CALGARY, Alberta--(BUSINESS WIRE)--Rocky Mountain Dealerships Inc. (TSX:RME, and hereinafter "RME"), Canada's largest agriculture equipment dealer, today announced that it has entered into a definitive agreement to acquire the shares (the "Acquisition") comprising John Bob Farm Equipment ("John Bob"). All financial figures are expressed in Canadian dollars.
John Bob is a Saskatchewan-based dealer of New Holland agriculture equipment (a brand of CNH Industrial) with locations in Outlook and Tisdale. A number of complimentary short line agriculture equipment brands including MacDon and Bourgault are also sold through John Bob’s locations. For the most recent fiscal year ending November 30, 2017, John Bob’s consolidated top-line revenue was approximately $38 million.
“At our investor event on May 30, 2018, we told investors that we would invest where we believed the best returns for our shareholders would be, and that we believed the best opportunities for Canadian growth would be in Saskatchewan," said Garrett Ganden, President & Chief Executive Officer of RME. "John Bob’s two New Holland dealerships in the agricultural heartland of Saskatchewan are a perfect fit with our growth plan. Both branches, located in great agricultural communities with long-standing support for New Holland products, can take full advantage of our integration framework and capital to expand sales and profitability. We look forward to working with and growing the New Holland portion of our agriculture business and see tremendous opportunity for RME as we work to further grow our dealer network in this very important market.”
Subject to the satisfaction of closing conditions and closing adjustments, the shares and real estate comprising John Bob will be purchased as follows:
- Real estate valued at $5.4 million in cash;
- The John Bob business for $7.5 million in cash; and
- An earn out in effect from July 1, 2018 to June 30, 2020 to a maximum of $0.5 million, based on 50% of annual EBITDA that exceeds $1.5 million after corporate overhead is charged back to the two branches.
The multiple paid for John Bob is effectively five times EBITDA, which is consistent with the multiple range discussed during the analyst day on May 30th, and consistent with an entry into a new market under a new brand with a strong management team. Investors are reminded that valuation metrics are based on the business and not the real estate as most dealerships operate under leases.
RME remains poised for further growth with a strong balance sheet and will use its existing cash and credit facilities to fund the Acquisition.
“By joining Rocky Mountain, our branches will be able to give our customers faster access to more agriculture equipment products and services while providing customers with the great care they have come to expect from our people,” said John McShannock, founder of John Bob. “I have no doubt that, as Rocky Mountain grows, so too will the opportunities for our employees and the surrounding communities.”
Caution regarding forward-looking statements
Certain information set forth in this news release, including, without limitation, statements that imply any future earnings, profitability, economic benefit or other financial results resulting from the acquisition of John Bob; statements about RME's ability for further growth; statements implying or discussing future growth or acquisition opportunities in Saskatchewan or elsewhere; statements discussing the valuation of acquisition; statements stating or implying that RME would continue invest where it believed the best returns for RME's shareholders would be; statements that the best opportunities for RME's Canadian growth would be in Saskatchewan; and, statements discussing customers' faster access to more agriculture equipment products and services as a result of this acquisition, are forward-looking information within the meaning of applicable Canadian securities laws. By its nature, forward-looking information is subject to numerous risks and uncertainties, some of which are beyond RME's control. While this forward-looking information is based on information and assumptions that RME's management believes to be reasonable, there is significant risk that the forward-looking information will prove not to be accurate. Readers are cautioned not to place undue reliance on forward-looking information as a number of factors could cause actual future performance and events to differ materially from that expressed in the forward-looking information. Accordingly, this news release is subject to the disclaimer and qualified by risks and other factors discussed by RME in its MD&A for the quarter ended March 31, 2018, and as discussed in RME's Annual Information Form dated March 13, 2018 under the heading "Risk Factors." Except as required by law, RME disclaims any intention or obligation to update or revise forward-looking statements, and further reserves the right to change, at any time, at its sole discretion, its current practice of updating its guidance and outlooks.
About Rocky Mountain Dealerships Inc. (TSX:RME)
RME is Canada's largest agriculture equipment dealer with branches located throughout Alberta, Saskatchewan, and Manitoba. Through its dealer network, RME sells, rents, and leases new and used agriculture equipment and offers product support and finance to its customers.