ENTREC Signs Option to Purchase Fort McMurray Property
October 5, 2012
Spruce Grove, Alberta, Canada – ENTREC Corporation (“ENTREC”) is pleased to announce that it has signed an option to purchase a 10 acre property (the “Property”) in Fort McMurray, Alberta, such option being exercisable at any time following the receipt of regulatory approval to the subdivision of the Property from the 27 acre parcel of land in which it is currently included. Once regulatory approval to that subdivision is received and the option is exercised, ENTREC intends to build a shop and office on the Property to support its Fort McMurray operations. This will allow ENTREC to significantly expand its Fort McMurray foot print and provide a base from which to significantly grow its on-site crane and heavy haul transportation services in the Fort McMurray region.
Perras Industrial Park Ltd. (“PIPL”), a non-arms length party, acquired from an arm’s length vendor (the “Original Vendor”) a 27 acre parcel of land in Fort McMurray for $850,000 per acre and subsequently gave ENTREC the option to purchase the Property for the same price per acre ($850,000 per acre). ENTREC has paid an initial deposit (the “Initial Deposit”) to PIPL of $3,500,000 and will pay a further $5,000,000 upon the exercise of the option to purchase the Property.
If regulatory approval to the subdivision of the Property from the 27 acre parcel of land in which it is currently included is not received within 24 months, then the option to purchase contemplates that ENTREC will enter a long term lease agreement with PIPL at market rates to be negotiated by the parties (with resort to arbitration if no agreement is reached) and with the Initial Deposit to be credited as pre-paid rent under the long term lease.
Until either (a) the option to purchase the Property is exercised or (b) regulatory approval to the subdivision of the Property from the 27 acre parcel of land in which it is currently included is not received within 24 months and ENTREC enters a long term lease agreement with PIPL, ENTREC will rent the Property from PIPL on a month to month basis for rent of $20,833.33 per month and use the site to store equipment used in its Fort McMurray operations.
Each of Rod Marlin, one of ENTREC’s directors and officers, and Glen Fleming, also one of its officers, owns 20% of the shares of PIPL. Therefore the transaction is technically a related party transaction under Multilateral Instrument 61-101 adopted by the Ontario Securities Commission. However, the purchase price for the Property, if the option to purchase is exercised, will be identical to the purchase price paid by PIPL to the Original Vendor for the Property. Further, any rent or other lease payments from ENTREC to PIPL will be on commercially reasonable terms. For the transaction, ENTREC is relying on the exemptions contained in sections 5.5(a) and 5.7(a), respectively, of Multilateral Instrument 61-101 from the valuation and minority shareholder requirements of that instrument as they apply to related party transactions since the fair market value of the Property is significantly less than 25% of ENTREC’s market capitalization.
ENTREC will only be able to exercise its option to purchase the Property following the receipt of regulatory approval to the subdivision of the Property from the 27 acre parcel of land in which it is currently included and, while such regulatory approval is anticipated to be received on favourable terms and conditions, there can be no assurance that such regulatory approval will be obtained or that it will be obtained on favourable terms and conditions. Also, it is expected that PIPL will finance a significant portion of its original acquisition of the lands with a vendor take-back financing and that the Original Vendor will register its interest in the entire 27 acre parcel of land as security for the vendor take-back financing. If approval to the subdivision of the lands is not obtained and if PIPL defaults on its obligations to the Original Vendor, ENTREC will have the option of purchasing the balance of the 27 acres from PIPL subject to the vendor take-back financing of the Original Vendor. If ENTREC does not exercise that option, the Original Vendor may enforce its security interest on the lands, including the Property leased by ENTREC.
ENTREC specializes in the lifting, transportation (over the road and on-site), loading, off-loading and setting of overweight and oversized cargo for the oil and gas, construction, petrochemical, mining and power generation industries. The common shares of ENTREC trade on the TSX Venture Exchange under the trading symbol "ENT".
This press release contains forward-looking statements that reflect ENTREC’s current beliefs and that are based on information currently available to ENTREC including statements relating to: (i) ENTREC either exercising its option to purchase the Property or entering into a long term lease for the Property; and (ii) the building of a shop on the lands to house ENTREC’s Fort McMurray operations. These statements require ENTREC to make assumptions it believes are reasonable but, as a result of such assumptions, such forward-looking statements 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. The assumptions made by ENTREC in making the statements relating to the building of a shop on the Property include, but are not limited to, the following: (i) regulatory approval to the subdivision of the Property from the 27 acre parcel of land in which it is currently included will be received; (ii) ENTREC will exercise its option to purchase the Property; and (iii) ENTREC will receive any debt financings required to complete the acquisition of the Property, make future required payments or to build the shop. The risks associated with the forward looking statements include the following: (i) those identified under the “Reader Advisory” above; (ii) all required regulatory approvals will not be obtained or will not be obtained on terms and conditions anticipated by or favourable to ENTREC; and (iii) ENTREC will not be able to obtain debt financing on acceptable terms. Although ENTREC believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because ENTREC can give no assurance that they will prove to be correct. 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:
Rod Marlin – Chairman & CEO
Telephone: (780) 960-5647
John M. Stevens – President & COO
Telephone: (780) 960-5625
Jason Vandenberg – CFO
Telephone: (780) 960-5630
Neither the TSX Venture Exchange nor its regulation services provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.