Expected to be 15%
accretive to earnings per share on a pro forma basis
LANGLEY, BC, Feb. 7, 2022 /CNW/ - Hardwoods Distribution Inc.
("HDI" or the "Company") (TSX: HDI)
today announced the completion of its previously announced
acquisition (the "Acquisition") of substantially all of
the assets and assumption of certain working capital liabilities of
Mid-Am Building Supply, Inc. ("Mid-Am"). The Acquisition was
completed for a purchase price of US$270 million and had an
effective closing date of February 4, 2022.
"We are excited to be welcoming Mid-Am's team to HDI," expressed
Rob Brown, President and Chief
Executive Officer of HDI. "Mid-Am strategically expands our
access to the pro dealer customer channel and, when combined with
strong participation in the pro dealer and home center customer
channels we gained when we acquired Novo Building
Products last year, substantially increases the addressable
market opportunity for HDI's products. The addition of Mid-Am also
raises our capability in the new home and repair and remodel
markets in the U.S., where we continue to see many factors
supporting a multi-year runway for growth."
"In the last six months we have added over US$900 million of estimated sales, and we
continue to see opportunity for growth. The building products space
remains fragmented which creates avenues to continue growing our
business through acquisitions, and our balance sheet continues to
be positioned to allow us to act on future opportunities,"
commented Mr. Brown."
In connection with the closing of the Acquisition, HDI closed on
an upsized credit facility with its existing lender, Bank of
America, N.A. (the "Lender"), for an increase in the size of
its existing senior secured credit facility (the "Expanded
Credit Facility") from its current size of US$525 million to a new aggregate facility amount
of up to US$900 million. The Expanded
Credit Facility includes (i) a revolving credit facility of up to
US$500 million which can be drawn upon in U.S. dollars and
Canadian dollars, and (ii) a term loan of up to
US$400 million. The New Credit Facility was
used to refinance
the outstanding debt of certain of the
Company's subsidiaries and fund the purchase price
for Mid-Am. The Expanded Credit Facility bears interest
at a rate equal to (a) Term SOFR plus (i) the applicable spread
adjustment for the relevant tenor and (ii) up to 2.25% or (b) the
base rate of interest charged by the Lender under the Expanded
Credit Facility from time to time ("Base Rate"). The Term
SOFR and Base Rate margins for the Expanded Credit Facility
are subject to performance pricing
adjustments, from time to time, based on
the Company's then applicable leverage ratio.
About HDI
HDI is one of North America's
largest suppliers of specialty building products to industrial
manufacturers, Pro Dealers, and home centers servicing the new
residential, repair and remodel, and commercial construction
end-markets. The Company currently operates a network in
North America of 89 distribution
and sales facilities in the United
States and Canada. HDI's
common shares are listed on the TSX under the symbol HDI.
Forward-Looking Statements
Certain statements in this news release may constitute
"forward-looking information" within the meaning of applicable
securities laws that involve known and unknown risks, uncertainties
and other factors that may cause actual results, performance
or achievements or industry results to be materially different
from any future results, performance or achievements or industry
results expressed or implied by such forward-looking
information. Forward-looking information are identified by the
use of terms and phrases such as "anticipate", "believe", "could",
"estimate", "expect", "intend", "may",
"plan", "predict", "project", "will", "would",
and similar terms and phrases, including
references to assumptions. Such information may involve, but is not
limited to, comments with respect to strategies, expectations,
planned operations or future actions. Forward-looking information
in this news release includes, without limitation, statements
with respect to: the expected accretion to
ash flows and earnings
resulting from the Acquisition; growth
prospects; we continue to see many factors supporting a
multi-year runway for growth in the new home and repair and remodel
markets in the U.S; and, the building products space remains
fragmented which creates avenues to continue growing our business
through acquisitions, and our balance sheet continues to be
positioned to allow us to act on future opportunities.
The forecasts and projections that make up the
forward-looking information in this news release are based on
assumptions which include, but are not limited to: no undisclosed
liabilities associated with the Acquisition; the financial impact
of the Acquisition is as currently expected by management; the
Company and Mid-Am do not lose any key personnel; there are no
decreases in the supply of, demand for, or market values of
products that harm the Company or Mid-Am's business; the Company
does not incur material losses related to credit provided to its
customers; the Company is able to sustain its level of sales and
earnings margins; the Company is able to grow its business long
term and to manage its growth; the Company is able to integrate
acquired businesses, including Mid-Am; there is no new competition
in the markets in which the Company operates that lead to reduced
sales and profitability; the Company can comply with existing
regulations and will not become subject to more stringent
regulations; no material product liability claims; importation of
products manufactured with hardwood lumber or sheet goods does not
increase and replace products manufactured in North America; the Company's management
information systems upon which it is dependent are not impaired;
the Company is not adversely impacted by disruptive technologies;
an outbreak or escalation of a contagious disease does not
adversely affect the Company's business; and, the Company's
insurance is sufficient to cover losses that may occur as a result
of its operations.
The forward-looking information and financial outlook in this
news release is subject to risks, uncertainties and other factors
that could cause actual results to differ materially from
historical results or results anticipated by the forward-looking
information. The factors which could cause results to differ from
current expectations include, but are not limited to: the actual
impacts of the Acquisition on the Company's earnings per share may
not be in line with management's expectations; the Acquisition may
not be immediately accretive to earnings per share; potential
undisclosed liabilities associated with the Acquisition; the
Expanded Credit Facility will be subject to certain restrictive
conditions that limit the discretion of management; exchange
rate fluctuations between the Canadian and US dollar could affect
the Company's performance; the Company's results are dependent upon
the general state of the economy; the Company depends on key
personnel, the loss of which could harm its business; decreases in
the supply of, demand for, or market values of hardwood lumber or
sheet goods could harm the Company's business; the Company may
incur losses related to credit provided to the Company's customers;
the Company's products may be subject to negative trade outcomes;
the Company may not be able to sustain its current level of sales
or earnings margins; the Company may be unable to grow its business
long term or to manage any growth; the Company may be unable to
integrate acquired businesses; competition in the Company's markets
may lead to reduced sales and profitability; the Company may fail
to comply with existing regulations or become subject to more
stringent regulations; product liability claims could affect the
Company's sales, profitability and reputation; importation of
products manufactured with hardwood lumber or sheet goods may
increase, and replace products manufactured in North America; disruptive technologies could
lead to reduced revenues or a change in our business model; the
Company is dependent upon its management information systems; the
Company's insurance may be insufficient to cover losses that may
occur as a result of the Company's operations; an outbreak or
escalation of a contagious disease may adversely affect the
Company's business; and, the Company's credit facilities affect its
liquidity, contain restrictions on the Company's ability to borrow
funds, and impose restrictions on distributions that can be made by
certain subsidiaries of the Company. More information about the
risks and uncertainties affecting HDI's business can be found in
the "Risk Factors" section of its Annual Information Form dated
March 11, 2021 which is available
under the HDI's profile on SEDAR at
www.sedar.com.
Although HDI has attempted to identify factors that would
cause actual actions, events or results to differ materially from
those disclosed in the forward-looking information in this news
release, there may be other factors that cause actions, events or
results not to be as anticipated, estimated or intended. Also, many
of the factors are beyond the control of HDI. Accordingly, readers
should not place undue reliance on forward-looking information in
this news release. The forward- looking information is made as of
the date of this news release, and HDI assumes no obligation to
publicly update or revise such forward-looking information to
reflect new information, subsequent or otherwise, except as may be
required by applicable securities law. The forward-looking
information contained herein is expressly qualified in its entirety
by this cautionary statement.
SOURCE Hardwoods Distribution Inc.