Diversified Royalty Corp. (TSX: DIV, DIV.DB and DIV.DB.A) (the
“Corporation” or “DIV”) and Mr. Lube Canada Limited Partnership
(“Mr. Lube”) announced today that effective May 1, 2022 the Mr.
Lube royalty pool (the “Mr. Lube Royalty Pool”) has been adjusted
to include the royalties from six new flagship Mr. Lube locations
and remove two flagship Mr. Lube locations that have permanently
closed. With the adjustment for these four net new openings, the
Mr. Lube Royalty Pool now includes 139 flagship locations.
Sean Morrison, President and Chief Executive
Officer of DIV, stated, “Mr. Lube continues to demonstrate growth
and strong performance. We believe that the experienced management
team at Mr. Lube and the strong store-level execution by its
franchisees will facilitate the continued growth of the Mr. Lube
brand across Canada.”
Stuart Suls, President and Chief Executive
Officer of Mr. Lube, stated, “As the pandemic evolved over the past
several years, we are proud of the resilience our franchisees
demonstrated in adapting to the constantly changing environment. We
look forward to continue strengthening the store level economics of
our franchisees, growing the Mr. Lube brand and the ongoing
mutually beneficial relationship with DIV.”
Additions to the Mr. Lube Royalty Pool
Subject to certain performance criteria being
met, the Mr. Lube Royalty Pool is adjusted annually on May 1 (the
“Adjustment Date”) to include new Mr. Lube locations that have been
open since July 1 of the previous reporting period and to remove
Mr. Lube locations that have been permanently closed during the
previous year. The initial consideration paid to Mr. Lube for the
estimated net additional royalty revenue was $3.4 million,
representing 80% of the total estimated consideration of $4.3
million. The initial consideration of $3.4 million was elected by
DIV to be paid in the form of 1,083,063 Common Shares of DIV on the
basis of the 20-day volume weighted average closing price of the
Common Shares for the period ended April 25, 2022 of $3.1592 per
Common Share.
The remaining consideration payable for the
additional royalty revenue of the six new Mr. Lube locations added
to the Royalty Pool on May 1, 2022 will be paid to Mr. Lube on May
1, 2023, the next Adjustment Date, and will be adjusted to reflect
the actual system sales of these six new locations for the year
ending December 31, 2022, net of the lost system sales of the two
permanently closed Mr. Lube locations removed from the Mr. Lube
Royalty pool on May 1, 2022.
On May 1, 2021, the Mr. Lube Royalty Pool was
adjusted to include royalties from 13 new flagship Mr. Lube
locations. The initial consideration previously paid by DIV was
$7.7 million, which represented 80% of the total estimated
consideration for those 13 locations, which estimate was based on
the forecast system sales of these 13 locations for the 2021 fiscal
year. As described further below, the remaining consideration
payable for the net additional royalty revenue related to 7 of the
13 locations (the “2022 True-Up Locations”) of $1.6 million was
paid by DIV to Mr. Lube in cash on May 1, 2022 based the actual
system sales of these locations for the year ending December 31,
2021. The remaining consideration payable for the net additional
royalty revenue related to 6 of the 13 locations will be paid to
Mr. Lube on May 1, 2023 and will be adjusted to reflect the actual
system sales of these locations for the year ending December 31,
2022.
The actual system sales for the 2022 True-Up
Locations added to the Royalty Pool on May 1, 2021 has now been
determined for the year ended December 31, 2021 to be $10.0
million. The total consideration payable to Mr. Lube for the net
additional royalty revenue of these 2022 True-Up Locations based on
their actual system sales for the year ended December 31, 2021 is
$5.4 million. After taking into account the $3.8 million previously
paid by DIV to Mr. Lube on May 1, 2021, DIV paid Mr. Lube the
remaining $1.6 million of cash consideration for the net additional
royalty revenue of these 2022 True-Up Locations on May 1, 2022.
For further details with respect to the manner
in which annual adjustments of the Mr. Lube Royalty Pool occur and
the agreements underlying the procedures therefor, see DIV’s Annual
Information Form dated March 10, 2022, a copy of which is available
on SEDAR at www.sedar.com.
About Diversified Royalty Corp.
DIV is a multi-royalty corporation, engaged in
the business of acquiring top-line royalties from well-managed
multi-location businesses and franchisors in North America. DIV’s
objective is to acquire predictable, growing royalty streams from a
diverse group of multi-location businesses and franchisors.
DIV currently owns the Mr. Lube, AIR MILES®,
Sutton, Mr. Mikes, Nurse Next Door and Oxford Learning Centres
trademarks. Mr. Lube is the leading quick lube service business in
Canada, with locations across Canada. AIR MILES® is Canada’s
largest coalition loyalty program with approximately two-thirds of
Canadian households actively participating in the AIR MILES®
Program. Sutton is among the leading residential real estate
brokerage franchisor businesses in Canada. Mr. Mikes currently
operates casual steakhouse restaurants primarily in western
Canadian communities. Nurse Next Door is one of North America’s
fastest growing home care providers with locations across Canada
and the United States as well as in Australia. Oxford Learning
Centres is one of Canada’s leading franchised supplemental
education services in Canada and the United States.
DIV intends to increase cash flow per share by
making accretive royalty purchases and through the growth of
purchased royalties. DIV expects to pay a predictable and stable
dividend to shareholders and increase the dividend as cash flow per
share increases allow.
Forward Looking Statements
Certain statements contained in this news
release may constitute “forward-looking information” or “financial
outlook” within the meaning of applicable securities laws that
involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements to
be materially different from any future results, performance or
achievements expressed or implied by such forward-looking
information or financial outlook. The use of any of the words
“anticipate”, “continue”, “estimate”, “expect”, “intend”, “may”,
“will”, ”project”, “should”, “believe”, “confident”, “plan” and
“intend” and similar expressions are intended to identify
forward-looking information and financial outlook, although not all
forward-looking information and financial outlook contain these
identifying words. Specifically, forward-looking information and
financial outlook in this news release includes, but is not limited
to, statements made in relation to: the amount and timing of the
payment for the remaining consideration payable to Mr. Lube for the
additional royalty revenue from 6 of the 13 Mr. Lube locations
added to the Mr. Lube Royalty Pool on May 1, 2021; the amount and
timing of the payment for the remaining consideration payable to
Mr. Lube for the additional royalty revenue from the six Mr. Lube
locations added to the Mr. Lube Royalty Pool on May 1, 2022; DIV’s
belief that the experienced management team at Mr. Lube and strong
store-level execution by its franchisees will facilitate the growth
of the Mr. Lube brand across Canada; Mr. Lube looking forward to
continuing to strengthen the store level economics of its
franchisees, growing the Mr. Lube Brand and the ongoing mutually
beneficial relationship with DIV; DIV’s ability to pay a
predictable and stable dividend to shareholders; or DIV may not
achieve any of its corporate objectives. These statements involve
known and unknown risks, uncertainties and other factors that may
cause actual results or events, performance, or achievements of DIV
to differ materially from those anticipated or implied in such
forward-looking information and financial outlook. DIV believes
that the expectations reflected in the forward-looking information
and financial outlook are reasonable but no assurance can be given
that these expectations will prove to be correct. In particular
there can be no assurance that: Mr. Lube will continue to make
royalty payments in the amounts and at the times required, or at
all; the amount of, or timing of the payment for, the additional
consideration payable to Mr. Lube for 6 of the 13 additional Mr.
Lube locations added to the Mr. Lube Royalty Pool on May 1, 2021
will occur in the amount or at the time estimated; the amount of,
or timing of the payment for, the additional consideration payable
to Mr. Lube for the six additional Mr. Lube locations added to the
Mr. Lube Royalty Pool on May 1, 2022 will occur in the amount or at
the time estimated; that transactions completed with Mr. Lube for
the additions to the Mr. Lube Royalty Pool will be accretive to DIV
shareholders; Mr. Lube will realize any of the intended benefits of
its growth strategy; Mr. Lube will continue opening new stores, or
that such stores will be successful if opened; that Mr. Lube will
succeed in improving store level economics of its franchisees; DIV
will be able to make monthly dividend payments to the holders of
its common shares; or DIV will achieve any of its corporate
objectives. Given these uncertainties, readers are cautioned that
forward-looking information and financial outlook included in this
news release are not guarantees of future performance, and such
forward-looking information and financial outlook should not be
unduly relied upon. More information about the risks and
uncertainties affecting DIV’s business and the businesses of its
royalty partners can be found in the “Risk Factors” section of its
Annual Information Form dated March 10, 2022 and in DIV’s most
recently filed management’s discussion and analysis, copies of
which are available under DIV’s profile on SEDAR at
www.sedar.com.
In formulating the forward-looking information
and financial outlook contained herein, management has assumed that
DIV will generate sufficient cash flows from its royalties to
service its debt and pay dividends to shareholders; lenders will
provide any necessary waivers required in order to allow DIV to
continue to pay dividends; the impacts of COVID-19 on DIV and its
royalty partners will be consistent with DIV’s expectations and the
expectations of management of each of its Royalty Partners, both in
extent and duration; DIV and its royalty partners will be able to
reasonably manage the impacts of the COVID-19 pandemic on their
respective businesses; and the performance of the Mr. Lube flagship
locations in the Mr. Lube Royalty Pool will be consistent with
DIV’s expectations. These assumptions, although considered
reasonable by management at the time of preparation, may prove to
be incorrect.
To the extent any forward-looking information in
this news release constitutes a “financial outlook” within the
meaning of applicable securities laws, such information is being
provided to provide investors with an estimate of the financial
impact to DIV of transactions with Mr. Lube described in this news
release.
All of the forward-looking information and
financial outlook in this news release is qualified in its entirety
by these cautionary statements and other cautionary statements or
factors contained herein, and there can be no assurance that the
actual results or developments will be realized or, even if
substantially realized, that they will have the expected
consequences to, or effects on, DIV. The forward-looking
information and financial outlook included in this news release is
presented as of the date of this news release and DIV assumes no
obligation to publicly update or revise such information to reflect
new events or circumstances, except as may be required by
applicable law.
THE TORONTO STOCK EXCHANGE HAS NOT
REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR THE
ACCURACY OF THIS RELEASE.
Additional Information
Additional information relating to the
Corporation and other public filings, is available on SEDAR at
www.sedar.com.
Contact: Sean Morrison, President and Chief
Executive Officer Diversified Royalty Corp. (604) 235-3146
Greg Gutmanis, Chief Financial Officer and VP
Acquisitions Diversified Royalty Corp. (604) 235-3146
Diversified Royalty (TSX:DIV.DB)
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