Meridian Assists Rent-A-Wreck Capital Inc. with Business Combination
(CALGARY, ALBERTA) RENT-A-WRECK CAPITAL Inc. (“RAWC”) announces that it has signed a Share Exchange Agreement dated October 13, 2006 relating to a business combination between RAWC and U-Save Auto Rental of America, Inc. (“U-Save”), a privately held Mississippi company, based in Jackson, Mississippi. Under the terms of the Share Exchange Agreement, RAWC will seek shareholder approval of a consolidation of its Common Shares and the acquisition by RAWC of all of the outstanding stock of U-Save in a “reverse take-over” (“RTO”) transaction. RAWC will be renamed “Franchise Services of North America, Inc.” (“FSNA”) or such other name as the parties may subsequently agree.
The proposed transaction involves a consolidation of RAWC’s common shares on a 4.0785967-for-one basis and the issuance by RAWC of 45,600,000 consolidated common shares to shareholders of U-Save, in exchange for all the shares of U-Save. Based on a deemed price of $0.50 per consolidated share, the transaction value is approximately $22,800,000. The deemed value of the combined entity will be $24,190,981, with 48,381,962 shares outstanding. At the conclusion of the proposed transaction (but prior to giving effect to the concurrent financings), the former shareholders of U-Save will hold 94.25% of the outstanding shares of FSNA, and the former RAWC shareholders will hold 5.75% of FSNA.
RAWC intends to convene a Special Meeting of its holders of Common Shares in late November, 2006 to approve the consolidation and the business combination transaction, once regulatory approvals have been received.
Concurrent Private Placements
In connection with the proposed business combination transaction, RAWC and U-SAVE have engaged Blackmont Capital Inc. and Meridian Merchant Capital Canada Ltd. to conduct private placements for gross proceeds of $3.5 million. These proceeds will be used to expand the Rent-A-Wreck brand in Canada, introduce U-Save into Canada, retire debt of FSNA, and expand its marketing and sales activities. Meridian has arranged for subscriptions for 3 million consolidated shares and options to acquire 450,000 consolidated shares at $0.50 per share for two years for an aggregate subscription price of $1.5 million and Blackmont has agreed to sell, on a best commercial efforts basis, 4 million consolidated shares at $0.50 per share for an aggregate subscription price of $2 million. Both private placements are subject to completion of the RTO and are scheduled to close concurrent with the business combination, or will be completed through the issuance of subscription receipts.
U-Save Auto Rental of America, Inc.
U-Save, with its subsidiary ARRC (Auto Rental Resource Center), has over 800 locations throughout the United States and is one of North America’s largest franchise car rental companies. U-Save is controlled, as to 86%, by U-Save Holdings, Inc., a private Mississippi company owned by Sanford Miller and Tom McDonnell, individuals residing in Florida and Mississippi, respectively.
Having primarily serviced U.S. municipal markets for the past 25 years, current expansion plans call for the opening of airport locations in the top 30 markets in the U.S. U-Save now services 23 airport markets in 12 different states. The strategy to expand U-Save’s presence in the airport market comes in response to requests from its franchisees and customers to extend the reach of the U-Save brand. The neighborhood market will continue to be a very important focus of the company, and further expansion in this market is also anticipated. U-Save Car Sales is a recent expansion of the U-Save brand into the Car Sales market. The strategy is to expand U-Save Car Sales throughout North America.
The following selected financial information of U-Save is based upon management prepared consolidated results of U-Save as at and for the twelve month periods ended August 31, 2006 and 2005.
|As of August 31, US dollars|
|Long term liabilities||$7,275,915||$7,231,304|
|For the 12 months ended August 31,|
Additional information on U-Save may be found at its website, www.usave.com.
Franchise Services of North America, Inc.
Upon completion of the proposed transaction and the two related private placements for aggregate gross proceeds of $3.5 million, it is expected that FSNA will be a Tier 1 industrial issuer pursuant to the policies of the TSX Venture Exchange (the “TSX-V”) and will have 55,381,962 consolidated shares issued and outstanding.
