AND Andlauer Heathcare Group Inc

Andlauer Healthcare Group Inc. (TSX: AND) (“AHG” or the “Company”) today announced that it has entered into definitive agreements to acquire 100% of T.F. Boyle Transportation, Inc. (“Boyle Transportation”) and 51% of Skelton USA Inc. (“Skelton USA”), increasing AHG’s aggregate ownership of Skelton USA to 100%. AHG expects the acquisitions to be immediately accretive to cash flow and earnings per share.

The Company also announced that it, together with Andlauer Management Group Inc. (“AMG” or the “Selling Shareholder”), has entered into an agreement with an underwriting syndicate led by CIBC Capital Markets and RBC Capital Markets (the “Underwriters”) to complete a new issue and secondary offering (the “Offering”), on a bought deal basis, of an aggregate of 3,500,000 subordinate voting shares at a purchase price of C$48.20 per subordinate voting share for aggregate gross proceeds of C$96,400,000 to the Company and C$72,300,000 to the Selling Shareholder.

The Acquisitions

Boyle Transportation

The Company has agreed to purchase all of the issued and outstanding shares of Boyle Transportation (the “Boyle Acquisition”) in exchange for consideration of approximately US$80 million, subject to customary purchase price adjustments of which US$60 million of the purchase price will be payable in cash and US$20 million will be satisfied through the issuance of AHG subordinate voting shares to the sellers which will be subject to lock-up restrictions for a minimum of 24 months from the date of issuance.

Boyle Transportation provides specialized transportation services to clients in the life sciences (approximately 75% of revenue) and government/defense sectors (approximately 25% of revenue). Boyle Transportation adheres to stringent quality and security standards, employs highly trained and dedicated professionals, continually invests in advanced technology and equipment, and has an expansive reach across the United States. Boyle was recently named the overall “Best Fleet to Drive For” in the U.S. and Canada for the second year in a row. The Best Fleets program is coordinated by the Truckload Carriers Association and Carriers Edge.

Skelton USA

The Company has agreed to purchase all of the issued and outstanding shares of Skelton USA not already owned by the Company (the “Skelton USA Acquisition”, and together with the Boyle Acquisition, the “Acquisitions”), in exchange for consideration of approximately C$50 million of which C$25 million of the purchase price will be payable in cash and C$25 million will be satisfied through the issuance of AHG subordinate voting shares to the sellers that will be subject to lock-up restrictions for a minimum of six months from the date of issuance.

Skelton USA was launched in 2017 and has been growing rapidly through successfully leveraging its reputation and brand for cold chain expertise. Skelton USA currently serves customers across the United States. 49% of Skelton USA’s issued and outstanding shares were acquired by AHG on March 1, 2021, together with all of the issued and outstanding shares of its affiliate company, Skelton Canada Inc.

Together, Boyle Transportation and Skelton USA generated over C$21 million of EBITDA (adjusted to exclude COVID-related government assistance) for the trailing twelve months ended August 31, 2021, at a margin of approximately 23.7%.

“We are thrilled to be welcoming the Boyle Transportation team to Andlauer Healthcare Group”, stated Michael Andlauer, Chief Executive Officer of AHG. “Boyle is a leader in the temperature-sensitive life sciences sector and brings complementary security and visibility capabilities to the defence sector. Our acquisition of the remainder of Skelton USA coupled with Boyle Transportation significantly advances our strategic expansion into the U.S. healthcare market. Each of Boyle and Skelton USA have a strong commitment to customer focused care and a people-first approach, which are core values of the Andlauer Healthcare Group.”

“We’re excited to join the Andlauer team,” stated Andrew Boyle and Marc Boyle, Co-Presidents of Boyle Transportation. “As part of the highly regarded AHG platform, we will be able to offer a broader suite of services to our valuable clients. We are confident that this strategic move will help Boyle Transportation continue to be the provider of choice to clients and the employer of choice to transportation and logistics professionals in the U.S.”

“Skelton USA’s experience in working with the AHG team has been exceptional,” said Ron Skelton, President of the Skelton Companies. “We look forward to continuing to provide best-in-class service to our customers in the U.S. and we believe we are better positioned to capitalize on growth opportunities in the U.S. market as a part of the larger AHG platform, which now includes Boyle Transportation.”

Boyle Transportation and Skelton USA will join AHG’s comprehensive platform of dedicated healthcare supply chain solutions and will continue to be led by their respective executive leadership teams.

AHG will finance the cash portion of the purchase price for the Acquisitions with the proceeds of the Offering, as discussed further below. Closing of the Acquisitions is subject to customary closing conditions, including the receipt of Toronto Stock Exchange (“TSX”) approval in connection with the issuance of the AHG subordinate voting shares. Closing of the Boyle Acquisition is also subject to regulatory approval from the United States Defense Counterintelligence and Security Agency. The Acquisitions are expected to close in the fourth quarter of 2021.

Offering

Pursuant to the terms of the Offering, 2,000,000 subordinate voting shares will be issued from treasury and offered by AHG for aggregate gross proceeds of $96,400,000 and an aggregate of 1,500,000 subordinate voting shares will be offered by the Selling Shareholder for aggregate gross proceeds of $72,300,000. The Selling Shareholder has also granted the Underwriters an over-allotment option, exercisable for a period of 30 days from the date of the closing of the Offering, to purchase up to an additional 15% of the aggregate subordinate voting shares to be sold pursuant to the Offering. The Company intends to use the net proceeds it receives from the Offering to pay the cash portion of the purchase price payable in connection with the Acquisitions. AHG will not receive any of the proceeds of the sale of subordinate voting shares by the Selling Shareholder.

