DGM Minerals Corp. Signs Definitive Agreement to Acquire Self-Storage
Properties in Poland and the Czech Republic
VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 01/10/14 -- DGM
Minerals Corp. ("DGM" or the "Company") (TSX VENTURE:DGM) is pleased
to announce, further to its news release issued November 5, 2013,
that it has entered into a definitive share purchase agreement dated
January 9, 2014 (the "Share Purchase Agreement"), under which DGM has
agreed to purchase all of the issued and outstanding shares of five
companies which, collectively, own and operate five self-storage
stores in Poland and the Czech Republic (the "Assets"). In
conjunction with the Share Purchase Agreement, DGM also entered into
an asset purchase agreement dated January 9, 2014 (the "Asset
Purchase Agreement") with Mr. Guy Pinsent, under which DGM acquired
the exclusive right to purchase the Assets from the vendors. Prior to
executing the agreements, DGM conducted extensive financial and legal
due diligence respecting the Target Companies and the Assets.
When consummated, the transaction will make DGM the largest
self-storage chain in Central Europe, a region which management
believes is poised for substantial short and long term growth in the
DGM's President and CEO, Peter Smith, continues to express a great
deal of enthusiasm for the proposed transaction: "We've spent a lot
of time and resources assessing this opportunity for DGM and we
continue to feel that it has outstanding potential. Self-storage is
an attractive sector to be in, and this particular opportunity gives
us five established self-storage businesses, all purpose-built or
renovated specifically for self-storage, and all in central,
inner-city locations where real estate values are expected to grow.
We also feel there is a significant growth opportunity for
self-storage in Central and Eastern Europe, given that a city like
Warsaw, for example, with a population close to that of Toronto, has
only two self-storage stores, both of which we will acquire under the
transaction. However, there still remains a lot of work to be done
before the transaction can be closed. Management will continue to
update the market as we progress."
The proposed transaction will be a "change of business" transaction
("COB") under the policies of the TSX Venture Exchange, and
accordingly requires the approval of DGM's shareholders. In
conjunction with the transaction, DGM will consolidate its current
issued and outstanding shares on a 10:1 basis (the "Consolidation")
and will change its name to "Less Mess Storage Inc." Prior to
pursuing the transaction that is the subject of this news release,
DGM was listed under the Mining Industry segment, focused on
exploring the Notamiche Property in Quebec. In June 2013, DGM
determined that it wasn't in its best interests to continue to expend
resources on the property. Following completion of the transaction
and the acquisition of the Assets, DGM will be listed on the TSX
Venture Exchange under the Industrial Industry Segment.
The Share Purchase Agreement
The vendors under the Share Purchase Agreement are Selvaag Eiendom
A.S. and Selvaag Self-Storage A.S. (the "Vendors"), each incorporated
under the laws of Norway. Each of the Vendors is owned by Selvaag
Gruppen A.S., out of Norway. DGM is acquiring five companies (the
"Target Companies") under the Share Purchase Agreement: three
companies incorporated in Poland (Krakowska House Sp. z o.o.,
Torunska House Sp. z o.o. and City Self-Storage Sp. z o.o.) and two
companies incorporated in the Czech Republic (Selvaag Evropska
Building A.S. and City Self-Storage S.R.O.). All of the issued and
outstanding shares of Krakowska House Sp. z o.o., Torunska House Sp.
z o.o. and Selvaag Evropska Building A.S. (which are property holding
companies) are owned by Selvaag Eiendom A.S. All of the issued and
outstanding shares of City Self-Storage Sp. z o.o. and City
Self-Storage S.R.O. (which are operating companies) are owned by
Selvaag Self-Storage A.S. Collectively, the five companies being
acquired operate five self-storage stores, two of which are in
Warsaw, Poland, and three of which are in Prague, Czech Republic.
Under the Share Purchase Agreement, DGM will acquire the Target
Companies for an aggregate purchase price of 14,000,000 Euros,
7,000,000 Euros of which is payable on closing, and 7,000,000 Euros
of which will be Vendor financed through DGM's assumption of existing
debt owed by the Target Companies to the Vendors.
