ENTREC Corporation Completes Acquisition of Capstan Hauling Ltd.

ACHESON, Alberta, Oct. 02, 2018 (GLOBE NEWSWIRE) -- ENTREC Corporation (“ENTREC” or the “Company”), a heavy haul transportation and crane solutions provider, is pleased to announce that it has completed the acquisition of Capstan Hauling Ltd. (“Capstan”).

Based in Grande Prairie, Alberta, Capstan is a leading provider of heavy haul transportation services to the oil and natural gas industry in north-west Alberta and north-east B.C.  Capstan has approximately 45 employees and lease operators and operates an extensive equipment fleet valued in excess of $9.0 million. Capstan’s fleet consists of mobile cranes, picker trucks, winch trucks and a wide variety of multi-wheeled trailers.

“With our outlook improving for the oil and natural gas industry in western Canada, this acquisition is very timely for ENTREC,” said John M. Stevens, ENTREC’s President and CEO. “Capstan has a very strong reputation for customer service and when combined with our existing operations in the region, we will be well positioned to benefit from improving market fundamentals. This includes the potential for increased demand for our services related to natural gas exploration and production should LNG Canada proceed with the construction of a Liquefied Natural Gas (“LNG”) facility in Kitimat.”

In conjunction with the acquisition, ENTREC has also merged its Grande Prairie oilfield transportation division with Capstan and will operate the combined business under the Capstan brand. The shareholders of Capstan have also retained a large ownership interest in the combined business post-acquisition and the existing Capstan management will lead and manage the combined business going forward.

The aggregate consideration paid at closing consisted of: (i) the issuance of common shares in a subsidiary of ENTREC at a value of $4.0 million; (ii) a promissory note of $3.0 million bearing interest at an annual rate of 5.00% and due September 30, 2023; and (iii) cash of $10.0 million less outstanding debt and finance lease obligations at closing and less certain holdback amounts. The final purchase price remains subject to adjustment based on Capstan’s working capital as at September 30, 2018 as well as other post-closing adjustments. The target working capital balance is $3.7 million.

Also included in the acquisition of Capstan was real estate assets valued at approximately $6.0 million. ENTREC is currently pursuing a sale-leaseback transaction related to the real estate assets. In conjunction with the acquisition, Current Financial Corp., a non-arm’s length party, provided a bridge financing loan to ENTREC in the amount of $3.5 million. The bridge financing loan was incurred to help temporarily finance the acquisition of Capstan until such time as ENTREC is able to complete its planned sale lease-back of the Capstan real estate.

The common shares of a subsidiary of ENTREC that were issued to the vendors will be presented as a minority interest in ENTREC’s consolidated statement of financial position. In addition, subject to the approval of the Toronto Stock Exchange (TSX) at the time of conversion, and based on the fair market value at the time of conversion, these common shares are convertible into common shares of ENTREC at the greater of: (i) the 10 day weighted average trading price of ENTREC common shares on the TSX at the time of conversion and (ii) $0.40 per share.

ENTREC is a heavy haul transportation and crane solutions provider to the oil and natural gas, construction, petrochemical, mining and power generation industries. ENTREC is listed on the TSX under the symbol ENT.

Forward-looking Statements

This press release contains forward-looking statements which reflect ENTREC’s current beliefs and are based on information currently available to ENTREC. These statements require ENTREC to make assumptions it believes are reasonable and are subject to inherent risks and uncertainties. Actual results and developments may differ materially from the results and developments discussed in the forward-looking statements as certain of these risks and uncertainties are beyond ENTREC's control. 

Examples of such forward-looking statements in this press release relate to, but are not limited to, ENTREC’s expectations regarding the future earnings of Capstan. ENTREC’s and Capstan’s ability to achieve forecasted earnings as a combined entity is dependent on, but are not limited to, ENTREC’s ability to achieve facility consolidations and the elimination of redundant administrative and operating costs, fluctuations in the demand for heavy haul transportation services in the areas Capstan serves, political and economic conditions, industry competition, and Capstan’s ability to attract and retain both customers and key personnel.

ENTREC’s ability to complete a sale lease-back of the Capstan real estate is dependent on its ability to successfully source and negotiate a sale lease-back transaction on terms acceptable to ENTREC. There can be no assurance this will be achieved.

Readers are cautioned not to place undue reliance on these forward-looking statements, which are given as of the date hereof, and to not use such forward-looking statements for anything other than their intended purpose. ENTREC undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

For further information, please contact: 

John M. Stevens - President & CEO
Telephone: (780) 960-5625

Jason Vandenberg – CFO
Telephone: (780) 960-5630