Texada Software's wholly-owned U.S. subsidiary has entered into non-binding agreements to acquire the operating assets of two U.S. based businesses: Rolls Scaffold & Equipment Inc., dba Rolls High Reach Inc., a Southern California-based four-location, 50-employee aerial equipment rental business established in 1958 (SoCal Aquisition), and DixEquip Inc. a Houston, Texas,-based single-location construction equipment dealership business, which has exclusive dealership and territories for Mustang, Donkey and LiuGong (DixEquip Acquisition).
The SoCal acquisition is expected to be accomplished through two separate transactions: a) acquisition of certain rental fleet and other operating business assets (excluding scaffolding assets which will be retained by Rolls) from Rolls for cash and assumed liabilities totaling approximately $1.1 million; and b) acquisition of rental fleet from an existing lender. The lender will be providing term financing of approximately $9.6 million in conjunction with this acquisition, repayable over 48 months, and additional rental fleet financing post-closing to assist in expansion of the rental fleet. Total consideration for the SoCal Acquisition will be about $10.7 million.
The total consideration for the DixEquip assets is expected to be approximately $0.8 million. If completed, substantially all of the purchase price of the assets being acquired, including equipment held for resale, rental fleet and other operating assets, will be satisfied by the assumption of existing trade debt and floor plan financing.
The acquisitions are subject to certain customary conditions, including completion of satisfactory due diligence, regulatory approvals, financing and other matters. The Rolls High Reach Acquisition was to be completed no later than Aug. 31, 2011. The DixEquip acquisition is expected to be completed later this year.
"These transactions mark a very significant milestone for Texada," said William Swisher, the company's chief executive officer. "The vertical integration of Texada into the equipment rental and dealership space will be an added benefit for all the company's stakeholders, including our existing customer base and valued employees."
"The additional size and scope of our business will allow us to grow and enhance our existing delivery platform to all our customers, enriching our existing offerings for the benefit of everyone," added Brian Spilak, Texada's president. "We have established clear strategic boundaries between the software business unit and future corporately owned equipment operations, ensuring our current and future customers can rely on the trusted brand we have built at Texada."
Vertical integration of the company's operations into the rental equipment and dealership businesses is not without risks, including the considerable financial leverage and annual debt repayment requirements relative to anticipated cash flows and execution of an operational turnaround for both acquisitions.
Further information on the businesses can be found at the following websites: www.rollsscaffold.com and www.dixequip.com. Texada is not responsible for any information included at these websites.
The company also announced today a non-brokered private placement of up to 40,000,000 common shares of the company at a price of $0.10 per share for anticipated gross proceeds of up to $4,000,000. The company intends to use the net proceeds of the Private Placement to satisfy certain liquidity conditions of the Lender Financing in connection with the SoCal Acquisition, to acquire additional rental fleet for both businesses, and for working capital purposes. Insiders of the company will be subscribing for greater than 25% of the private placement, on the same terms as arm's length investors.