A&W Revenue adds 46 new restaurants to royalty pool
A&W REVENUE Royalties Income Fund and A&W Food Services of Canada Inc. have confirmed that, effective Jan. 5, 2019, the number of A&W restaurants for which royalties are paid to A&W Trade Marks LP will be increased by 46 new restaurants that were opened across Canada between Sept. 8, 2017, and Sept. 6, 2018, less ei ght res tau rants that were permanently closed during this period. The addition of these 38 net new restaurants brings the total number of A&W restaurants in the royalty pool to 934. Since the inception of the fund in 2002, the number of restaurants for which royalties are paid to the fund (through the partnership) has increased by 349 restaurants (from 585 to 934). “We are very pleased to be adding 38 net new A&W restaurants to the royalty pool,” commented Susan Senecal, president and chief executive officer of A&W Food Services. “A&W Food Services has opened over 115 new A&W restaurants across Canada in the last three years. We are delighted with this pace of growth, particular in Ontario and Quebec, which are our most important growth markets.”
The estimated annualized sales of the 46 new A&W restaurants being added to the royalty pool on Jan. 5, 2019, are $62,283,000 and annual sales for the eight permanently closed restaurants were $4,795,000. The net estimated annualized sales of $57,487,000 from the 38 net new restaurants translate into estimated net additional annual royalty payments to the fund of $1,725,000 on the basis of the royalty of 3 per cent of sales. The consideration for the estimated net additional royalty revenue is $21,844,000, representing 80 per cent of the consideration payable for such net additional royalty payments, calculated by discounting the estimated additional royalties by 7.5 per cent and dividing the result by the yield on units of the fund. This consideration will be paid on Jan. 5, 2019, by issuance of 627,514 limited partnership units of the partnership, which will immediately be exchanged for 1,255,028 non-voting common shares of A&W Trade Marks. These ad di tional shares of A&W Trade Marks are exchangeable at the option of A&W Food Services for 627,514 limited voting units of the fund, subject to the approval of the Toronto Stock Exchange.
The fund and A&W Food Services also announced today that the actual sales of the new restaurants added to the royalty pool on Jan. 5, 2018, have now been determined. The actual annual sales for the 42 new restaurants added on Jan. 5, 2018, were $63,783,000, compared with the original estimate of $55,642,000. As a result, the remaining 20 per cent of the initial consideration, or $5,198,000, has now been paid to A&W Food Services by issuance of 149,063 LP units at a price of $34.87 per unit. Additional consideration of $3,989,000 has also been paid to A&W Food Services in the form of 114,409 LP units also at a price of $34.87 per unit, as the actual sales exceeded the original estimate. The 149,063 LP units and additional 114,409 LP units have been exchanged for an aggregate of 526,944 non-voting common shares of A&W Trade Marks. These additional non-voting common shares of A&W Trade Marks are exchangeable at the option of A&W Food Services for 263,472 limited voting units of the fund, subject to the approval of the TSX.
The growth of the royalty pool reflects the continuing strength and success of the A&W brand. The fund’s current annualized distribution rate is $1.716 per unit.
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Mike Caswell condensed this news release ([email protected]watch.com).
Richard Neil McKerracher, John Ross McLernon, Hugh R Smythe
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