Corporate Presentation January 2015 TSX.V: QE
www.qe2corp.com
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com2 READERS
ADVISORY This corporate presentation (the Presentation) has been
prepared by management of QE2 Acquisition Corp. (the Corporation)
based on public information and the Corporations confidential
information. This Presentation is for information purposes only and
is being made available on a confidential basis solely to enable
the prospective investor to evaluate the securities of the
Corporation (the Securities). This Presentation does not constitute
an offer to sell to any person, or a general offer to the public
of, or the general solicitation from the public of offers to
subscribe or purchase, any of the Securities. Any unauthorized use
of this Presentation is strictly prohibited. Distribution or
copying of this Presentation, in whole or in part in any medium, to
any person other than the prospective investor is prohibited
without the prior written consent of the Corporation. The
information contained in these slides, the Presentation made to you
verbally and any other information provided to you (in writing or
otherwise) in connection with the Corporation and its business (the
Presentation Materials) is subject to updating, completion,
revision, verification and amendment without notice which may
result in material changes. The Presentation Materials are not
intended to provide financial, tax, legal or accounting advice and
do not purport to contain all the information that a prospective
investor may require. Each prospective investor should perform and
rely on its own investigation and analysis of the Corporation and
the terms of any offering of the Securities, including the merits
and risks involved, and are advised to seek their own professional
advice on the legal, financial and taxation consequences of making
an investment in the Corporation. No securities commission or
similar regulatory authority in Canada has reviewed or in any way
passed upon this presentation, and any representation to the
contrary is an offence. Neither the Corporation nor the agent of
the Corporation makes any representation or warranty, express or
implied, and assumes no responsibility for the accuracy or
completeness of the information contained in this Presentation or
any other oral or written communication transmitted to prospective
investors, and nothing contained in this summary is, or shall be
relied upon as, a promise or representation by the Corporation or
the agent of the Corporation as to the past or future performance
of the Corporation. The Corporation does not undertake to provide
any additional further information or to enter into negotiations
regarding the investment opportunity to which these Presentation
Materials relate. The Corporation retains the right, at any time,
to terminate any discussions or negotiations with prospective
investors. In the event of such termination the Corporation will
not be under any obligation to disclose the reasons for such
termination nor will they have any liability to any recipient
hereof for any costs whatsoever incurred in the consideration of
the information contained in these Presentation Materials.
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com3
FORWARD-LOOKING INFORMATION Certain statements contained in this
Presentation are forward looking statements. These forward looking
statements are not based on historical facts but rather on the
expectations of management of the Corporation regarding the
resulting company's future performance. All statements, other than
statements of historical fact, may be forward looking statements.
Forward looking statements are often, but not always, identified by
the use of words such as seek, anticipate, plan, continue,
estimate, expect, may, will, project, predict, propose, potential,
targeting, intend, could, might, should, believe and similar
expressions. Although the Corporation believes in light of the
experience of its officers and directors, current conditions and
expected future developments and other factors that have been
considered appropriate that the expectations reflected in this
forward-looking information are reasonable, undue reliance should
not be placed on them because the Corporation can give no assurance
that they will prove to be correct, and actual results, performance
or achievement could differ materially from those expressed in, or
implied by, these forward-looking statements. Forward-looking
statements contained in this Presentation include, but are not
limited to, statements with respect to the Corporation's business
strategy, the market in which the Corporation operates; the ability
of the Corporation to successfully integrate businesses; the timing
and nature of equity offerings to be completed by the Corporation;
the Corporation's potential revenue; the ability of the Corporation
to successfully complete mergers and acquisitions; the ability of
the Corporation to realize on the potential of target companies;
and other expectations, beliefs, plans, objectives, assumptions,
intentions or statements about future events or performance.
Forward-looking statements contained in this Presentation reflect
the current beliefs and assumptions of the Corporation's management
based on information in its possession as of the date of this
Presentation. Readers are cautioned that the foregoing list is not
exhaustive. The forward looking statements contained herein are
expressly qualified in their entirety by this cautionary statement.
The forward looking statements included in this presentation are
made as of the date of this presentation and the Corporation does
not undertake and is not obligated to publicly update such forward
looking statements to reflect new information, subsequent events or
otherwise unless so required by applicable securities laws.
