Cold Spring Capital (stock symbol: CDS), which raised gross proceeds totaling $120 million went it went public on November 11, 2005, has announced that it has entered into an agreement to acquire Sedona Development Partners, LLC, a real estate developer.
Cold Spring Capital Inc. Enters into Agreement to Acquire Sedona Development Partners, LLC
Friday November 3, 4:50 pm ET
Cold Spring Capital Fulfills Objective to Identify Acquisition Opportunity In the Real Estate Sector
NEW CANAAN, Conn.--(BUSINESS WIRE)--Cold Spring Capital Inc. (AMEX:CDS - News), a special purpose acquisition company, and Sedona Development Partners, LLC ("SDP"), a privately held development company, jointly announced they have entered into a definitive agreement pursuant to which Cold Spring Capital ("Cold Spring") will purchase all outstanding equity interests of SDP for a combination of cash, notes and convertible notes totaling $132.1 million.
SDP is a leading specialty real estate development and operating company with over 140 employees that owns and operates The Club at Seven Canyons, a private, high-end fractional ownership development. Located in Sedona, Arizona, the club offers a Tom Weiskopf championship golf course ranked one of the top 50 Golf Retreats by Golf Digest, and one of a kind, five-star amenities.
Cold Spring expects its consolidated 2007 revenue to be approximately $164.1 million, with 2007 EBITDA of approximately $60.2 million and 2007 net income of approximately $26.7 million.
Cold Spring uses EBITDA as a non-GAAP financial performance measurement. EBITDA is calculated by adding back to net income (loss) interest, taxes, depreciation and amortization. EBITDA should not be considered in isolation or as a substitute for comparable measures calculated and presented in accordance with GAAP. Cold Spring's consolidated estimated EBITDA for 2007 has been calculated by adding estimated interest expense of $6.1 million, estimated depreciation and amortization of $9.7 million, and a pro forma tax provision of $17.7 million to pro forma estimated net income of $26.7 million.
THE TRANSACTION
Under the terms of the agreement, the owner of SDP will sell its equity interests for approximately $132.1 million consisting of $82.1 million in cash, a three year $5 million subordinated 8% promissory note, and a four year $45 million subordinated 8% note which is convertible into 7 million shares of Cold Spring common stock. The convertible note mandatorily converts into common stock if the average daily closing price of Cold Spring's common stock equals or exceeds $6.43 per share during any period of 20 consecutive trading days after the first anniversary of the closing. In addition, during the 30 day period following the one year anniversary of the closing, the holder of the note can elect to convert the note into 7 million shares of common stock regardless of the trading price. In addition, Cold Spring will assume all SDP's outstanding debt at closing.
Upon consummation of the transaction, Randy Stratton will remain Chairman and Chief Executive Officer of Cold Spring, and Joseph Weingarten will remain President and Director. David Cavan, who is the controlling owner of SDP, will join Cold Spring as President of Real Estate Development. Additionally, David Epstein, who is not affiliated with SDP, will join Cold Spring as its Chief Financial Officer.
Mr. Cavan will remain as President and Chairman of Cavan Real Estate Investments and Chairman of Cavan Management Services, L.L.C. ("CMS"), entities controlled by Mr. Cavan, which are not being acquired as part of the transaction. CMS will continue to oversee operations and development of the Seven Canyons project through a 10 year management agreement. CMS has a 30 year history of developing and owning multiple real estate projects in the southwestern United States.
Mr. Stratton commented, "We are very pleased to announce the pending transaction with SDP, an established specialty real estate operating company with proven development expertise, particularly in exclusive luxury fractional ownership properties as demonstrated by SDP's existing property at Seven Canyons in Sedona, Arizona. In addition to its premier luxury resort property, we believe that SDP's real estate development, sales and marketing experience will provide a platform that will allow us to capitalize on future specialty real estate acquisitions and development opportunities.
"We believe that partnering with SDP would be an attractive transaction for all stakeholders of Cold Spring and SDP, as well as for members of The Club at Seven Canyons. As a team, we believe that we can make immediate borrowing cost improvements to SDP in order to continue creating value for our shareholders. We believe that pre-sales and existing inventory levels at SDP's Seven Canyons property provide visible and predictable earnings for 2007 and through the anticipated sell out period."
Mr. Cavan added, "We are excited and look forward to partnering with Cold Spring's experienced team in order to continue our expansion of our platform to ensure our world class success as a leader in fractional luxury homes. We believe that this combination of SDP and Cold Spring will add continued growth through new opportunities and additional capital strength to our real estate platform. This transaction will accelerate our strategic plan to expand SDP. We expect that these opportunities will contribute to building value for Cold Spring shareholders."
The closing of the transaction is subject to Cold Spring's stockholder approval and other customary closing conditions. Additionally, the closing is subject to not more than 19.99% of Cold Spring's shareholders voting their shares against the transaction and electing to convert their Cold Spring shares into cash.
Cold Spring will file a form 8-K with the Securities and Exchange Commission, which will more fully describe the transaction and expects to file a preliminary proxy statement as soon as possible.
Conference Call Information
Cold Spring will host a conference call on November 7, 2006 at 11:00am ET to discuss the transaction. Interested parties should call (866) 770-7146, (international dial in (617) 213-8068) with pass code 64432565 to access the call. Investors may also access this call via the Internet at:
www.coldspringcapital.com
or
www.streetevents.com
(for institutional investors subscribing to this service)
or
www.earnings.com
(audio only)
For those who are unavailable to listen to the live broadcast, a replay will be available through May 15, 2007 and can be accessed by dialing (888) 286-8010 (international dial in (617) 801-6888). The pass code is 77981817.
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