The 7,000,000 Euros of existing debt has been divided into two equal
facilities (A and B) of 3,500,000 Euros each. Facility A will bear
interest as follows: for three years from the closing date, the
interest rate shall be three-month Euribor plus 2.5%, but in no case
shall it exceed 5.0%; and following three years from the closing date
until the maturity date (five years after the closing date), the
interest rate shall be three-month Euribor plus 8.0%. Facility B will
bear interest as follows: for three years from the closing date, the
interest rate shall be 5.0%; and following three years from the
closing date until the maturity date (five years after the closing
date), the interest rate shall be three-month Euribor plus 8.0%. The
principal on the facilities shall be repaid as follows: 125,000 Euros
on each facility on the first and second anniversaries after closing;
400,000 Euros on each facility on the third and fourth anniversaries
after closing; the remaining principal on the fifth anniversary after
closing. The existing debt will be secured by a first charge against
the four freehold properties owned by the Target Companies.
The Share Purchase Agreement provides that closing of the transaction
must occur within 60 days of the date of the Agreement; provided
however that the Vendors have agreed to extend the closing date for
reasonable administrative delays or to receive TSX Venture Exchange
approval of the transaction, as long as DGM has demonstrated by no
later than February 15, 2014 that it has secured financing of no less
than 7,000,000 Euros to close the transaction.
Upon executing the Share Purchase Agreement, DGM paid a 100,000 Euro
deposit to the Vendors. Under the Agreement, if the transaction fails
to close because DGM fails to secure necessary financing, the deposit
will be forfeited to the Vendors. If the transaction fails to close
for any other reason, the deposit will be returned to DGM.
The Assets being acquired by DGM are five self-storage stores, each
of which has been operating for at least five years. The five stores
are operated by the Vendors under the name "City Self-Storage" and
will be re-branded by DGM to "Less Mess Storage". Two of the five
stores are in Warsaw, Poland, and three are in Prague, Czech
Republic. In the case of four of the five stores, DGM will also be
acquiring the attached real estate on which such stores operate. The
fifth store operates in a leased property and the lease agreement is
due for renewal in 2022.
The Target Companies own and operate two stores near the centre of
Warsaw, Poland: the Krakowska store and the Torunska store.
The Krakowska store is four kilometres from Warsaw's city center and
its lot is approximately 26,000 square feet. The self-storage
facility was built in 2006, and has 695 rental storage rooms with a
combined self-storage area of approximately 25,000 square feet. The
self-storage areas include a retail space and office. The
self-storage section of the building has four levels, and there are
two additional levels of rental office space above the storage area,
with a separate entrance and elevator. The building also has an
underground parking garage with 43 parking spaces. Average occupancy
of the Krakowska store over the past 12 months to December 13, 2013,
has been 93%.
The Torunska store is eight kilometres from Warsaw's city center. The
lot is approximately 32,000 square feet. The self-storage facility
was built in 2007 and has 747 rental storage rooms with a combined
self-storage area of approximately 30,000 square feet, as well as a
retail area. The self-storage section of the building has three
levels, and the outdoor parking lot has 12 parking stalls. Average
occupancy of the Torunska store over the past 12 months to December
13, 2013, has been 80%.
The Target Companies have three stores located in Prague, Czech
Republic: the Holesovice store, the Dejvice store and the Pankrac
store. The Holesovice store and the Dejvice store are owned by the
Target Company, while the Pankrac store is a leased property.
