GVIC Announces Sale of 45% interest in ERIS and STP Businesses

VANCOUVER, British Columbia, July 16, 2020 (GLOBE NEWSWIRE) -- GVIC Communications Corp. (“GVIC” or the “Company”) announced today that it has sold a 45% interest in its ERIS and STP businesses (the “Businesses”) to Madison Venture Corporation (“Madison”), through the acquisition by Madison of units ("Units") in ERI Environmental Risk Limited Partnership, the limited partnership established to hold the Businesses (the “Limited Partnership”). 

The Company received $11 million in cash and retained 100% of the cash flow of the Businesses attributed to Madison’s 45% interest for two years in exchange for the 45% interest.  The transaction pricing reflects a value of $28 million (the “Enterprise Value”) for the Businesses.  Pursuant to the Limited Partnership agreement (the "Agreement"), Madison has the right, for a period of 3 years following closing, to acquire from GVIC an additional 4% of the outstanding Units at the pro rata Enterprise Value per Unit and an additional 2% of the outstanding Units at the greater of the pro rata fair market value per Unit and the pro rata Enterprise Value.  The Agreement contains a buy/sell provision that is exercisable after 3 years and a mutual right of first refusal. 

The transaction was completed to alleviate the financial distress caused by the impact of the COVID pandemic on the Company’s revenues and cash flow, and to allow the Company to maintain access to its banking facility and have sufficient liquidity. 

The Company’s consolidated revenues (including its proportionate share in its joint ventures) declined approximately 36% in April and May.  In order to maintain operating cash flow and liquidity, the Company has been implementing a comprehensive program including a) significant operating cost reductions including wage rollbacks, reduced work weeks, temporary layoffs and a variety of other cost reduction measures, b) government assistance including the wage subsidy and work share programs, c) capital raising through the ERIS and STP transaction and d) amendment of its bank facility.  The Company acted quickly to implement the cost reductions and is monitoring costs on an ongoing basis to remain in line with revenues.