At Second Cup, we know that in order to provide the best coffee for our Guests, we must continue to work in harmony with both the environment and people who provide us with the best quality coffee beans. To both our Guests and coffee producers, we pledge that our coffee growing environment is treated with the utmost respect and dignity. All of our coffee producers provide a safe and healthy work environment and employees are compensated in a fair and equitable manner. As well, Second Cup continues to provide financial remuneration for quality beans to directly benefit the farmers, workers and mills. This is our promise.
Second Cup Royalty Income Fund announces acquisition of the The Second Cup Ltd. and the rescheduling of the Annual Meeting
May 1, 2009
9:09am
MISSISSAUGA, ON, May 1 /CNW/ - Second Cup Royalty Income Fund (the
"Fund") (TSX: SCU.UN) announced today that its wholly-owned subsidiary has
entered into an agreement to acquire all of the outstanding shares of The
Second Cup Ltd. ("Second Cup") for nominal consideration effective June 27,
2009. Following closing of the acquisition, Second Cup and its management team
will continue to operate the Second Cup business as a wholly-owned subsidiary
of the Fund, recombining the business of the Fund with the business of Second
Cup. Second Cup is the operating company that carries on the business of
franchising Second Cup cafés and operating company-owned cafés in Canada.
Second Cup currently makes royalty payments to a subsidiary of the Fund
pursuant to a license and royalty agreement. As a result of the recombination,
unitholders will own both the royalty and operating branches of the business.
The Fund also announced that the annual general meeting has been rescheduled
and will take place on June 8, 2009.
The acquisition is the result of a review of the structure of the Fund
and the Second Cup business, undertaken by the Fund and The Second Cup Coffee
Company Inc., the current owner of Second Cup. In connection with its review,
the Fund received financial advice from TD Securities Inc., the Fund's
exclusive financial advisor. Based on its review and such financial advice,
the Board of Trustees of the Fund determined that it was in the best interests
of unitholders to recombine the business of Second Cup with the Fund for a
number of reasons, including:
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- the recombination simplifies the relationship between the Fund and
Second Cup and provides unitholders with direct oversight over the
operation of the Second Cup business through the Fund's Board of
Trustees;
- the recombination will enable unitholders to enjoy the full upside in
the business attributable to operational improvements, new café
openings, exciting new business opportunities and the eventual
strengthening of the Canadian economy;
- the recombination will not impact the Fund's intention to pay
distributions at an annual rate of $0.92 as announced on April 20,
2009;
- the recombination will mean that unitholders will in the future
receive the full benefit of net new café openings as there will no
longer be a "vend-in" mechanism; and
- the Fund will take on no additional bank debt as a result of the
recombination and will have a strong pro forma balance sheet to
support the future growth of the business.
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Commenting on the recombination, David Bloom, Chairman of the Board of
Trustees of the Fund, stated "the recombination allows unitholders to capture
the benefit of the long term prospects of Second Cup. Notwithstanding the
Fund's current top line royalty structure, unitholders are exposed to the risk
of operating shortfalls at Second Cup in difficult business environments, as
experienced in 2008 and as expected for 2009. On a going forward basis,
distributions to unitholders and the value of the Fund's units will be based
upon the performance of the Second Cup business as a whole. My fellow trustees
and I are confident in the experienced management team under the leadership of
Stacey Mowbray, President, and its focus on strengthening the Second Cup
trademark by delivering superior customer satisfaction, by launching exciting
new initiatives and programs to enhance customer loyalty and by profitably
growing the café network."
Closing of the acquisition is subject to receipt of the consent of the
Fund's lender as well as certain other conditions contained in the purchase
agreement.
The Fund is an open-ended trust established under the laws of the
Province of Ontario. It holds, through an indirect wholly-owned limited
partnership, the Canadian trade-marks and other intellectual property and
associated rights used by Second Cup in connection with the operation of
Second Cup cafés in Canada. For more information on the Second Cup Royalty
Income Fund please visit www.secondcupincomefund.com.
Second Cup is Canada's largest specialty coffee café franchisor and
second largest retailer of specialty coffee, as measured by number of cafés.
For further information on Second Cup, visit www.secondcup.com.
%SEDAR: 00021352E
For further information: Jim Anas, (905) 362-1833, investor@secondcup.com, www.secondcupincomefund.com