle with Prime Restaurants of Canada Inc. ("PRC"), PRC's sole shareholder, Prime Restaurant Holdings Inc. ("PRH") and PRC Trademarks Inc. ("TradeMarkCo") regarding the principal terms of a proposed transaction (the "Combination Transaction") to combine and form a new, publicly-traded corporation to be named Prime Restaurants Inc. ("Amalco").
PRC also announced that an operational restructuring plan designed to improve its business of operating and franchising restaurants is being implemented.
Under the existing structure, TradeMarkCo receives licensing royalties generated by the Prime Restaurants. The Combination Transaction will consolidate ownership of the intellectual property for the Prime Restaurants (which is currently owned by TradeMarkCo) and the franchising business currently operated by PRC. The conversion to a corporation in conjunction with the Combination Transaction will also provide certainty to the unitholders of the Fund ("Unitholders") with respect to the 2011 effective date of tax legislation affecting income trusts and will simplify the structure of the combined business.
"We believe our unitholders will benefit from the combination of the Prime Restaurants and the related intellectual property, together with an early conversion to a corporation" said Steven Sharpe, Chairman of the Fund. "The combination will enable investors to more easily value our operations, our brands and our growth potential. The trustees of the Fund and the principals and management team at PRC believe that the interests of all parties are best served by a corporate structure that provides greater transparency, oversight of the operating business and access to financing. The proposed combination will result in a corporate structure that provides enhanced accountability to investors, and a more direct correlation between the performance of the operating business and the results and prospects of the public company. Under the proposed new structure, the current 'vend-in' formula for new restaurant additions to the royalty pool will be eliminated and the benefits of growth in the Prime Restaurant system will accrue to all investors. In conjunction with the operational restructuring well under way at Prime, we believe the future is bright for the combined businesses."
Principal Terms of the Proposed Combination Transaction
The new entity, Amalco, will be the result of the combination of PRC and TradeMarkCo. The Fund will be dissolved as part of the transaction and Unitholders will receive shares in Amalco. The definitive terms of the transaction are to be reflected in a combination agreement to be negotiated among the parties.
PRC has been in default of its royalty payment obligations under the license and royalty agreement between PRC and TradeMarkCo since October 2009, which resulted in a reduction of monthly distributions to Unitholders. The Combination Transaction will include the resolution of this default and all deferred amounts under current arrangements between the parties.
PRH's current indirect fully-diluted interest in the Fund (after the exercise of certain exchange rights by PRC) is approximately 36.7%. Amalco will have three classes of shares: (i) a class that is planned to be listed on the TSX and which will be held by PRH and the Unitholders (the "Public Shares"), (ii) a class held by PRH only and convertible into Public Shares if certain financial targets are met (the "B Shares") and (iii) a class held by PRH only, that is non-voting and non-participating and which is also convertible into the Public Shares if certain financial targets are met (the "C Shares"). Immediately after the completion of the Combination Transaction, PRH's interest in Amalco will be approximately 25% of the shares outstanding at closing (prior to factoring in the C Shares) and PRH will own approximately 7% of the Public Shares. The agreement in principle provides that PRH may convert its B Shares and C Shares into Public Shares if certain financial targets are met by Amalco (in whole or in part) over the next three to five years. If the financial targets are met in full by Amalco, PRH's interest in Amalco could grow to as much as 30% (taking into consideration the possible conversion of the C Shares). If the financial targets are not met, PRH's interest in Amalco could drop to as low as 23% of the shares outstanding. Immediately after the completion of the Combination Transaction, Unitholders of the Fund other than PRC will receive Public Shares, representing approximately 75% of shares outstanding on closing (prior to factoring in the C Shares) and approximately 93% of the Public Shares. All of the foregoing percentages are calculated prior to the implementation of a long-term incentive plan for employees and directors of Amalco which will have a dilutive effect on all shareholders.
Highlights of Operational Restructuring
PRC operates and franchises casual dining restaurants and premium pubs. In response the challenging economic conditions facing its corporate and franchised restaurants and pubs, PRC has implemented a restructuring plan designed to improve operations and financial results. The highlights of the operational restructuring include:
1. reductions to office overhead and expenses;
2. centralizing brand management and key support services for all brands,
resulting in a unified operating methodology and processes; and
3. introduction of key internal and external operating metrics, focusing on
restaurant audits, mystery shoppers and web-based guest feedback.