The Holesovice store is three kilometres from Prague's city center
and its lot is approximately 85,000 square feet. The original
buildings on the site are comprised of a three level main building
and a two level sub-building. These buildings were constructed in
1951 but were then converted through an extensive renovation for
self-storage purposes in 2002. There are 556 rental storage rooms
with a combined self-storage area of approximately 54,000 square feet
and a retail space. These buildings also house a storage area for
ancillary products sold by the Target Companies throughout the Czech
Republic and Poland, and an open plan office area for central staff,
a marketing coordinator and financial controller, both handling
Poland as well as the Czech Republic. Average occupancy of the
Holesovice store over the past 12 months to December 13, 2013, has
The Dejvice store is the newest store of the five operated by the
Target Company. It is located five kilometres from Prague's city
center and its lot is approximately 30,000 square feet. The
self-storage facility was built in 2008 and has 635 rental storage
rooms with a combined self-storage area of approximately 28,000
square feet. The self-storage section of the building has six levels,
and the outdoor parking lot has 34 parking stalls. Average occupancy
of the Dejvice store over the past 12 months to December 13, 2013,
has been 67%.
The Pankrac store is the only store of the five that is not owned by
the Target Companies. The leased facility is located three kilometres
from Prague's city center and consists of three floors of a car
parking garage, converted to self-storage use in 2002, and a retail
area. The Pankrac store has 633 rental storage rooms with a combined
self-storage area of approximately 25,000 square feet. The
self-storage section of the building has three levels, and the
outdoor parking lot has ten parking stalls. Average occupancy of the
Holesovice store over the past 12 months to December 13, 2013, has
Financial Information Respecting the Assets
The audited total revenue for all five stores for the 12 months ended
September 30, 2013 was $4,155,513, with an unaudited EBITDA for the
same period of $2,104,273. Total assets of the Target Companies as of
September 30, 2013 were $18,963,990 (audited), and the net book value
of the tangible assets of the Target Companies were $16,869,072
(audited), split between tangible assets of $8.4m in Poland and $8.5m
in the Czech Republic.
Self-storage revenues for the Target Companies (collectively) have
grown 20% over the past three years and EBITDA has grown 36%.
The Asset Purchase Agreement
Under the Asset Purchase Agreement, DGM acquired from Pinsent the
exclusive right to purchase the Assets from the Vendors, which
exclusive right Pinsent had secured under a letter agreement dated as
of October 29, 2013. DGM will also acquire other assets that Pinsent
has obtained or developed with respect to his proposed acquisition of
the Assets, including certain intellectual property respecting the
business to be conducted following the successful acquisition of the
Assets (i.e. the "Less Mess" brand and intellectual property).
The consideration payable under the Asset Purchase Agreement is the
issuance of 2,300,000 post-Consolidation DGM common shares, as
follows: Pinsent will receive 1,300,000 shares; Peter Smith (DGM's
President and CEO) will receive 600,000 shares; Michael Raven (DGM's
Corporate Secretary) will receive 200,000, and two arm's length
parties will receive 100,000 shares each.
The Asset Purchase Agreement is conditional on DGM completing the
Consolidation, Pinsent being appointed to DGM's board of directors
and approval of the transaction by DGM's board, DGM's shareholders
(if required) and the TSX Venture Exchange.
To finance its acquisition of the Target Companies and the Assets,
DGM intends to raise between $12,000,000 and $15,000,000 in a private
placement financing. DGM has executed an engagement letter with Euro
Pacific Canada ("EuroPac") under which EuroPac will conduct a "best
efforts" private placement offering of up to $15,000,000 (subject to
an over-allotment option to increase the size of the offering by up
to 15% of the base offering size). As compensation, EuroPac will
receive: a work fee of $25,000 (plus HST); a cash fee equal to 7% of
the aggregate gross proceeds of the financing; and compensation
options to acquire the number of securities of DGM as is equal to 7%
of the aggregate gross proceeds of the financing. The compensation
options shall be exercisable for a period of twenty-four (24) months
from closing at an exercise price equal to the issue price of the DGM
shares under the offering.
Board of Directors
It is anticipated that following the acquisition of the Target
Companies and the Assets, Guy Pinsent and Robin Greenwood will be
elected to DGM's board of directors.
Guy Pinsent is an entrepreneur with a background in investment
banking (Citibank London, branded consumer team with clients
including Bacardi, Diageo and British American Tobacco), the British
Foreign Service and real estate investment and development. Mr.
