Franchise Services of North America Inc. Announces Agreement to Acquire Advantage(R) Rent-A-Car Business
-- Acquisition complements FSNA's existing North America portfolio of 28 airports serviced under the U-Save Car & Truck Rental® brand with the addition of 62 rental locations servicing airports -- Macquarie Capital will fund the transaction in exchange for a 49.76% equity stake -- Purchase of Advantage enables Hertz to complete the acquisition of Dollar Thrifty
CALGARY, Aug. 28, 2012 /CNW/ – FRANCHISE SERVICES OF NORTH AMERICA INC. (“FSNA” or the “Company”) (TSX-V: FSN) today announced that it
entered into an arm’s length agreement on July 13, 2012 to acquire
Simply Wheelz, LLC, a Delaware limited liability company and the
holding company of the Advantage® Rent-A-Car brand (“Advantage”) and
certain other divested assets (together, the “Assets”) from Hertz
Global Holdings, Inc. (NYSE: HTZ). FSNA’s purchase of Advantage
facilitates Hertz’s $2.3 billion announced acquisition of Dollar
Thrifty Automotive Group, Inc. (NYSE: DTG) announced yesterday.
Macquarie Capital provided FSNA a full range of advisory and financing
services including structuring advice and negotiation strategy to
facilitate the acquisition of Advantage, which is currently operated as
an integrated unit under Hertz and shares back office functions. In
addition to providing these services, Macquarie Capital has indirectly
committed $15 million in equity capital in order to fund the total
consideration for the Assets, resulting in Macquarie Capital holding a
49.76% equity stake in FSNA upon completion of the transaction.
FSNA will operate Advantage from 62 rental locations servicing airports
across the United States. This includes certain former Thrifty rental
locations whereby Advantage will now operate from in-terminal
concessions in new markets in the United States. The acquisition
significantly expands upon FSNA’s current leisure car rental presence,
which consists of 28 franchised airport locations operated under the
U-Save Car & Truck Rental® brand globally.
“The acquisition of Advantage is a significant milestone for FSNA as it
marks a major step forward in our growth strategy by considerably
strengthening our position in the U.S. car rental market,” said Sandy
Miller, Co-Chairman and Co-CEO of FSNA. “Advantage is a well-known
brand in the leisure rental car space, and their operations include
prime airport locations, which will complement our existing North
American business. We plan to continue the development of the brand
both domestically and internationally. We welcome the Advantage
employees and their customers and are committed to making this a
seamless transition for all.”
“Expanding our car rental footprint and running multi-branded companies
will help to enhance the underlying value of the company for our
shareholders. We also believe that in many instances, an opportunity
will exist for our franchisees to expand their offerings and this will
mean an incremental opportunity for our insurance divisions,” added Tom
McDonnell, Co-Chairman and Co-CEO of FSNA.
“This transaction demonstrates our commitment to finding innovative
solutions for clients, and we are pleased to partner with FSNA and
Hertz to effectuate a transaction that is strategic for both
companies,” said Robert Bertagna, Global Head of Industrials, Macquarie
Capital. “This exemplifies Macquarie’s client partnership approach
whereby the firm seeks to find solutions to help fulfil client needs,
including strategic advice and a full range of structured capital
“This acquisition represents a significant opportunity in the evolution
of FSNA’s business and we are grateful to be able to partner with
Macquarie Capital, which was critical in enabling the transaction
through a significant commitment of capital and tailored, expert
advice,” added Mr. Miller.
The acquisition will proceed by way of a merger between wholly owned
subsidiaries of the Company and Macquarie Capital (the “Merger”).
Macquarie Capital, through a wholly owned subsidiary, has entered into
a purchase agreement with Hertz for the acquisition (the “Acquisition”)
of the Assets.
The completion of the Acquisition is conditioned upon, among other
things, Hertz completing its acquisition of Dollar Thrifty. In turn,
the completion of the Acquisition is a condition precedent to the
completion of the Merger. The Merger is expected to close in the
fourth quarter and is subject to certain conditions as more fully
described in the appendix to this press release.
All dollar amounts in this press release are in U.S. dollars unless
otherwise specified. More information regarding the Assets and the
transaction can be found in the appendix to this press release.
Trading of the Company’s common shares on the TSX Venture Exchange
(“TSXV”) has been halted pending receipt and review of the applicable
documentation by the TSXV.
Edinger Associates PLLC, Stikeman Elliott LLP and Paul Hastings LLP are
acting as legal advisors to FSNA. Seer Capital Management LP also
assisted as financial advisor to FSNA.
Sidley Austin LLP and Blake, Cassels & Graydon LLP are acting as legal
advisors to Macquarie Capital.
FSNA is a publicly traded company listed on the TSX Venture Exchange.
The Company and its subsidiaries own the following brands: U-Save Car &
Truck Rental®, U-Save Car Sales, Rent-A-Wreck of Canada, PractiCar,
Auto Rental Resource Center (“ARRC”), Xpress Rent A Car and Peakstone
U-Save, together with its subsidiary ARRC, has over 1,100 locations
throughout the United States and is one of North America’s largest
franchise car rental companies. Having primarily serviced the local
market for the past 30 years, the Company is expanding into the airport
market with plans for the opening of airport locations in the top 30
markets in the United States and the major airports in Canada. U-Save
currently services 28 airport markets in 11 different states and 7
countries. U-Save Car Sales is an expansion of the U-Save brand into
the car sales market, and provides goods and services to car sales
operators looking to affiliate with a national brand.
Practicar Systems Inc. (a wholly owned subsidiary of FSNA) owns the
rights to the Rent-A-Wreck® and the PractiCar® trademarks for all of
Canada. The Rent-A-Wreck® system operates a network of 68 franchise
locations from coast-to-coast in Canada, providing a range of vehicle
rental, leasing and sales options to its customers. The Rent-A-Wreck®
system has been in continuous operation in Canada since 1976.
Completion of the Merger will be subject to a number of conditions,
including TSX Venture Exchange acceptance and approval by the Company’s
shareholders. The Merger cannot close until all required approvals are
obtained. There can be no assurance that the Merger will be completed
as proposed, or at all.
Investors are cautioned that, except as disclosed in the circular of
FSNA to be prepared in connection with the Merger, any information
released or received with respect to the Merger may not be accurate or
complete and should not be relied upon. Trading in the securities of
FSNA should be considered highly speculative.
The TSX Venture Exchange has in no way passed upon the merits of the
Merger and has neither approved nor disapproved the contents of this
Certain statements made in this press release which includes the
attached appendix are forward looking in nature, including statements
made with respect to the Merger; the operating results of the combined
businesses; the benefits of the completed transaction to the Company;
the anticipated timing to close the transaction; and other matters. The
words “may,” “could,” “should,” “would,” “expect,” “intend,”
“estimate,” “anticipate,” “believe,” or “outlook” and similar
expressions often identify forward-looking information. By their
nature, forward-looking statements require FSNA to make assumptions and
are subject to inherent risks and uncertainties and other factors that
may cause the actual results, performance or achievements to differ
materially from the anticipated results, performance or achievements
expressed or implied by such forward-looking statements. Such factors
include, but are not limited to, expectations and assumptions
concerning the Merger and the satisfaction of conditions to the
completion of the Merger the parties’ ability to close the transaction
and within the currently anticipated timeline; and the factors and
assumptions discussed in the Company’s Consolidated Financial
Statements for the year ended September 30, 2011 and other documents
filed with certain provincial securities regulators. Readers are
cautioned not to place undue reliance upon any such forward-looking
statements, which speak only as of the date made. Although FSNA
believes that the expectations and assumptions on which the
forward-looking statements are based are reasonable, undue reliance
should not be placed on the forward-looking statements because FSNA can
give no assurance that they will prove to be correct. FSNA’s
forward-looking statements are qualified in their entirety by these
cautionary statements. In addition, the forward-looking statements are
made only as of the date of this press release, and except as required
by applicable law, FSNA undertakes no obligation to publicly update
these forward-looking statements to reflect new information, subsequent
events or otherwise.
Neither TSX Venture Exchange nor its Regulation Services Provider (as
that term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release.
About the Assets
The Assets consist primarily of the Advantage® brand name, concession
agreements and the contracts associated with its existing car rental
operations at 62 on- and off-airport locations in the United States and
a small amount of related personal property (i.e., fuel, shuttle
busses, furniture, phone systems, computers, etc. used in those airport
car rental facilities).
