A&W Revenue Royalties Income Fund announces a sale of units to shareholders of A&W of Canada Inc.

VANCOUVER, BC, April 16, 2021 /CNW/ - A&W Food Services of Canada Inc. ("Food Services") and A&W Revenue Royalties Income Fund (the "Fund") (TSX: AW.UN), announced today that A&W of Canada Inc. ("A&W Canada"), an indirect shareholder of Food Services, has completed a reorganization to provide liquidity for some of its long-standing shareholders and to simplify the indirect ownership of Food Services (the "Reorganization").

Prior to the Reorganization, Food Services owned securities in A&W Trade Marks Inc. (the "Exchangeable Securities") equivalent to 4,951,828 Trust Units (as defined below) of the Fund representing a 26% fully-diluted ownership of the Fund, not including the remaining equivalent Trust Units of the Fund issuable to Food Services as consideration for the January 5, 2021 adjustment to the Royalty Pool to be issued in December 2021.  The Exchangeable Securities owned by Food Services are exchangeable into either Limited Voting Units in the Fund (the "LVUs") or into Publicly Tradeable Units (the "PTUs" and together with the LVUs the "Trust Units") as permitted by the Fund's Amended and Restated Declaration of Trust and the Amended and Restated Exchange Agreement (the "Exchange Agreement"). 

As part of the Reorganization and pursuant to the Exchange Agreement, 1,042,000 Exchangeable Securities were exchanged into 521,000 PTUs, which were subsequently sold to shareholders of A&W Canada in private sales at the request of A&W Canada. The 521,000 PTUs were disposed of at a market value of $36.42 per PTU.  The 521,000 PTUs sold are subject to a four-month statutory hold period under applicable securities laws.

In addition, Food Services exchanged 3,014,040 of its Exchangeable Securities for 1,507,020 LVU's at $36.42 per LVU. The LVUs will continue to be owned by Food Services and assuming that all securities held by Food Services were exchanged for Trust Units of the Fund (but not including the remaining equivalent Units issuable to Food Services as consideration for the January 5, 2021 adjustment to the royalty pool of the Fund to be issued in December 2021), Food Services would hold 4,430,828 Trust Units, representing approximately 23% of the outstanding voting securities of the Fund on a fully-diluted basis.  As a result of the Reorganization, Food Services' percentage interest in the outstanding voting securities of the Fund decreased by approximately 3% on a fully-diluted basis. 

As part of this Reorganization, Food Services will pay a dividend in the aggregate amount of $66.3 million to its shareholders.  The purpose of the Reorganization, including the exchange by Food Services of 1,042,000 of its Exchangeable Securities for 521,000 LVU's and the disposition of the 521,000 Units at the request of A&W Canada, was to provide liquidity for some of its long-standing shareholders and to simplify the indirect ownership of Food Services. 

Food Services will continue to review their holdings of securities of the Fund and A&W Trade Marks Inc., and depending on market conditions, general economic conditions and industry conditions, the trading price of the Units, Food Services' and the Fund's business and financial condition and prospects and/or other relevant factors, may develop a variety of plans or intentions in the future and may increase or decrease its investments in the securities of the Fund or A&W Trade Marks Inc. or pursue a variety of actions in the open market or in privately negotiated transactions with one or more persons. Food Services may also engage with the trustees of the Fund from time to time concerning the foregoing and the Fund's and Food Services' business, management, operations, capitalization, financial condition, governance, strategy and future plans.

Food Services has filed an early warning report dated April 16, 2021 (the "Early Warning Report") with respect to the Reorganization and the sale of a portion of its ownership of securities exchangeable for Trust Units of the Fund.

There is no change in the total number of equivalent Trust Units of the Fund as a result of the Reorganization and the transaction is not dilutive to the Unitholders.  There is also no change in the amount of cash available to pay distributions to Unitholders of the Fund as a result of the Reorganization.  The regular monthly distribution is currently 13.5 cents per month per Trust Unit and is equivalent to an annual distribution rate of $1.62 per unit.

The Reorganization does not constitute a change of control of Food Services, as the existing shareholders will continue to maintain majority control of Food Services. There will also be no change in management or operations of the Food Services' business in connection with the Reorganization.

A&W Food Services of Canada Inc. – A&W Food Services of Canada Inc. is a corporation amalgamated under the laws of Canada and is 100 per cent Canadian owned and is one of the strongest brand names in the Canadian foodservice industry. A&W is the nation's second largest hamburger restaurant company with over 1,000 locations coast-to-coast. A&W Restaurants feature famous trade-marked menu items such as The Burger Family®, Chubby Chicken®, and A&W Root Beer®. For more information, please visit www.aw.ca.

A&W Revenue Royalties Income Fund – The A&W Revenue Royalties Income Fund is a limited purpose trust established to invest in A&W Trade Marks, which through its interest in A&W Trade Marks Limited Partnership (the Partnership), owns the A&W trade-marks used in the A&W quick service restaurant business in Canada.  The A&W trade-marks comprise some of the best-known brand names in the Canadian foodservice industry.  In return for licensing Food Services to use its trade-marks, Trade Marks (through the Partnership) receives royalties equal to 3% of the sales of A&W restaurants in the Royalty Pool. For more information, please visit www.awincomefund.ca.

Forward-Looking Information

Certain statements in this news release may contain forward-looking information within the meaning of applicable securities laws in Canada (forward-looking information). The words "anticipates", "believes", "budgets", "could", "estimates", "expects", "forecasts", "intends", "may", "might", "plans", "projects", "schedule", "should", "will", "would" and similar expressions are often intended to identify forward-looking information, although not all forward-looking information contains these identifying words.  Specific forward-looking statements include statements with respect to: the expectation that Food Services will pay a dividend; and Food Services acquiring or disposing of additional securities of the Fund in the future.

The forward-looking information is based on assumptions that management considered reasonable at the time it was prepared, which assumptions include: current store closures will be temporary and restaurant performance will continue to improve; the Fund will receive sufficient revenue in the future (in the form of royalty payments from Food Services) to maintain monthly distributions; the projections for the A&W business and the Fund provided by Food Services are accurate; no material changes will occur in the quick service restaurant burger market including as a result of changes in consumer taste or health concerns or changes in economic conditions or unemployment, the COVID-19 pandemic or a disease outbreak; and the impacts of the COVID-19 pandemic on the A&W system will not significantly worsen.

The forward-looking information is subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by the forward-looking information.  Those risks and uncertainties are described in the Fund's most recent Management Discussion and Analysis under the heading "Risks and Uncertainties" and the Fund's Annual Information Form under the heading "Risk Factors", available on SEDAR at www.sedar.com. The forward-looking information contained in this news release represents the Fund's expectations as of the date of this news release, and are subject to change after this date. The Fund assumes no obligation to update or revise any forward-looking information, except as required by applicable law.

SOURCE A&W Revenue Royalties Income Fund