Franchise Services of North America Inc. announces US$6.5 million private
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TSX-V Trading Symbol: FSN
CALGARY, July 8, 2013 /CNW/ - FRANCHISE SERVICES OF NORTH AMERICA INC. ("FSNA"
or the "Company") (FSN.V) today announced that it intends to conduct a
non-brokered private placement (the "Private Placement") of up to 500,000
shares of series B preferred stock in the capital of the Company ("Series B
Preferred Shares") at a subscription price of U.S. $13.00 per share, which is
equal to CDN $13.74 based on the closing rate of exchange on July 5, 2013 of
U.S. $1 = CDN $1.0567 as provided by the Bank of Canada, for gross proceeds of
up to U.S. $6.5 million. Each Series B Preferred Share will be convertible, in
whole or in part, into 39.25 shares of common stock in the capital of the
Company ("Common Shares") at a conversion price per Common Share of U.S.
$0.33, which is equal to CDN $.35 based on the closing rate of exchange on
July 5, 2013. Holders of Series B Preferred Shares will be entitled to
convert their Series B Preferred Shares into Common Shares following the
earlier of: (i) November 3, 2014 or (ii) the date of a change of control of
the Company. The Company may additionally compel conversion of the Series B
Preferred Shares: (i) in connection with a change of control of the Company or
(ii) five years less a day from the closing date of the Private Placement.
The right to convert the Series B Preferred Shares will expire five years from
the closing date of the Private Placement. The Series B Preferred Shares
will be non-voting prior to their conversion.
Net proceeds of the Private Placement will be used for general working capital
purposes. The Private Placement is expected to close on or about July 12,
In accordance with the Rules of the TSX Venture Exchange, FSNA announces that
insiders of the Company will be subscribing for greater than 25% of the
Private Placement. Thomas P. McDonnell, III, Chairman and Chief Executive
Officer of the Company, intends to subscribe for up to 76,923 Series B
Preferred Shares. Mr. McDonnell presently owns or controls 22,535,635 Common
Shares, representing 35.87% of the issued and outstanding Common Shares.
Boketo LLC intends to subscribe for up to 423,077 Series B Preferred Shares.
Boketo LLC presently owns or controls 62,212,200 shares of series A preferred
stock of the Company, representing all of the issued and outstanding series A
preferred stock of the Company, and no Common Shares.
The Private Placement will not result in the creation of any new insiders or
control persons. No commission or finder's fee is payable in connection with
the Private Placement.
As Mr. McDonnell and Boketo LLC are each considered to be "related parties" of
FSNA under Part 1.1 of Multilateral Instrument 61-101 ("MI 61-101"), their
participation in the Private Placement constitutes a "related party
transaction" within the meaning of MI 61-101. The board of directors of FSNA
has determined that the Private Placement is exempt from the formal valuation
and minority shareholder approval requirements of MI 61-101 as neither the
fair market value of the subject matter of, nor the fair market value of the
consideration for, the transaction, insofar as it involves related parties,
exceeds 25% of FSNA's market capitalization calculated on the basis of its
issued and outstanding Common Shares.
A material change report in respect of the transaction was not filed 21 days
in advance of the expected closing of the Private Placement. The shorter
period was necessary in order to permit FSNA to close the Private Placement in
a timeframe consistent with usual market practice for transactions of this
The Series B Peferred Shares and Common Shares issuable on conversion thereof
will be subject to a hold period and restricted period from the date of
issuance in accordance with the policies of the TSX Venture Exchange and
applicable securities legislation. The securities offered will not be
registered under the United States Securities Act of 1933 (the "Act") and may
not be offered or sold in the United States absent registration or an
applicable exemption from the registration requirements of the Act.
The Private Placement remains subject to standard filing requirements and the
receipt of approval from the TSX Venture Exchange.
FSNA is a publicly traded company listed on the TSX Venture Exchange. The
Company and its subsidiaries own the following brands: Advantage Rent A Car
("Advantage"), 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 Financial Services.
Advantage is currently positioned as a brand, and targets consumers in the
value-oriented segment of the U.S. rental car market. As of July 2013,
Advantage is expected to operate from approximately 75 locations servicing
airports and five additional satellite locations in hotels in Hawaii and Las
Vegas and has a fleet of approximately 24,000 cars, ranging from economy cars
to SUVs. Advantage primarily services the leisure segment of the rental car
market and predominantly operates in key domestic leisure destinations,
including California, Florida, Texas, Colorado, Hawaii and Arizona.
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-AWreck® and the PractiCar® trademarks for all of Canada. The
Rent-A-Wreck® system operates a network of 69 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.
Forward Looking Information
Certain statements made in this news release are forward-looking in nature,
including statements concerning the completion and timing of the Private
Placement, the anticipated use of the net proceeds of the Private Placement
and statements made with respect to Advantage's operations, including
expectations as to the number of locations and size of fleet. The closing of
the Private Placement could be delayed if FSNA is not able to obtain the
necessary regulatory and stock exchange approvals on the timelines it has
planned. The Private Placement will not be completed at all if these approvals
are not obtained or if some other condition to the closing is not satisfied.
Accordingly, there is a risk that the Private Placement will not be completed
within the anticipated time or at all. 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. The forward-looking statements
contained in this news release are based on certain key expectations and
assumptions made by FSNA. 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 news release, and except as required by applicable securities
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.
For further information on FSNA or any of its operating subsidiaries please
contact: Thomas P. McDonnell, III Franchise Services of North America Inc.
SOURCE: Franchise Services of North America Inc.
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-0- Jul/08/2013 14:01 GMT
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