Distributions
In anticipation of the Combination Transaction, the Fund also announced today that monthly distributions to Unitholders are expected to remain at $0.04 per Unit effective until the distribution payable in April 2010 to Unitholders of record on March 31, 2010.
If the Arrangement receives all necessary approvals and is implemented, it is anticipated that Amalco will adopt a dividend policy to pay dividends on a quarterly basis on the Public Shares. It is currently anticipated that the amount of such quarterly dividend will initially be $0.12 per Public Share. The dividend policy will be subject to the discretion of the board of directors of Amalco and may vary depending on, among other things, Amalco's operating cash flow, financial requirements, restrictions under future credit facilities, the satisfaction of solvency tests imposed by the corporate legislation for the declaration of dividends and other conditions existing at such future time. As a result, no assurance can be given as to whether Amalco will pay dividends, or the frequency or amount of any such dividend.
Board of Directors and Management Team
The initial directors of Amalco will be Steven Sharpe, Paul Haggis and Michael Aronovici, current trustees of Prime, as well as John Rothschild and Sidney Horn, both of whom are currently directors of PRC and TradeMarkCo. Messrs. Sharpe, Haggis and Aronovici will all be independent directors of Amalco. Mr. Rothschild, currently the Chief Executive Officer of PRC, will be Chief Executive Officer of Amalco. The current management team at PRC will move to Amalco and continue to guide operations.
Approvals and Closing of the Transaction
Additional details of the Combination Transaction will be announced by way of news release and filings on SEDAR (www.sedar.com) in the coming weeks. The Combination Transaction will be implemented through a plan of arrangement. Prime expects to mail an information circular to Unitholders in respect of the Combination Transaction and other business in early March 2010. The Unitholder vote in respect of the Combination Transaction will take place at the Annual and Special Meeting of the Fund, which is currently scheduled to be held on March 30, 2010. The record date for determining Unitholders entitled to vote on the Combination Transaction is expected to be February 26, 2010. The Combination Transaction is subject to, among other customary conditions, execution of definitive agreements and other required documentation, receipt by the trustees of the Fund of a satisfactory formal valuation and fairness opinion, approval by the Ontario Superior Court of Justice of the plan of arrangement by which the transaction will be implemented and a positive vote in favour of the Combination Transaction by the holders of at least 66 2/3% of Prime's voting units represented at the meeting (including a majority of the voting units held by disinterested Unitholders). If approved, the Combination Transaction is scheduled to close on or about April 5, 2010.
The trustees of the Fund have engaged Capital Canada Limited to prepare a formal valuation of PRC and the Fund as well as a fairness opinion on the Combination Transaction.
The Combination Transaction and listing of the Public Shares of Amalco are subject to all necessary regulatory approvals, including approval of the TSX.
About Prime Restaurants Royalty Income Fund
The Fund, through TradeMarkCo, is entitled to receive top-line royalties of 3.25% of the gross food and beverage revenue from pooled restaurants under the terms of a 99-year licence agreement between TradeMarkCo and PRC.
About PRC and the Fund
PRC operates and franchises a diversified portfolio of leading brands of casual dining restaurants and premium pubs in Canada. As a pioneer in the Canadian casual dining industry since 1980, it is considered an important innovator in the development of strong brands, and today has three core brands: East Side Mario's, Casey's and Fionn MacCool's. PRC and its franchisees employ over 12,000 people across the country.
The Fund is a limited purpose trust authorised to issue an unlimited number of Trust Units and established to invest in TradeMarkCo. The source of revenue for the Fund is through its ownership in, and debt instrument issued by, TradeMarkCo. The Fund receives interest income on the TradeMarkCo Note which it distributes to its Unitholders. TradeMarkCo owns certain trade-marks and licenses their use to PRC which operates and franchises the restaurant and bar business. In return, TradeMarkCo receives royalty income from the royalty pooled restaurants operated and franchised by PRC. Additional information relating to the Fund, including the Fund's financial statements, the Annual Information Form of the Fund and PRC's MD&A and consolidated financial statements can be found at www.sedar.com and the Fund's website at www.primeincomefund.ca
