Alaris Royalty Corp. Contributes US$46 Million to a New Partner

Alaris Royalty Corp. Contributes US$46 Million to a New Partner

CALGARY, Alberta, Nov. 19, 2018 (GLOBE NEWSWIRE) — Alaris Royalty Corp. (“Alaris” or the “Corporation”) (TSX: AD) is pleased to announce that it has contributed US$46,000,000 (the “GWM Contribution”) to a new partner, GWM Holdings, Inc. (“GWM”) and a subsidiary thereof. The GWM Contribution results in an increase of approximately $0.20 cents and $0.10 cents per share of revenue and net cash from operations respectively. Based on the GWM Contribution and outlook of the Corporation, Alaris is also pleased to announce an increase to its dividend of three cents per share (the “Dividend Increase”) on an annual basis, bringing the monthly dividend to $0.1375 ($1.65 per share annualized) from the current $0.135 ($1.62 per share annualized). The Dividend Increase will apply to the November dividend, payable in December. Following the GWM Contribution and Dividend Increase Alaris estimates its run-rate payout ratio to be approximately 90%.


“Given recent capital deployment into current and new partners, the confidence we have in another strong aggregate distribution reset coming January 1, 2019 and continued capital deployment opportunities in front of us, we are pleased to be able to pass along a modest dividend increase to our shareholders,” said Darren Driscoll, Chief Financial Officer, Alaris.


NEW PARTNER – GWM Holdings, Inc.

GWM Holdings, Inc. provides data-driven digital marketing solutions for advertisers globally. The company manages performance and branding campaigns for advertisers across all forms of digital media including display, video, connected TV, social, and email on devices including computers, mobile, tablets, and Connected TV. With a global presence, GWM has offices in North America, Asia, and Europe.

Pursuant to the agreements (the “GWM Agreements”) among Alaris, Alaris USA and GWM, Alaris and Alaris USA collectively made the US$46,000,000 GWM Contribution in exchange for an aggregate annualized cash distribution of US$5,580,000 (the “GWM Distribution”). Due to the structure used for the GWM Contribution, the after-tax yield on the GWM Distribution is expected to be equivalent to that of a deal done at a first year pre-tax yield of approximately 13%. Commencing on January 1, 2020, the GWM Distribution will be adjusted annually based on the percentage change in gross revenue over the most recently completed 12 month period versus the prior 12 month period, subject to a collar of 8%. A wider collar on the GWM Distribution will allow Alaris to capture more upside through larger resets as GWM is expecting significant growth in the years to come. Given the growth profile of GWM, the 8% collar and an 8.57x predetermined exit multiple, Alaris is expecting returns equal to or greater than prior deals that had higher first year pre-tax yields. GWM used the proceeds from the GWM Contribution to complete a management buyout of an existing equity sponsor.


“We are extremely pleased to be adding GWM as a new partner. The management team of GWM targeted Alaris as a way of increasing their stake in their company as they continue on their high growth trajectory. Transitioning from traditional private equity ownership to a partnership with Alaris will result in a significant gain for them if they achieve the objectives that they’ve set. For Alaris, the company has not only shown excellent growth, they are a true cash conversion business with low levels of debt or required capital expenditures. Combine that with a high free cash flow cushion and we are confident that we’ve added another very strong partner,” said Steve King, President and Chief Executive Officer, Alaris.

Based on Alaris’ review of GWM’s internal pro forma results for the most recent trailing twelve month period in 2018, management of Alaris believes that GWM would have an earnings coverage ratio in a range of 1.5x to 2.0x, after giving effect to the GWM Contribution, other changes to GWM’s capital structure and the GWM Distribution payable to Alaris.


ABOUT THE CORPORATION:

Alaris provides alternative financing to private companies (“Partners”) in exchange for distributions with the principal objective of generating stable and predictable cash flows for dividend payments to its shareholders. Distributions from the Partners are adjusted each year based on the percentage change of a “top line” financial performance measure such as gross margin and same-store sales and rank in priority to the owners’ common equity position.

For further information please contact:

Curtis Krawetz

Vice President, Investments and Investor Relations

Alaris Royalty Corp.

P: (403) 221-7305

www.alarisroyalty.com