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com4 Table of
Contents OUR FOCUS AND OBJECTIVE INVESTMENT HIGHLIGHTS ABOUT US
Leadership Team Capitalizing on Canadas Growth Infrastructure
Growth at Provincial Level QE2 Business Strategy PORTFOLIO
COMPANIES Pillar Contracting Ltd. Candesto Enterprises Ltd.
FINANCIAL HIGHLIGHTS QE2 Projections Capital Structure and
Valuation Term Sheet WHY INVEST IN QE2 Contact Information
Biographies Disclaimers
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com5 Our Focus
& Objective We acquire Infrastructure and Utility Service
companies that keep Canada growing. We are focused on a niche of
SMEs that are capitalizing on the Infrastructure requirements
across Canada. Over the next 10 years (2014-2024) the Government of
Canada plans to invest $70 billion for public infrastructure,
including the $53-billion New Building Canada Plan for provincial,
territorial and municipal infrastructure. Strong proven Management
team Active Board of Directors Strong Corporate Governance
Aggressive M&A strategy Estimated Annual Revenues ($ millions)
Focused on growing revenues to $100MM by 2018 Source:
Infrastructure Canada
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com6 A Unique
Strategy in a Unique Market History of Strong Returns and Growing
Cash Flow Growing Through Focused Acquisitions Investment
Highlights Consistency in Customer Base QE2 Acquisition Corp. (QE2)
was founded to take advantage of Canadas booming economy through a
unique strategy of aggregating infrastructure and utility service
companies at compelling valuations Retaining key management ensures
business continuity while QE2 brings breadth of growth avenues
Investors receive exposure to infrastructure-focused companies that
have proved resilient across a wide spectrum of market conditions
Our current and future acquisition targets have a track-record of
bottom line growth Portfolio companies Pillar Contracting and
Candesto Enterprises have been providing infrastructure services in
Alberta for the last 16 20 years; management is keen to continue
building upon this success QE2 is designed to build upon this
established growth through broader connections across Canada QE2
focuses on acquiring businesses that are largely independent of oil
and gas fluctuations Our clients are municipalities, major utility
companies and construction companies that primarily depend on
general economic and population growth rather than cyclical factors
The strategy of QE2 is to move quickly on strategic acquisitions
that are complimentary to the portfolio Target purchase price of
2-3x EV/EBITDA translates to a significant multiple lift in the
public markets Minimize equity dilution through a balanced leverage
strategy Currently evaluating multiple acquisition
opportunities
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com7 1.
Compensation Committee 2. Audit Committee 3. Governance Committee
Management Board of Directors Leadership Team
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com8
Capitalizing on Canadas Growth $70 billion for public
infrastructure, including $53 billion New Building Canada Plan will
support projects of national, regional and local significance that
promote economic growth, job creation and productivity. The federal
government works with provinces, territories, municipalities and
the private sector to provide funds to economically- focused
projects. With a P3 Screen for projects of over $100 million in
eligible costs, our Government is ensuring that large
infrastructure projects are delivered in the most cost-effective
way. Source: Infrastructure Canada World-class infrastructure is
the backbone of our country's economic productivity. Our Government
is committed to investing in Canada's infrastructure to reduce
commuting times for families, enhance economic competitiveness,
encourage job creation and strengthen trade corridors. Housing,
transportation, utilities and construction investment requirements
has laid a strong foundation for the infrastructure-focused
business of QE2 Government of Canada Infrastructure Allocation
(2014-2019) ($ billions)
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com9
Infrastructure Growth at Provincial Level Source: Infrastructure
Canada and Provincial Budgets British Columbia In Budget 2014,
capital spending on infrastructure projects expected to total $17.7
billion over 3 years Alberta Government of Alberta will invest
$19.2 billion in public infrastructure over 3 years Saskatchewan
Plans to spend $2.5 billion on infrastructure over next 3 years
Manitoba Recently unveiled 5 year, $5.5 billion Infrastructure Plan
Provincial Infrastructure Spend Expected to be Strong Ontario
Ontario plans to invest more than $130 billion in public
infrastructure over the next 10 years. This will support more than
110,000 jobs on average each year in construction and related
industries. Quebec The 2013-2023 Qubec Infrastructure Plan proposes
$92.3 billion in spending affecting every sector of activity
