TORONTO, ONTARIO–(Marketwired – Aug. 27, 2015) – Grenville Strategic Royalty Corp. (TSX VENTURE:GRC) (“Grenville” or the “Company”) today announced that it has entered into a buyout agreement with Above Security Inc. (“Above Security”), one of its investee companies, as a result of the proposed acquisition of Above Security by Hitachi Systems, Ltd. (“Hitachi”), a wholly owned subsidiary of Hitachi, Ltd. Above Security will, in accordance with the terms of the royalty agreement between the parties and subject to the completion of the Hitachi acquisition, buy out Grenville’s royalty investment in Above Security. Grenville will receive a buyout payment of $6.2 million, less transaction-related expenses, upon closing of the Hitachi acquisition, which is expected to be completed on or around October 15, 2015 subject to the satisfaction of conditions of closing typical for transactions of this nature.
Based on the $3.18 million invested by Grenville in Above Security, this results in a total return of approximately $3 million, representing an IRR of approximately 128% and a 2.1x cash on cash return.
“As with the successful exit of our investment in Wmode, the anticipated exit of our investment in Above Security represents another excellent example of an opportunity to monetize immediate gains in our portfolio,” said William (Bill) R. Tharp, President and Chief Executive Officer of Grenville. “The $8.8 million in exits from Wmode and Above Security are examples of the type of expected investment outcomes that provide positive offsets to the also expected impairments inherent in an SME portfolio, more than balancing the bookends of a higher-risk, higher-return portfolio.
“Investing in small and medium-sized enterprises by its nature brings wins and losses, but we continue to believe that the core of our portfolio – the investments that represent the bulk of our recurring revenue and drive consistent cash flows and fundamentals – is the underlying strength of our business. We’ve seen that core strengthen materially quarter over quarter and remain even more confident today that the repeatability of our business model will create consistent growth over the long term,” continued Mr. Tharp.
APO Solutions Recovery
Notwithstanding the impairment taken by the Company in 2014 in its $1 million investment in APO Solutions, the Company has aggressively pursued enforcement measures in an effort to recover some portion of its investment. As a result of those enforcement measures, the Company has successfully recovered almost 50% of its initial investment. Net of transaction and enforcement costs, the Company estimates that the recovery will result in a positive impact to profits of between $400,000 and $440,000.
About Grenville
Grenville is a Toronto-based company that was formed to provide royalty-based finance solutions by acquiring revenue streams generated by growing small and medium sized enterprises. Grenville has identified a large and underserviced finance market for companies generating up to $50 million in revenue, many of which are well managed and generating improving cash flow, but face difficult financing hurdles from traditional debt and equity markets. The non-dilutive royalty financing structure offered by Grenville can bridge the financing needs of these companies until traditional debt or equity is available to them on more attractive commercial terms. The application of Grenville’s royalty financing structure into sectors not traditionally serviced by royalty companies represents a new and innovative financing model – Capital Simplified – that has already attracted a considerable number of opportunities with attractive potential returns.
Grenville Strategic Royalty Corp.
William (Bill) R. Tharp
President and Chief Executive Officer(
416) 777-0383
This press release contains certain “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking information and statements are not representative of historical facts or information or current condition, but instead represent only Grenville’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of Grenville’s control. Generally, such forward-looking information or statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or may contain statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken, “will continue”, “will occur” or “will be achieved”. The forward-looking information contained herein may include, but is not limited to, information with respect to: prospective financial performance, including the Company’s opinion regarding the current and future performance of its portfolio; expenses and operations; anticipated cash needs and need for additional financing; anticipated funding sources; future growth plans; royalty acquisition targets and proposed or completed royalty transactions; estimated operating costs; estimated market drivers and demand; business prospects and strategy; anticipated trends and challenges in Grenville’s business and the markets in which it operates; the amount and timing of the payment of dividends by Grenville; and Grenville’s financial position.
By identifying such information and statements in this manner, Grenville is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Grenville to be materially different from those expressed or implied by such information and statements. An investment in securities of Grenville is speculative and subject to a number of risks including, without limitation, risks relating to: the need for additional financing; the relative speculative and illiquid nature of an investment in Grenville; the volatility of Grenville’s share price; Grenville’s lack of operating history; Grenville’s ability to generate sufficient revenues; Grenville’s ability to manage future growth; the limited diversification in Grenville’s existing investments; ability to negotiate additional royalty purchases from new investee companies; dependence on the operations, assets and financial health of investee companies; limited ability to exercise control or direction over investee companies; potential defaults by investee companies and the unsecured nature of Grenville’s investments; Grenville’s ability to enforce on any default by an investee company; competition with other investment entities; tax matters; Grenville’s ability to pay dividends in the future and the timing and amount of those dividends; reliance on key personnel, particularly Grenville’s founders; dilution of shareholders’ interest through future financings; and general economic and political conditions. Although Grenville has attempted to identify important factors that could cause actual results to differ materially from those contained in the forward-looking information and statements, there may be other factors that cause results not to be as anticipated, estimated or intended.
In connection with the forward-looking information and forward-looking statements contained in this document, Grenville has made certain assumptions. Assumptions about the performance of the Canadian and U.S. economies over the next 24 months and how that will affect Grenville’s business and its ability to identify and close new opportunities with new investees are material factors that Grenville considered when setting its strategic priorities and objectives, and its outlook for its business. Key assumptions include, but are not limited to: assumptions that the Canadian and U.S. economies relevant to the Company’s investment focus will remain relatively stable over the next 12 to 24 months; that interest rates will not increase dramatically over the next 12 to 24 months; that Grenville’s existing investees will continue to make royalty payments to Grenville as and when required; that the businesses of Grenville’s investees will not experience material negative results; that Grenville will continue to grow its portfolio in a manner similar to what has already been established; that tax rates and tax laws will not change significantly in Canada and the U.S.; that more small to medium private and public companies will continue to require access to alternative sources of capital that Grenville will have the ability to raise required equity and/or debt financing on acceptable terms; and that Grenville will have sufficient free cash flow to pay dividends. Grenville has also assumed that access to the capital markets will remain relatively stable, that the capital markets will perform with normal levels of volatility and that the Canadian dollar will not have a high amount of volatility relative to the U.S. dollar. In determining expectations for economic growth, Grenville primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies.
Although Grenville believes that the assumptions and factors used in preparing, and the expectations contained in, the forward looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements.
For additional information with respect to these risks, uncertainties and assumptions, please refer to the “Risk Factors” section of Grenville’s annual information form dated February 11, 2015 and the other public filings of Grenville available on SEDAR at www.sedar.com. The forward-looking information and statements contained in this press release is made as of the date hereof, and Grenville does not undertake to update any forward-looking information and/or statement that is contained or referenced herein, except in accordance with applicable securities laws. All subsequent written and oral forward looking information and statements attributable to Grenville or persons acting on its behalf is expressly qualified in its entirety by this notice.
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.
