Alaris Equity completes $75.3M investment in Kubik

Executive Summary

• Alaris Equity Partners Income Trust completed a $75.3 million investment in Kubik LP, structured as $62.5 million in debt/preferred equity and $12.8 million in minority common equity.
• The trust simultaneously approved a 3% increase to its quarterly distribution, raising it to 38 cents per unit ($1.52 annually), directly supported by the new investment's projected cash flows.
• The transaction targets a 13% initial annual yield, with all proceeds allocated to provide partial liquidity to existing Kubik shareholders.

Key Details

• Investment Amount & Structure: $75.3 million total, comprising $62.5 million in debt and preferred equity, and $12.8 million exchanged for minority common equity ownership in Kubik LP.
• Proceeds Use: Partial liquidity to existing Kubik shareholders.
• Expected Returns & Yield Terms: Annualized cash distribution to Alaris of $8.1 million; initial combined annual yield of 13%. The yield resets annually plus or minus 8% based on changes in Kubik's revenue.
• Distribution Increase: Board approved a 3% increase to the quarterly distribution, bringing it to 38 cents per trust unit ($1.52 annually).
• Payout Ratio: Maintained below the trust's 65% to 70% target.
• Earnings Impact: Preferred distributions from Kubik are expected to increase pro forma distributable cash by 7 cents per unit annually; the common distribution was increased by 4 cents annually to align with the new earnings.
• Target Company Profile: Kubik is a full-service designer and fabricator of custom trade show exhibits, brand activations, and immersive environments, founded in 1983 and headquartered in Toronto.
• Client Base & Subsidiaries: Serves Fortune 500 clients including Philips, Honeywell, Kia, Nissan, BMW, and Lexus. Subsidiary Kubik Maltbie focuses on permanent exhibits for museums and cultural institutions.

Notable Quotes

• Gregg Delcourt, Chief Investment Officer, Alaris: "We are highly impressed with the entire Kubik team and the company's deep, established customer relationships. The company has a track record of over 40 years and long-term relationships with some of the world's largest companies. We look forward to supporting Kubik's growth through operational value creation and disciplined add-on acquisitions, while staying committed to Kubik's consistent, high-quality execution and core corporate values."
• Elliot Kohn, President, Kubik: "We are excited to partner with Alaris. Alaris's culture and its alignment with founder-led businesses reflects our corporate principles and values. This investment gives us the flexibility to expand and accelerate our service offerings for our customers, while maintaining our high standard of creativity, customer service and fabrication quality."
• Steve King, President & CEO, Alaris: "As part of our strategy and proven track record of providing unitholders with a strong and stable distribution, Alaris has announced a four-cent increase to our annual distribution... The preferred distributions that Alaris will receive from Kubik, increase our pro forma distributable cash by seven cents per unit annually. In keeping with our objectives of maintaining a conservative payout ratio, we have increased the distribution by that same percentage of the new earnings."