Serving municipalities and large construction companies, QE2 will
gain full exposure to the infrastructure and utility service
requirements in Canada Serving municipalities and large
construction companies, QE2 will gain full exposure to the
infrastructure and utility service requirements in Canada
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com10 Future
Acquisitions QE2 Business Strategy QE2s strategy is to acquire
infrastructure-focused service providers in Canada and improve
their performance through superior operations management and
business plan execution QE2 has already completed two private
company acquisitions: Pillar Contracting and Candesto Enterprises
Pillar Contracting has been providing street light installation and
post painting services in Alberta for the last 16 years Candesto
Enterprises has been providing street sign and guardrail
installation in Alberta for the last 20 years QE2 focuses on
operations across Canada Through its two initial acquisitions, QE2
has already gained a substantial client base The company has
identified several high impact acquisitions to add to the existing
portfolio QE2 Overview Current Clients Foundation for Future Growth
Motivated Management Team Active Board of Directors Active Board of
Directors Strong Corporate Governance Target acquisition multiples
of 2.0-3.0x EV/EBITDA Management team in place and willing to stay
for the transition period or longer Established client base and a
history of successful operations Businesses with healthy margins
and low or no debt Acquisition Criteria
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com11
Portfolio Company Overviews: Pillar Contracting Pillar Contracting
was acquired by QE2 in October 2013 Primary services include:
Street light bulb replacement and post painting Safety testing for
street light integrity Traffic lights maintenance Flagging services
and other 16 year history of success and growth Founder agreed to
continue to operate the business after the sale Strong customer
base includes major utility companies and municipalities in Alberta
and Saskatchewan Potential expansion opportunity into private
sector with a focus on parking lots, transmission boxes, cable
boxes, oversized loads and other Recurring revenue streams through
service and maintenance Ability to expand into Saskatchewan and
Manitoba Overview
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com12 Overview
Portfolio Company Overviews: Candesto Enterprises Candesto
Enterprises was acquired in April 2014 2013 EBITDA of $1.5 mm
Implied EV/EBITDA of 1.8x Primary services include: Assembly and
installation of highway signs Guardrail and miscellaneous fencing
installation Successful operating history of over 20 years with
founder willing to stay for another five years Management expects
consistent margins and operating performance in the future Customer
base includes municipalities and general contractors Given
Candestos experience and efficiency in guardrails and signage
installation, direct competitors are likely to subcontract the
companys services
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com13 Note:
Based on management estimates and includes Includes $1.5 mm, 24
months, 12% convertible debt financing (assumed conversion after 24
months) QE2 and Candesto 2013A numbers are as of Jan. 31, 2014,
Pillar 2013A numbers are as of Sep. 30, 2013. Future projections
for all three companies are harmonized to Dec. 31 year-end QE2 Cash
Flow Analysis (Based on Already Completed Acquisitions) QE2
Projections (Operations) EBITDA Projections Free Cash Flow
Projections
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com14 Note:
Based on management estimates and includes Includes $1.5 mm, 24
months, 12% convertible debt financing (assumed conversion after 24
months) QE2 and Candesto 2013A numbers are as of Jan. 31, 2014,
Pillar 2013A numbers are as of Sep. 30, 2013. Future projections
for all three companies are harmonized to Dec. 31 year-end QE2 Cash
Flow Analysis (Based on Already Completed Acquisitions + QE2) QE2
Projections (Consolidated) EBITDA Projections Free Cash Flow
Projections
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com15 Why
Invest in QE2
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com16 Calgary
Mailing Address: Suite 4034, 909 - 17 Ave SW, Calgary, AB, T2T 0A4
Mihali (Mike) Belantis CEO Direct: 1.403.701.7299 Email:
[email protected]@QE2corp.com Contact Information Ben Leung CFO
Direct: 1.403.613.6888 Email: [email protected]@QE2corp.com v3
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com17 Appendix
A - Biographies Mike Belantis CEO and Director Mr. Belantis has
more than 15 years experience identifying opportunities, investing
and consulting for companies in both the private and public
sectors. He has played an instrumental role in laying the
foundation for many successful start-ups. One of his most recent
has grown to a market cap in excess of $300 million. As CEO, Mr.
