Dominion Mortgage Centers Reaches Agreement to Acquire Remaining 30% of Newton Connectivity Systems
VANCOUVER, British Columbia, Feb. 10, 2022 (GLOBE NEWSWIRE) — Dominion Lending Centers Inc. (TSX: DLCG) (“DLC” or the “Company”) is pleased to announce that it has entered into a purchase agreement with Next4 Holdings Inc. (“ Next4″) to acquire the remaining 30% of 10017078 Canada Inc. (“Newton Holdco”) that DLC does not already own (the “Newton Acquisition”) for an aggregate purchase price of $24,000,000 (the ” Buying price “). The purchase price is to consist of a cash payment of $16,865,000 and the issuance of 1,853,247 Class “A” common shares of the Corporation (the “Common Shares”) having a deemed value of $3.85 per share (the “Share Consideration”). DLC currently owns 70% of Newton Holdco and Newton Holdco owns 100% of the issued and outstanding shares of Newton Connectivity Systems Inc. (“Newton”). Closing of the Newton Acquisition is expected to occur on or about February 28, 2022.
Geoff Willis (Chairman of Newton) and Kevin Dear (Vice Chairman of Newton) are both directors and 25% indirect shareholders of Next4. As such, the acquisition of Newton is a related party transaction for purposes of applicable securities laws, however, the Company is relying on exemptions from the minority shareholder valuation and approval requirements prescribed by Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions given that the fair market value of the acquisition is less than 25% of DLC’s market capitalization.
Gary Mauris, Executive Chairman and CEO of the company, said, “We acquired Newton together with Next4 in December 2016 and are incredibly proud of what we have built over the past 5 years. Newton has become one of the leading connectivity platforms for mortgage professionals and lenders in Canada and has become an integral part of the DLC franchise system. With Newton able to send offers directly to lenders on its own connectivity bridges starting July 1, 2022 and with over 50% of the DLC Group’s funded volumes now submitted through Velocity, we felt the time was right. ideal to acquire the exceptional 30% of Newton that we did not already have. Additionally, we are pleased to announce that Geoff Willis and Kevin Dear will remain with us to continue their excellent leadership of Newton in the future.
In order to finance the acquisition of Newton, the Company intends to enter into an amending agreement with The Toronto-Dominion Bank (“TD”), pursuant to which the Company will increase its acquisition line of credit by $24,000,000 (the ” acquisition line of credit”). A total of $16,865,000 is expected to be drawn from the acquisition line of credit to pay the sellers the cash consideration at closing and a total of $7,135,000 is expected to be drawn from the acquisition line of credit to be transferred to the Company’s non-core business unit as compensation for the issuance of the equity consideration (the amount of which was paid on the Company’s junior term loan with TD). Thus, the acquisition of Newton will result in net additional borrowings of $16,865,000, with the Corporation’s core business borrowings increasing by $24,000,000 and the Corporation’s non-core business borrowings decreasing by $7,135,000. With the issuance of the stock consideration, the adjustments between the core business and the non-core business are required to make the company’s non-core business whole for the stock consideration paid to Next4.
About Dominion Lending Centers Inc.
The DLC Group is the leading network of mortgage professionals in Canada. The DLC Group operates through Dominion Lending Centers and its three principal subsidiaries, MCC Mortgage Center Canada Inc., MA Mortgage Architects Inc. and Newton Connectivity Systems Inc., and has operations across Canada. The DLC Group’s extensive network includes approximately 7,500 agents and 515 locations. Based in British Columbia, DLC Group was founded in 2006 by Gary Mauris and Chris Kayat.
The Company’s contact details are as follows:
Caution Regarding Forward-Looking Information
Certain statements contained herein constitute forward-looking information under applicable securities laws. Forward-looking information generally contains statements containing words such as “anticipate”, “believe”, “estimate”, “will”, “expect”, “plan”, “intend” or similar words suggesting future results or prospects. Forward-looking information contained in this document includes, but is not limited to:
the expected completion of the acquisition of Newton; and
the expected completion of the amendment to the credit agreement with TD to increase the acquisition line of credit.
This forward-looking information is based on a number of assumptions which may prove to be incorrect. Assumptions have been made regarding the following matters, in addition to any other assumptions identified in this press release:
the conditions to complete the Newton Acquisition will be satisfied and the transactions will be completed as planned; and
the Company and TD will negotiate the modification of the credit agreement on mutually acceptable terms.
This forward-looking information is necessarily based on numerous estimates and assumptions, including significant estimates and assumptions, relating to the factors identified below which, although considered reasonable by the Company as of the date hereof, taking into account experience and management’s perception of current conditions and expected developments, are inherently subject to significant commercial, economic and competitive uncertainties and hazards. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. These factors include, but are not limited to, changes in taxes; increases in operating, general and administrative and other costs; changes in interest rates; general business, economic and market conditions; our ability to obtain services and personnel on a timely basis and at an acceptable cost to carry out our business; DLC’s ability to maintain its current number of franchisees and add additional franchisees; changes to Canadian mortgage and mortgage brokerage laws; significant declines in overall mortgage activity in Canada; changes in fees paid for mortgage brokerage services in Canada; changes to the regulatory framework for the Canadian housing industry; demand for DLC products remaining consistent with historical demand; changes or interpretation of laws, regulations or policies; the outcome of existing and potential legal proceedings, regulatory actions, audits and assessments; and other risks and uncertainties described in our other filings with Canadian securities regulators.
Many of these uncertainties and contingencies may affect our actual results and could cause actual results to differ materially from those expressed or implied by any forward-looking statements made by or on our behalf. Readers are cautioned that forward-looking statements are not guarantees of future performance. All forward-looking statements made in this press release are qualified by these cautionary statements. The above list of risks is not exhaustive. For more information on the risks, see the risk factors identified in our last annual report. The forward-looking information contained herein is made as of the date hereof and, except as required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements or information, whether due to new information, future events or otherwise.