• Strengthens leadership position of Company as the largest provider of aftermarket parts for the Canadian and US transit bus industry;
• Added value through combined scale, footprint and overhead utilization and management expects transaction to be accretive to earnings and cash flow.
DBNA’s Orion parts business generated revenue in 2012 of approximately $54 million, a portion of which was from supporting the nearly 10,000 Orion buses currently in operation in Canada and the United States. The purchase price for the assets was approximately $29 million (which includes an estimated $6.5 million for the purchase of accounts receivable) and is subject to post-closing adjustments for working capital which are normal and customary for these types of transactions. The purchase price was funded by using proceeds from the recently announced equity investment by Marcopolo S.A., one of the world’s leading global bus manufacturers, which made the first tranche of its investment in New Flyer, totaling C$51.7 million, on February 15, 2013.
Under the terms of the transaction with DBNA, New Flyer has:
• acquired DBNA’s Orion aftermarket parts inventory, accounts receivable and assumed certain obligations under its parts contracts with transit customers;
• acquired an exclusive license to use DBNA’s proprietary part designs for Orion buses in connection with New Flyer’s aftermarket parts business; and
• entered into an arrangement under which New Flyer will be the exclusive supplier of parts required by DBNA for customer warranty support, under Orion bus purchase contracts and pre-closing parts contracts.
The companies have also entered into a transition services agreement for an interim period following the purchase, during which time the business will be prudently and efficiently integrated into New Flyer’s business systems and four existing parts distribution centers in Canada and the US.
“This announcement follows on the co-operative relationship we have developed with Daimler Buses North America,” explained Paul Soubry, New Flyer’s President and Chief Executive Officer. “In the last eight months we have assumed two Orion bus manufacturing contracts: one for New York City Transit and the other for King County Metro in Seattle for a total of 194 firm bus orders and options for an additional 291 buses (for a total of 485 equivalent units).” Mr. Soubry went on to explain,“This acquisition is consistent with our strategic plan and enables New Flyer to further diversify and grow our aftermarket parts business.”
Bernd Voigt, President and CEO of Daimler Buses North America added,“It was important to DBNA that we have a market leader such as New Flyer supporting the Orion buses currently in service in Canada and the US with high quality parts and proven service. Further, DBNA required a reliable source of spare parts as we fulfill our bus warranty and support obligations to Orion customers under bus purchase contracts. Together with New Flyer, we will make sure a robust service infrastructure continues to provide a high level of service and support.”
New Flyer will provide further details and insights into its transition and integration plan as part of the next investor call scheduled for 9:00 am (Eastern time) on March 22, 2013, following the release of its 2012 year-end results. Orion customers will receive direct communication from DBNA and New Flyer regarding the transition of the business, and are asked to continue working directly with the Orion Aftermarket Parts Service Organization as usual, until further advised.
CIBC World Markets acted as financial advisor to the Company.
All dollar amounts are stated in US currency, unless otherwise noted.
About New Flyer
New Flyer (newflyer.com) is the leading manufacturer of heavy-duty transit buses in Canada and the United States. The Company’s three manufacturing facilities in Winnipeg, MB; St. Cloud, MN and Crookston, MN are all ISO 9001, ISO 14001 and OHSAS 18001 certified. The Company currently operates a parts fabrication facility in Elkhart, IN and four parts distribution centers in Winnipeg, MB; Brampton, ON; Erlanger, KY and Fresno, CA. The Company also operates a service center in Arnprior, ON.
With a skilled workforce of over 2,200 employees, New Flyer is a technology leader, offering the broadest product line in the industry, including drive systems powered by clean diesel, LNG, CNG and electric trolley as well as energy-efficient diesel-electric hybrid vehicles. New Flyer has delivered over 32,000 heavy-duty buses in Canada and the United States. All products are supported with an industry-leading, comprehensive parts and service network. Further information is available on New Flyer’s website.
The common shares and convertible unsecured subordinated debentures of New Flyer are traded on the Toronto Stock Exchange under the symbols NFI and NFI.DB.U, respectively.
This press release may contain forward-looking statements relating to expected future events, including the parts supply and licensing arrangements between New Flyer and DBNA, the integration of the acquired business into New Flyer’s existing business, the diversification and growth of New Flyer’s aftermarket parts business and the accretive effects of the transaction to earnings and cash flow of New Flyer. Although the forward-looking statements contained in this press release are based upon what management believes to be reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward-looking statements, and the differences may be material. Actual results may differ materially from management expectations as projected in such forward-looking statements for a variety of reasons, including risks related to acquisitions, joint ventures and other strategic relationships with third parties, market and general economic conditions and economic conditions of and funding availability for customers to purchase buses and to purchase parts or services, customers may not exercise options to purchase additional buses, the ability of customers to terminate contracts for convenience and the other risks and uncertainties discussed in the materials filed with the Canadian securities regulatory authorities and available on SEDAR at sedar.com. Due to the potential impact of these factors, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.