(TSX: NFC)
TORONTO, June 12 /CNW/ - Northern Financial Corporation (TSX: NFC)
("Northern" or the "Company") today reported estimated results for its fiscal
year ended March 31, 2006 pending the finalization of such results and also
reported on an investment in Lakeside Steel Corporation through a Northern-led
investor group.
Estimated Financial Results
Northern estimates revenue of approximately $26,000,000 for the March 31,
2006 fiscal year and net income of approximately $1,000,000, which may be
compared with revenue of $15,037,055 and a net loss of $3,176,734 for the
fiscal year ended March 31, 2005.
Northern estimates approximately $19,600,000 in cash, deposits,
securities and long-term investments compared with $15,190,476 as at March 31,
2005.
Northern anticipates issuing its final year end results in the next 10
days.
Lakeside Steel Corporation
In its merchant banking business, Northern invests its own capital
alongside its clients in the shares of undervalued companies identified by
Northern. These investments provide Northern with the opportunity to earn a
percentage of the profits realized by the particular investor group led by
Northern.
Northern has formed investor groups in several companies including
Proprietary Industries Inc. (TSX:PPI) where Northern owns approximately 11% of
the issued shares. The estimated results for March 31, 2006 include the
accrued net gain to Northern for its ownership position in Proprietary.
Northern recently formed an investor group which acquired approximately
48% of the issued shares of Lakeside Steel Corporation ("Lakeside") for
$3,000,000. Northern invested $400,000 in the investor group. Lakeside is one
of Canada's largest steel pipe and tubing manufacturers. Lakeside owns three
steel pipe and tube fabricating facilities located on 92 acres of land in
Welland, Ontario. The total plant capacity is 200,000 tonnes. Lakeside employs
approximately 500 employees. Lakeside's tubular steel products are primarily
for the oil and gas, mining, automotive, distributor, manufacturing and
fabricating businesses.
The business carried on by Lakeside was acquired by Stelco Inc.
("Stelco") in 1963 and was sold by Stelco to Lakeside on October 31, 2005,
with Romspen Investment Corporation through an affiliate ("Romspen") being the
sole shareholder initially and then subsequently the Northern-led investor
group acquired 48% of Lakeside. Romspen, a client of Northern, also owns
approximately 48% of Lakeside. Wes Roitman, a director of Northern, is a
principal of Romspen.
Each of Northern and Romspen has appointed two directors to the Lakeside
Board. Vic Alboini and Ian Bradley, directors of Northern, are the Northern
nominees. Wes Roitman and David Whiting are the Romspen nominees. Mr. Alboini
is Chairman of Lakeside.
Because the Romspen cash acquisition price was nil and the Northern-led
investor group paid $3,000,000, there is an equity adjustment agreement that
provides for the Northern investor group to earn an increasing percentage of
the gross proceeds for the realized Romspen investment in Lakeside to a
maximum of 50% of gross proceeds above $15 million.
In addition to Northern's $400,000 investment, Northern will earn an
increasing percentage of the profits made by the investors in the Northern
investor group that invested the remaining $2.6 million to a maximum 40% of
any profits above $24 million. If, for example, the realized value of Lakeside
were $20 million, $40 million or $60 million, the Northern profit would be
approximately $3 million, $8.5 million and $15 million, respectively.
Lakeside announced an agreement today to merge with one of its best
customers, Canadian Tubulars (1997) Ltd., TSI Tubular Services Inc. and 911499
Alberta Inc. (collectively referred to as "Tubulars"). The name of the merged
company ("New Lakeside") will be Lakeside Steel Corporation, the current name
of Lakeside.
Tubulars, one of Lakeside's best customers, purchases steel products from
Lakeside, provides value-added services and sells pipe and tubular products to
oil and gas customers. Tubulars owns a threading and coupling plant in Port
Colborne, Ontario, five miles from the Lakeside plant in Welland. Lakeside is
already one of Canada's largest steel pipe and tube manufacturers. With a
stronger financial and integrated operating platform, New Lakeside is
positioned to grow organically, implement additional acquisitions, enhance
cash flow and attract capital. This bodes well for the employees of New
Lakeside, the Welland community and the shareholders of New Lakeside.
Based on operating results for the five month period to March 31, 2006,
Lakeside has annualized revenue of $215 million and net income of $6 million,
which excludes an extraordinary gain as at March 31, 2006. Tubulars has
revenue of $85 million and pre-tax income of $11 million. Combined, the New
Lakeside would have $300 million in revenue and $17 million in pre-tax income.
The merger will result in the shareholders of Lakeside and the
shareholders of Tubulars each owning 50% of the shares of New Lakeside. The
merger is scheduled for completion by July 31, 2006. If completed, the
Northern investor group will own 24% of New Lakeside.
The Board of Directors of New Lakeside will consist of Vic Alboini and
Wes Roitman, and two representatives from Tubulars, Brian Huffman, President
and Kert Ness, Vice President. Vic Alboini will become Chairman of New
Lakeside and Brian Huffman will become President and CEO.
Lakeside also announced that Ian Bradley has been appointed interim
President of Lakeside. Ian is a director of Northern and a very experienced
executive with a strong financial background and a demonstrated track record
of success in building high profile businesses in competitive environments.
Ian was formerly Chief Financial Officer at PBB Global Logistics Income Fund
which was based in Fort Erie. He was also President of Mattel Canada Inc. and
previously Chief Financial Officer of Mattel. He has also been Chief Financial
Officer at several other companies.
Northern Financial Corporation wholly owns Northern Securities, a full
service investment dealer that provides financial advisory services to retail
and institutional clients and investment banking services to small
capitalization companies.