Belantis is involved in all aspects of QE2s acquisitions,
investments and new project initiatives. He also leads the team in
setting the strategy and vision for the organization and
articulating the road map for growth and a sustainable competitive
advantage. Mr. Belantis is involved in identifying prospective
targets and market opportunities; in the case of acquisitions,
conducting due diligence, determining appropriate valuation and
structure, developing strategy for and conducting negotiations,
driving activities to closure and coordinating with other business
units. He leads the team to ensure the organization has the drive,
motivation and energy needed to succeed. Ben Leung CFO Mr. Leung is
a Chartered Accountant with over 20 years of financial accounting
and management experience in both public practice and private
industry. He has served as the QE2's Controller for the last 12
months focusing on financial reporting and internal controls. His
experience includes financial reporting, taxation, risk management,
human resources and corporate governance. Prior to joining QE2, Mr.
Leung was a senior manager with a Calgary based accounting firm and
focused on the audit and assurance department. Previous to that, he
has held controllership positions with publicly listed companies in
the pharmaceutical, oil and gas, and manufacturing industries.
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com18 Appendix
A - Biographies Brent Buhler Vice President Finance Mr. Buhler is
Managing Director of Cambio Merchant Capital, a Calgary-based
boutique shop which provides merger and acquisition services for
both foreign private equity groups, as well as growth-oriented
domestic enterprises. For the past fifteen years, Mr. Buhler has
provided value to many Canadian market sectors - from manufacturers
to breweries, from energy service companies to exploration juniors
and has experience with a wide spectrum of privately held Alberta-
based companies. In addition to his broad business experience, Mr.
Buhler has a varied academic background. He has studied business
and marketing at University of Calgary and also holds a Master of
Arts from Ambrose Seminary.
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com19 Appendix
A - Biographies Maria Nathanail Corporate Secretary and Director
Ms. Nathanail has been practicing law since 2006. Her experience
has helped her to develop her excellent legal, commercial and
business development skills. She has acted for many start-up
companies providing guidance through the growth process. She is
currently an associate with Burstall Winger Zammit LLP in Calgary,
Alberta, practicing in the areas of securities, corporate finance,
mergers and acquisitions and general corporate commercial law.
Prior to that, Ms. Nathanail was an associate with Torys LLP and
Gowling Lafleur Henderson LLP. Ms. Nathanail obtained a Bachelor of
Arts Degree in Political Science from the University of Calgary and
a Juris Doctor from the University of Saskatchewan. Joe Gagliardi
Director Mr. Gagliardi is a Certified Management Accountant and the
founding partner of a successful Alberta-based recruiting firm,
Recruitment Partners. Prior to his 8 years as a professional
recruiter Mr. Gagliardi worked as a senior accounting professional
with both private and publically traded organizations, earning him
a wide spectrum of experience in industrial manufacturing, oil and
gas service companies, food processing and agriculture, where he
has held roles from Controller to CFO. Mr. Gagliardi is an active
volunteer in the business community, particularly as a director on
the board of directors for CMA Alberta and as the Chair of the
Business Advisory Council for the J.R. Shaw School of Business
(NAIT).
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com20
DISCLAIMERS (continued) Future-Oriented Financial Information This
Presentation contains future-oriented financial information and
financial outlook information (collectively, the "FOFI") about
prospective results of operations, net income, financial position,
cash flows, and components thereof, all of which are subject to the
same assumptions, risk factors, limitations, and qualifications as
set forth in the above paragraphs. FOFI contained in this
Presentation was made as of the date of this Presentation and is
provided for the purpose of giving a general overview of the
business operations of the Corporation. The Corporation disclaims
any intention or obligation to update or revise any FOFI contained
in this Presentation, whether as a result of new information,
future events or otherwise, unless required pursuant to applicable
law. Readers are cautioned that the FOFI contained in this document
should not be used for purposes other than for which it is
disclosed herein. The Corporation calculates EBITDA as "earnings
before interest, taxes, depreciation and amortization". EBITDA does
not have any standardized meaning prescribed by international
financial reporting standards (IFRS) and therefore it may not be
comparable with the calculation of similar measures for other
entities. Management uses EBITDA to analyze the operating
performance of the business. EBITDA as presented is not intended to
represent cash provided by operating activities, net earnings or
other measures of financial performance calculated in accordance
with IFRS. Investor Rights Securities legislation in certain of the
Canadian provinces provides purchasers of securities pursuant to an
offering memorandum (such as this Presentation) with a remedy for
damages or rescission, or both, in addition to any other rights
they may have at law, where the offering memorandum and any
amendment to it contains a "Misrepresentation". Where used herein,
"Misrepresentation" means an untrue statement of a material fact or
an omission to state a material fact that is required to be stated
or that is necessary to make any statement not misleading in light
of the circumstances in which it was made. These remedies, or
notice with respect to these remedies, must be exercised or
delivered, as the case may be, by the purchaser within the time
limits prescribed by applicable securities legislation. Purchasers
should refer to such applicable securities legislation for the
complete text of these rights or consult with a legal adviser. The
following statutory rights of action for damages or rescission will
only apply to a purchase of securities of QE2 Acquisition Corp.