In connection with the RTO, the options currently outstanding under U-Save’s stock option plan will be converted into options under RAWC’s stock option plan on a basis that preserves their in the money value. The term of certain options issued under RAWC’s stock option plan that would otherwise expire prior to the completion of the RTO will be extended, subject to shareholder approval, for a period of either 90 days or one year.
Board of Directors and Management Team
Contingent on approval of this transaction by RAWC shareholders, FSNA will be led by an experienced board and management team comprised of the following individuals:
Board of Directors:
Sanford Miller, Tom McDonnell, Dave Forseth, Phil DeLeon, Vicki Pyne
Senior Management Team:
Sanford Miller – Co-Chief Executive Officer
Tom McDonnell – Co-Chief Executive Officer
Robert M. Barton – Executive Vice President & Chief Operating Officer
O. Kendall Moore – Vice President, General Counsel & Secretary
Henri Lefebvre – Chief Accounting Officer & Canadian General Manager
Ashley Chambliss – Controller, US Operations
Sanford Miller, Co-Chief Executive Officer and a Director. Mr. Miller joined U-SAVEâ in December, 2003 as Co-Chief Executive Officer. Mr. Miller also presently serves as Manager of Basin Street Partners, LLC, a private equity firm promoting entrepreneurial activities. Previously, Mr. Miller was Chairman of the Board of Directors and CEO of Budget Group, Inc., the holding company for Budget Rent A Car Corporation and related subsidiaries. He served in this capacity from 1997 until November, 2002, at which time he left to be employed on a full-time basis with Basin Street Partners. Mr. Miller has served as past President of the American Car Rental Association and Chairman of Budget RAC Corporate Licensee Advisory Board. Mr. Miller is resident in Ormond Beach, Florida.
Thomas P. McDonnell, III, Co-Chief Executive Officer and a Director. Mr. McDonnell has been President of Private Investment Management, Inc., in Jackson, Mississippi since 1990. During the same period, he has served as President and Director of LeFleur Transportation of Jackson, Inc. and its affiliates. Since 1994, he has been a U-SAVEâ franchisee, and he currently operates two U-SAVEâ franchises in the Jackson area, and one in Myrtle Beach, South Carolina. Mr. McDonnell became Chief Executive Officer and Director of U-SAVEâ in 1996 and served as President from 1999 to 2003, and again from September, 2005 to September, 2006. Mr. McDonnell is resident in Madison, Mississippi.
Dave Forseth, Director. Mr. Forseth is the current CEO and Chairman of the Board of RAWC. He has been the President and Chief Executive Officer of Practicar Systems Inc., the wholly owned and operating subsidiary of RAWC, since October, 1997. Mr. Forseth will also serve as a consultant to FSNA following the completion of the RTO in order to assist in the continued development of the Rent-A-Wreck system, and the Canadian expansion of U-Save. Mr. Forseth will also continue to be active in granting franchises throughout Canada on behalf of FSNA and its subsidiaries. Mr. Forseth is resident in Calgary, Alberta.
Phil DeLeon , Director. Mr. DeLeon has been President of OnX Enterprise Solutions, Inc., a company listed on the Toronto Stock Exchange (TICKER: ON), since January, 2000. OnX is a leading IT services organization focusing on delivering consulting, web design, infrastructure, integration and outsourcing solutions. Mr. DeLeon is resident in Toronto, Ontario.
Vicki Pyne , Director. Ms. Pyne is the Senior Vice President of Cigna Health Care, a subsidiary of Cigna Corporation (NYSE: CL) and has been in this role since May, 2006. From September, 2002 to May, 2006, Ms. Pyne served as Vice President, Human Resources-Asia Pacific for Cigna International, and from September, 1998 to July, 2002, Ms. Pyne was the Senior Vice President-Human Resources for Budget Group, Inc. Ms. Pyne is resident in Hartford, Connecticut.
Robert M. Barton, Executive Vice President, Chief Operating Officer. In September of 2006, Mr.Barton became U-Save’s Chief Operating Officer. Mr. Barton has served as Executive Vice President of U-SAVEâ since August, 2005. In July of 2004, Mr. Barton joined U-Save Auto Rental of America, Inc. as Vice President, Sales and Marketing. From June, 2003 to April, 2006, Mr. Barton was part owner and Executive Vice President of Van Rental Services, LLC, a U-Saveâ franchise located in Tampa, Florida. From July, 2000 to June, 2003, Mr. Barton served as Executive Director of Dollar Thrifty Automotive Group in Tampa, Florida. From May 1985 to July 2000, he was Vice President of Budget Group, Inc., the holding Company for Budget Rent A Car Corporation and related subsidiaries, headquartered in Scottsdale, Arizona. Mr. Barton is resident in Lithia, Florida.