The Assets also include concession agreements and contracts associated
with certain on-airport locations currently operated by Dollar Thrifty,
together with certain related personal property. These rental
locations, formerly under the Thrifty brand name, will enable Advantage
to operate from in-terminal concessions in new markets in the United
States. The acquisition significantly expands upon FSNA’s current
leisure car rental presence, which currently consists of 28 franchised
airport locations operated under the U-Save Car & Truck Rental® brand
Information in Respect of the Transaction
On July 13, 2012 Adreca Holdings Corp. (“Adreca”) and Boketo LLC (the
“Investor”), wholly-owned subsidiaries of Macquarie Capital, entered
into an agreement with FSNA and Advantage Company Holdings, Inc.
(“Merger Sub”), a wholly-owned subsidiary of FSNA (the “Merger
Agreement”). Following the Merger, the surviving entity Merger Sub
will be a wholly-owned subsidiary of FSNA. Pursuant to the Merger
Agreement, and upon the satisfaction of certain conditions, Merger Sub
and Adreca will merge, with Merger Sub as the surviving entity, and the
Investor shall be issued preferred shares of FSNA (“Preferred Shares”)
from treasury and certain rights to acquire additional Preferred Shares
upon the exercise of outstanding options convertible into common shares
of FSNA held by others such that the Investor’s equity interest will
equal 49.76% of the total outstanding equity capital of FSNA on an
as-converted basis after completion of the Merger notwithstanding the
exercise of any currently outstanding options or warrants of FSNA. In
connection with the acquisition of the Assets by Adreca, it will be
capitalized with approximately $15 million by the Investor.
The Preferred Shares shall vote together with the common shares on all
matters, except that the separate approval of the majority of the
Preferred Shares shall be required in respect of certain fundamental
matters and that the Preferred Shares will have certain board approval
rights. The Preferred Shares will have pre-emptive and coattail
rights. Holders of the Preferred Shares will be paid dividends on an
as-converted basis if any dividends are paid on the common shares of
FSNA, and upon liquidation, dissolution or winding-up, holders of the
Preferred Shares shall be entitled to receive $0.00001 per share. The
Preferred Shares shall be convertible, upon satisfaction of certain
conditions, for common shares of FSNA.
The Investor has also agreed, upon certain conditions, to provide up to
$7,500,000 in additional financing if necessary to FSNA if other
third-party financing cannot be obtained. If provided by the Investor,
the additional financing would be in the form of exchangeable debt and
could result in the Investor obtaining additional common shares of FSNA
at any time following the date that is 18 months from the closing of
the Merger or in the event of a change in control of FSNA. The terms of
such additional financing remain subject to the approval of the TSXV.
The Merger is subject to important contingencies. The completion of the
Merger is conditional upon, among other things, the acquisition by
Adreca of the Assets. The completion of the Acquisition is itself
conditional upon, among other things, Hertz or one of its subsidiaries
consummating the acquisition of Dollar Thrifty (the “Hertz/ Dollar
Thrifty Acquisition”). The Hertz/ Dollar Thrifty Acquisition is
conditional upon customary closing conditions, including FTC approval.
FSNA will seek shareholder approval of the Merger. In order to
facilitate the Merger and to comply with certain terms of the Merger
Agreement, FSNA also intends to seek shareholder approval for the
continuance of FSNA (i.e. relocate its jurisdiction of incorporation)
to the State of Delaware and to set the number of directors of FSNA at
seven. Shareholders holding more than 662/3% of FSNA’s common shares have
entered into agreements to vote their common shares in favour of the
Merger and the continuance of FSNA to Delaware.
Completion of the Merger will be subject to a number of other
conditions, including, without limitation, obtaining the approval of
the TSXV and FSNA’s shareholders. The Merger will not close until the
required approvals are obtained.
Management Services Agreement and Warrant of Adreca
It is possible that Adreca will acquire the Assets before the Merger is
complete. In connection with the Merger and the Acquisition, FSNA and
Adreca entered into the Management Services Agreement pursuant to which
FSNA will provide Adreca with certain management services in respect of
the Assets pending closing of the Merger. As consideration for the
services provided under the Management Services Agreement, FSNA shall
be entitled to its costs plus 25% in respect of services provided by
FSNA employees and to recover its costs in respect of all other
services. In addition, FSNA has been issued a warrant of Adreca (the
“Warrant”) entitling FSNA to receive 35% of the common shares of Adreca
in certain circumstances as consideration for, among other things, the
services provided under the Management Services Agreement. The Warrant
is only exercisable if the Merger has not been consummated by May 9,
2013 or as otherwise set out in the Merger Agreement.
SOURCE Franchise Services of North America Inc.