AMG currently holds all 25,100,000 multiple voting shares and 10,200 subordinate voting shares of the Company, representing approximately 65.3% of the issued and outstanding shares and 88.3% of the voting power attached to all outstanding shares. Following the closing of the Offering (assuming no exercise of the over-allotment option) and after giving effect to the Acquisitions, AMG will hold all 23,600,000 multiple voting shares and 10,200 subordinate voting shares of the Company, representing approximately 56.9% of the issued and outstanding shares and 84.1% of the voting power attached to all outstanding shares.

The subordinate voting shares will be offered (i) in Canada by way of a short-form prospectus and (ii) in the United States by way of private placement to Qualified Institutional Buyers pursuant to the exemption from registration provided by Rule 144A under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") and corresponding exemptions from registration under state securities laws.

Closing of the Offering is expected to occur on or about October 26, 2021, subject to customary closing conditions, including required approvals of the TSX. No securities regulatory authority has either approved or disapproved the contents of this press release. The subordinate voting shares have not been, and will not be, registered under the U.S. Securities Act, or any state securities laws. Accordingly, the subordinate voting shares may not be offered or sold within the United States unless registered under the U.S. Securities Act and applicable state securities laws or pursuant to exemptions from the registration requirements of the U.S. Securities Act and applicable state securities laws. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the subordinate voting shares in any jurisdiction in which such offer, solicitation or sale would be unlawful.

Advisors

Goodmans LLP is acting as legal counsel to AHG, Nutter McClennen & Fish LLP is acting as legal counsel to Boyle Transportation and Owens Wright LLP is acting as legal counsel to Skelton USA. Stikeman Elliott LLP is acting as legal counsel to the Underwriters and Feltmate Delibato Heagle LLP is acting as legal counsel to AMG.

Bengur Bryan & Co., Inc. is acting as the exclusive financial advisor to Boyle Transportation.

About Boyle Transportation

Boyle Transportation is a specialized transportation logistics provider delivering exceptional quality, safety and security to select clients in the life sciences and government/defense sectors. Its long-term, exclusive focus on these technical and quality-focused markets has led to the adoption of stringent quality standards, highly trained and dedicated professionals, and continual investment in technology and equipment. Headquartered in Massachusetts, Boyle Transportation operates throughout the 48 contiguous United States and to/from Canada. For more information on Boyle Transportation, please visit: www.boyletransport.com.

About Skelton USA

Skelton USA is an affiliate company of Skelton Canada Inc. and has grown its fleet size to75 trucks and 100 trailers since its founding in 2017. With its highly specialized validated and qualified equipment, Skelton USA has developed a niche in the transportation of temperature-sensitive pharmaceuticals, biologics, plasma products and vaccines. For more information on Skelton, please visit: www.skeltontruck.com.

About AHG

AHG is a leading and growing supply chain management company offering a robust platform of customized third-party logistics ("3PL") and specialized transportation solutions for the healthcare sector. The Company's 3PL services include customized logistics, distribution and packaging solutions for healthcare manufacturers across Canada. AHG's specialized transportation services, including air freight forwarding, ground transportation, dedicated delivery and last mile services, provide a one-stop shop for clients' healthcare transportation needs. Through its complementary service offerings, available across a coast-to-coast distribution network, the Company strives to accommodate the full range of its clients' specialized supply chain needs on an integrated and efficient basis. For more information on AHG, please visit: www.andlauerhealthcare.com  

For further information, please contact:

Peter Bromley	Bruce Wigle
Chief Financial Officer	Investor Relations
Tel: (416) 744-4900	Tel: (647) 496-7856

Forward Looking Information

This press release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking information") within the meaning of applicable securities laws, including statements regarding the timing and completion of the proposed Acquisitions, the receipt of TSX approval for the issuance of subordinate voting shares in connection with the Acquisitions, the anticipated benefits of the Acquisitions (including the extent to which they will be accretive), the proposed Offering, closing of the Offering and the intended use of proceeds thereof. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects", "is expected", "an opportunity exists", "budget", "scheduled", "estimates", "outlook", "forecasts", "projection", "prospects", "strategy", "intends", "anticipates", "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or, "will", "occur" or "be achieved", and similar words or the negative of these terms and similar terminology. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information.

Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances. This forward-looking information is based on our opinions, estimates and assumptions that, while considered by the Company to be appropriate and reasonable as of the date of this press release, are subject to known and unknown risks, uncertainties, and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to: the risk that the acquired companies will not perform in accordance with expectations and past history; the risk that all conditions to completion of the Offering and the Acquisitions (including regulatory approvals and third party consents) will not be satisfied or waived; the risk that the acquired companies may not be efficiently integrated or that synergies will not be realized; and those other risks discussed in greater detail under the "Risk Factors" section of our annual information form which is available under our profile on SEDAR at www.sedar.com. If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. Although we have attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information.

There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, AHG assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

All of the forward-looking information contained in this press release is expressly qualified by the foregoing cautionary statements.

Non-IFRS Financial Measures

This news release contains certain non-IFRS measures, including “EBITDA”. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. These non-IFRS measures are used to provide investors with supplemental measures of a company’s operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures.