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VANCOUVER, Dec. 16 /CNW/ --
TRADING SYMBOL: The Toronto Stock Exchange - AW.UN
VANCOUVER, Dec. 16 /CNW/ - A&W Revenue Royalties Income Fund (the Fund)
and A&W Food Services of Canada Inc. (A&W Food Services) announced
today that, effective January 5, 2011, the number of A&W restaurants
for which royalties are paid to A&W Trade Marks Limited Partnership
(the Partnership) will be increased by 20 new restaurants that were
opened across Canada between October 2009 and September 2010, less five
restaurants that were permanently closed during this period. The
addition of these 15 net new restaurants brings the total number of A&W
restaurants in the Royalty Pool to 715. This is the ninth increase in
the number of restaurants in the Royalty Pool since the inception of
the Fund in 2002. Since that time, the number of restaurants for which
royalties are paid to the Fund (through the Partnership) has increased
by 130 restaurants, from 585 to 715.
"We are delighted with the growth of new A&W restaurants across Canada
and in particular in Ontario, our most important growth market in the
country," said Paul Hollands, President and Chief Executive Officer of
A&W Food Services. "Our new restaurants further strengthen our
position as Canada's second largest burger chain."
The estimated annualized sales of the 20 new A&W restaurants being added
to the Royalty Pool on January 5, 2011 are $20,160,000 and annual sales
for the five permanently closed restaurants were $1,673,000. The net
sales of $18,487,000 from the 15 net new restaurants translate into
estimated additional annual royalty payments to the Fund of $555,000 on
the basis of the royalty of 3% of sales. The initial consideration for
the estimated additional royalty revenue is $6,859,000, calculated by
discounting the estimated additional royalties by 7.5% and dividing the
result by the yield on units of the Fund. The yield is based on the
weighted average trading price of the units of the Fund for the 20
trading days ending November 1, 2010, or $19.68. 80% of the
consideration will be paid on January 5, 2011 by issuance of 278,818
limited partnership (LP) units which will immediately be exchanged for
shares of A&W Trade Marks Inc. (Trade Marks). These additional shares
of Trade Marks are exchangeable at the option of A&W Food Services for
278,818 units of the Fund, subject to the approval of the TSX.
A final reconciliation of the consideration and number of LP units
issued will be made in December 2011 based upon the actual annual sales
of the new restaurants.
Reconciliation of January 5, 2010 Royalty Pool Amendment
The actual sales of the new restaurants added to the Royalty Pool on
January 5, 2010 have now been determined. The actual annual sales for
the 23 new restaurants added on January 5, 2010 were $25,781,000
compared to the original estimate of $24,879,000. As a result, the
remaining 20% of the initial consideration or 83,181 LP units have now
been issued to A&W Food Services. Additional consideration of $244,000
has also been paid to A&W Food Services in the form of 17,004 LP units
as the actual sales exceeded the original estimate. The 83,181 LP units
and additional 17,004 LP units have been exchanged for 100,185
additional shares of Trade Marks. These additional shares of Trade
Marks are exchangeable at the option of A&W Food Services for 100,185
units of the Fund, subject to the approval of the TSX.
As a result of the additional shares of Trade Marks issued to A&W Food
Services relating to the reconciliation of the January 5, 2010 Royalty
Pool Amendment, and prior to the substantial issuer bid (described
below), Food Services owns the equivalent of 6,382,901 units of the
Fund representing 43.4% of the units of the Fund on a fully-diluted
basis.
Substantial Issuer Bid
On November 10, 2010, the Fund announced a substantial issuer bid (the
Offer) to purchase for cancellation 2,500,000 of its units, at a price
of $20.00 per unit. The Offer is made to all of the Fund's
unitholders, including Food Services who has agreed to deposit to the
Offer shares of Trade Marks exchangeable for a total of 2,500,000
units. If more than 2,500,000 units are tendered, the Fund will
purchase the units on a pro rata basis. The Offer will remain open for
acceptance until December 17, 2010 unless withdrawn or extended by the
Fund.
The Offer and issuer bid circular and other related documents containing
the terms of the Offer are available on SEDAR at www.SEDAR.com.
About the Fund
The Fund is a limited purpose trust established to invest in Trade
Marks, which through its interest in the Partnership, owns the A&W
trade-marks used in the A&W quick service restaurant business in
Canada. The A&W trade-marks comprise some of the best-known brand
names in the Canadian foodservice industry. In return for licensing
A&W Food Services to use its trade-marks, Trade Marks (through the
Partnership) receives royalties equal to 3% of the sales of A&W
restaurants in the Royalty Pool. The Royalty Pool is adjusted annually
to add new restaurants, less any A&W restaurants that have permanently
closed. The Partnership pays A&W Food Services for the additional net
new restaurants in the form of an increase in the limited partnership
interest of A&W Food Services, based upon a formula set out in the
licence agreement. A&W Food Services' additional limited partnership
interest may be exchanged for additional shares of Trade Marks which
are exchangeable for units of the Fund. These annual adjustments to
the Royalty Pool are required under the licence agreement.
A&W Food Services is the second largest quick-service hamburger
restaurant chain in Canada. Operating coast-to-coast, A&W restaurants
feature famous trade-marked menu items such as The Burger Family,
Chubby Chicken and A&W Root Beer.
This release may contain certain forward-looking statements reflecting
A&W Revenue Royalties Income Fund's current expectations in the quick
service segment of the restaurant food industry in Canada. Investors
are cautioned that all forward-looking statements involve risks and
uncertainties, including, without limitation, changes in market,
competitive developments, and potential downturns in economic
conditions generally. Additional information on these and other
potential factors that could affect the Fund's financial results are
detailed in documents filed from time to time with the provincial
securities commissions in Canada.
To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/December2010/16/c5984.html
pDon Lesliebr/ Chief Financial Officerbr/ A&W Food Services of Canada Inc.br/ (604) 988-2141br/ email: a href="mailto:investorrelations@aw.ca"investorrelations@aw.ca/abr/ a href="http://www.awincomefund.ca"www.awincomefund.ca/a/p