("QE2" or the "Corporation") in the event that the foregoing
presentation is deemed to be an offering memorandum pursuant to
applicable securities legislation in the Provinces of Ontario,
Saskatchewan, Manitoba, Newfoundland and Labrador, Nova Scotia, New
Brunswick and Prince Edward Island. Resale Restrictions The shares
will be subject to a number of resale restrictions, including a
restriction on trading. Until the restriction on trading expires, a
shareholder will not be able to trade the shares unless the
shareholder complies with an exemption from the prospectus and
registration requirements under securities legislation.
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QE2 Acquisition Corp. www.qe2corp.comwww.qe2corp.com21 INVESTOR
RIGHTS Ontario Securities legislation in Ontario provides that when
an offering memorandum is delivered to an investor to whom
securities are distributed in reliance upon the "accredited
investor" prospectus exemption provided in Section 2.3 of NI 45-106
Prospectus and Registration Exemptions (the "Accredited Investor
Exemption"), the right of action described below is applicable,
unless the prospective purchaser is: (a) an association governed by
the Cooperative Credit Associations Act (Canada) or a central
cooperative credit society for which an order has been made under
Section 473(1) of that act; (b) a bank, loan corporation, trust
company, trust corporation, insurance company, treasury branch,
credit union, caisse populaire, financial services corporation, or
league that, in each case, is authorized by an enactment of Canada
or a jurisdiction of Canada to carry on business in Canada or a
jurisdiction in Canada; (c) a Schedule III bank, meaning an
authorized foreign bank named in Schedule III of the Bank Act
(Canada); (d) the Business Development Bank of Canada incorporated
under the Business Development Bank of Canada Act (Canada); or (e)
a subsidiary of any person referred to in paragraphs (a), (b), (c)
or (d), if the person owns all of the voting securities of the
subsidiary, except the voting securities required by law to be
owned by the directors of the subsidiary. Where an offering
memorandum that contains a Misrepresentation is delivered in
connection with a trade made in reliance on the Accredited Investor
Exemption or certain other exemptions available under applicable
securities legislation in Ontario, a purchaser who purchases a
security offered by the offering memorandum during the period of
distribution will have, without regard to whether the purchaser
relied on the Misrepresentation, a statutory right of action for
damages against the issuer and a selling security holder on whose
behalf the distribution was made or, while still the owner of
securities a right of rescission against the issuer or selling
security holder on whose behalf the distribution was made. If the
purchaser elects to exercise the right of rescission, the purchaser
will have no right of action for damages. The right of action will
be exercisable by the purchaser only if the purchaser commences the
action, in the case of any action for rescission, not more than 180
days after the date of the transaction that gave rise to the cause
of action and in the case of any action, other than an action for
rescission, before the earlier of: (i) 180 days after the plaintiff
first had knowledge of the facts giving rise to the cause of
action; or (ii) three years after the date of the transaction that
gave rise to the cause of action. A defendant shall not be liable
for a Misrepresentation if it proves that the purchaser purchased
the securities with knowledge of the Misrepresentation. In an
action for damages, the defendant shall not be liable for all or
any portion of the damages that the defendant proves do not
represent the depreciation in value of the securities as a result
of the Misrepresentation relied upon. In no case shall the amount
recoverable for the Misrepresentation that exceeds the price at
which the securities were offered.