Pinsent was formerly a partner at Personal Storage, a private British
self-storage business, at the time the sixth largest in the UK,
before focussing on the self-storage opportunity in Poland and
neighboring markets. Mr. Pinsent's real estate experience includes
head of business development at Colliers International Poland, and
consulting to a wide range or investors and developers. Mr. Pinsent
assisted on the financing, development and sale of Helical Poland's
'Europa Centralna' retail park, an investment of EUR 115 million
delivering 720,000 square feet of retail space (Phase 1), one of the
largest retail developments in Europe. Mr. Pinsent was educated at
Eton College and Cambridge University (Economics MA), lives in Warsaw
and speaks fluent Polish.
Robin Greenwood is the current CEO of Storage King UK, an 18 store
self-storage chain with stores throughout the United Kingdom. He is
also currently the director and treasurer for the UK Self-Storage
Association. He was formerly CEO for Extra Space Europe, a Vice
President for Shurguard UK and director of sales and marketing for
Access Self-storage. Mr. Greenwood has been a senior executive in
self-storage for over 25 years, working for some of the world's
largest operators during that time.
It is anticipated that Michael Anderson and Thomas Lamb, both current
board members of DGM, will not seek re-election at the meeting of
DGM's shareholders to be held to approve the transaction that is the
subject of this news release.
Further Transaction Details
Further details regarding the transaction will be provided in a
Management Information Circular which will be mailed to shareholders
of DGM in connection with the meeting of such shareholders to be
called to approve the transaction and will be accessible under DGM's
SEDAR profile at www.sedar.com shortly following the mailing. DGM
plans to give notice of the meeting in January 2014, mail the
Management Information Circular in February 2014 and hold the meeting
in March 2014. The transaction is expected to close shortly after the
Completion of the transaction is subject to a number of conditions,
including TSX Venture Exchange acceptance and disinterested
Shareholder approval. The transaction cannot close until the required
Shareholder approval is obtained. There can be no assurance that the
transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the Management
Information Circular to be prepared in connection with the
transaction, any information released or received with respect to the
COB may not be accurate or complete and should not be relied upon.
Trading in the securities of DGM Minerals Corp. should be considered
The TSX Venture Exchange has in no way passed upon the merits of the
proposed transaction and has neither approved nor disapproved the
contents of this press release.
About the Company
DGM Minerals Corp. is a Vancouver-based company and has its common
shares listed on the TSX Venture Exchange. For further information,
please refer to the Company's filings on SEDAR (www.sedar.com) or
contact the Company by telephone at 778.999.7030.
ON BEHALF OF THE BOARD
Peter Smith, President and CEO
This update contains "forward-looking information" that is based on
the Company's current expectations, estimates, forecasts and
projections. This forward-looking information includes, among other
things, the Company's business, plans, outlook and business strategy.
The words "may", "would", "could", "should", "will", "likely",
"expect," "anticipate," "intend", "estimate", "plan", "forecast",
"project" and "believe" or other similar words and phrases are
intended to identify forward-looking information.
Forward-looking information is subject to known and unknown risks,
uncertainties and other factors that may cause the Company's actual
results, level of activity, performance or achievements to be
materially different from those expressed or implied by such
forward-looking information. Such factors include, but are not
limited to: uncertainties related to the ability of the Company to
obtain or maintain an interest in a suitable business, property or
properties, changes in economic conditions or financial markets;
changes in prices for the Company's products or increases in costs;
litigation, legislative, environmental and other judicial,
regulatory, political and competitive developments; technological or
operational difficulties; and labour relations matters.
This list is not exhaustive of the factors that may affect our
forward-looking information. These and other factors should be
considered carefully and readers should not place undue reliance on
such forward-looking information. Except as required by law, the
Company disclaims any intention or obligation to update or revise
forward-looking information, whether as a result of new information,
future events or otherwise.
NEITHER THE 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.
DGM Minerals Corp.
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