O. Kendall Moore, Vice President, General Counsel and Secretary. Mr. Moore joined U-Saveâ in May, 2000 as General Counsel and Secretary. From 1987 to 2000, he was employed by Butler, Snow, O’Mara, Stevens & Cannada, PLLC, Mississippi’s largest law firm, where he served as U-Save’s primary external counsel. Mr. Moore is resident in Madison, Mississippi.
Henri Lefebvre, Chief Accounting Officer & Canadian General Manager. Mr. Lefebvre has been with RAWC as Chief Financial Officer and Secretary since June, 1999. He has been a Principal of Facto Management Inc., a private management consulting firm, since 1989 to date, and Chief Financial Officer and Secretary of a junior public petroleum company from 1988 to 1994. He obtained his Certified General Accountant (CGA) designation in 1980. Mr. Lefebvre is resident in Calgary, Alberta.
Ashley Chambliss , Controller, US Operations. In March, 2001, Ms. Chambliss joined U-Save as its Controller. From February, 1999 to February, 2001, Ms. Chambliss served as controller of a subsidiary of the Mississippi Hospital Association. From December, 1997 to February, 1999 Ms. Chambliss was a Supervising Senior Accountant with KPMG Peat Marwick, LLC. Ms. Chambliss obtained her Certified Public Accountant designation in March, 1997. Ms. Chambliss is resident in Madison, Mississippi.
Conditions to Completion of Transaction
Completion of the transaction is subject to a number of conditions, including completion of the $3.5 million private placements, TSX-V acceptance and shareholder approval. The transaction cannot close until the required shareholder approval is obtained. There can be no assurances that the transaction will be completed as proposed or at all.
Investors are cautioned that except as disclosed in the information circular to be prepared in connection with the transaction, any information released or received with respect to the RTO may not be accurate or complete and should not be relied upon. Trading in the securities of RAWC should be considered highly speculative.
Resumption of Trading
Trading in the shares of RAWC will remain halted until the TSX-V has confirmed that the documentation requirements of Policy 5.2 of the exchange have been met.
Blackmont Capital, Inc., subject to completion of satisfactory due diligence, has agreed to act as sponsor to RAWC in connection with the transaction. An agreement to sponsor should not be construed as any assurance with respect to the merits of the transaction or the likelihood of completion.
About Rent-A-Wreck Capital Inc.
RAWC is a publicly traded company on the TSX-V (TICKER: RAW). RAWC, through its wholly owned subsidiary, Practicar Systems Inc., owns the rights to the Rent-A-Wreck Trademarks for all of Canada. Rent-A-Wreck® operates a network of 50 franchises from coast-to-coast in Canada, providing a range of vehicle rental/leasing and sales options to its customers. The Rent-A-Wreck system has been in continuous operation in Canada since 1976.
About Blackmont Capital, Inc.
Blackmont is an independent investment firm with over 650 employees in 11 locations across the country. Blackmont provides clients with senior expertise in wealth management, institutional sales and trading, investment banking, and research. Along with parent company Rockwater Capital Corporation (RCC-TSX), the combined firm administers over $14 billion in client assets across Canada. Blackmont Capital Inc. – Member of CIPF and the IDA.
About Meridian Merchant Capital Canada Ltd.
Meridian Merchant Capital Canada Ltd (“Meridian”) is a Calgary and Vancouver based merchant banking firm providing corporate finance and services and advice, as well as arranging capital, and investing its own capital through its Trinity Capital Canada LP private fund. Meridian helps established, mid-market companies access private capital for growth, mergers/acquisitions, management buy-outs, or sale of businesses (particularly related to succession of entrepreneurial founders). Meridian identifies companies with established revenues of at least $5 million annually, seeking $1-25 million in equity, debt, or mezzanine capital.