Golf Town Income Fund has entered into a definitive Transaction Agreement with OMERS Capital Partners for all of the assets of Golf Town Limited Partnership to be acquired for proceeds equal to CA$17.15 ($16.28) per outstanding Golf Town Unit on a fully diluted basis. Such proceeds are expected to be paid to Golf Town's Unitholders by way of redemption and/or other distribution in respect of the outstanding Golf Town Units. Subsequent to the redemption of the Units, Golf Town will be wound up.
“This transaction provides significant value and liquidity to our Unitholders, while preserving the opportunity to surface even greater value during the go shop process,” said Marshall Cohen, the Chairman of the Board of Trustees of Golf Town. “The transaction is also positive for our employees, vendors, and customers because of the opportunity they have in partnering with OMERS, which has an outstanding track record in building strong enterprises and which shares our commitment to our customers, employees and the markets we serve.”
Paul Renaud, President & CEO at OCP, said: “Golf Town is a real Canadian success story. We are investing with an exceptional management team and are very excited about the opportunity to continue to grow the business.”
The completion of the transaction is subject to the approval of Golf Town's Unitholders at a special meeting which is expected to be held on September 21, 2007. Golf Town has set August 21, 2007 as the record date for the special meeting. The Board of Trustees of Golf Town, other than Trustees who are also senior management of Golf Town (who were not eligible to vote in respect of the transaction), has unanimously approved the transaction and unanimously recommends that Unitholders vote for the approval of the proposed transaction with OCP.
The transaction must be approved by the holders of Units and Special Voting Units representing more than 66 2/3% of the Units and Special Voting Units represented at the meeting and by the holders of more than 50% of the Units and Special Voting Units, other than Units and Special Voting Units held by members of senior management of Golf Town, represented at the meeting.
Golf Town's financial advisor, BMO Capital Markets, has provided an opinion to the Board of Trustees that the consideration to be received by Golf Town's Unitholders under the transaction is fair from a financial point of view to Unitholders (other than Unitholders who are members of senior management of Golf Town, in respect of whom no opinion is expressed). TD Securities is acting as financial advisor to OCP in connection with this transaction.
The Agreement contains a go shop provision pursuant to which the Fund has the right to solicit and engage in discussions and negotiations with respect to potential competing proposals through the go shop period, which ends on September 19, 2007.
After September 19, 2007, Golf Town is subject to a no shop restriction on its ability to solicit third party proposals, provide information and engage in discussions with third parties. The no shop provision is subject to a fiduciary out that allows Golf Town, subject to certain conditions, to provide information and participate in discussions with respect to any unsolicited acquisition proposal received after September 19, 2007 which the Board of Trustees has determined in good faith constitutes or is reasonably likely to result in a Superior Acquisition Proposal.
Golf Town may terminate the Agreement under certain circumstances, including if the Board of Trustees determines in good faith it has received a Superior Acquisition Proposal. Golf Town has agreed to provide OCP with notice of any Superior Acquisition Proposal and to negotiate with OCP for a period of three business days prior to accepting a Superior Acquisition Proposal. If Golf Town terminates the Agreement in order to accept a Superior Acquisition Proposal it must pay a fee of approximately CA$3.2 million to OCP if such termination occurs during the go shop period or approximately CA$7.1 million if such termination occurs following the go shop period.
Golf Town and OCP expect to close the transaction on or about September 28, 2007. If the transaction closes on or before October 1, 2007 Unitholders will not receive the distribution for the month of September. If the transaction closes on or after October 2, 2007, Unitholders will receive the distribution for the month of September, estimated to be CA$0.104 per Unit.
Golf Town also reported that second quarter sales grew 14.9% to CA$94.3 million ($85.8 mm) from CA$82.1 million ($73.1 mm) recorded for the comparable period in 2006. The growth in sales was attributable to the addition of new stores and strong same store sales of 3.6%.
Golf Town's 2007 spring store openings have included new stores in Dartmouth, Nova Scotia, Boisbriand, Quebec, St. Catharines, Ontario and Brampton, Ontario. Two more stores in Ottawa and Windsor, Ontario are planned for later this year.
Golf Town's EBITDA increased by 17.2% over the comparable period in 2006, resulting in EBITDA of CA$17.0 million ($15.5 mm) for the quarter.
Said Stephen Bebis, president and CEO, “The golf season didn't start until late April this year. Despite the slow start, strong sales in May and June have resulted in another solid quarter for Golf Town. The golf season continues to be strong into Q3.”
Gross profit slipped 10 basis points to 36.1% of sales from 36.2% in the year-ago quarter. Net income increased 8.1% to CA$10.9 million ($9.9 mm) compared to CA$10.1 million ($9.0 mm) last year.
Said Bebis: “All of the major golf brands have had a good year with new product introductions. Demand for the new square head technology introduced by Callaway and Nike is expected to continue to be strong for the rest of the season and into next year.”
