SIR Royalty Income Fund : Lembit Janes Announces Nomination of Trustees for Election at Meeting of Unitholders of SIR Royalty Income Fund

TORONTO, April 12, 2021 /CNW/ - Lembit Janes today announced that he has lost confidence in the board of trustees (the "Board") of SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") and will therefore be nominating 3 new independent trustees (the "Unitholder Nominees") for election at the annual general meeting of unitholders of the Fund to be held on June 29, 2021 (the "Meeting") to replace 3 of the current trustees (namely John McLaughlin, Peter Luit and William Rogers). Mr. Janes is the Fund's largest independent unitholder as he beneficially owns or exercises control or direction over 1,562,888 units, representing approximately 18.66% of the outstanding units and 15.10% of the votes that may be cast at the Meeting.

Reasons Why Change is Required
Mr. Janes has been a unitholder of the Fund since September 2010 and believes in the long-term value of the units. While he has no intention of questioning the good faith conduct of the current "Independent" Trustees, he believes change is required to better protect the interests of the unitholders other than SIR Corp. ("SIR"). It is the hope of the Unitholder Nominees that a change of the Board will result in the restoration of distributions to unitholders in the near term, more transparency and unitholder engagement, and a more robust pursuit of plans to maximize unitholder value. 

Below are some, and certainly not all, of the facts that have led Mr. Janes to pursue what he believes is the only course open to him to protect all unitholders:

There has been no change in the Independent Trustees since the Fund's IPO in 2004. The Independent Trustees have been in place since 2004 and regardless of whether they were truly independent in 2004, after 17 years it is simply time for a change.

Decision to suspend unitholder distributions for the benefit of SIR is concerning. On March 23, 2020, the Fund announced that as "a result of the suspension of SIR's dine-in operations, the Trustees of the Fund have temporarily suspended unitholder distributions until further notice."  Since that date, the trading price of the units has dropped significantly. As previously noted in our February 5, 2021 press release, it would appear that the Fund is the only TSX-listed restaurant royalty company to have abandoned its distribution commitments. The Fund received no consideration for this decision to defer distributions, and a year has gone by and there is no indication that distributions will be made anytime soon.

Conduct of SIR is clearly self-serving and strong independent leadership is required to protect unitholders.  Since the COVID-19 pandemic, SIR has acted in what Mr. Janes believes is a clearly self-interested manner to the detriment of the unitholders, and the Independent Trustees have not done enough to protect unitholders. For example:

• SIR's opportunistic $3.55 per unit buyout proposal announced on January 6, 2021 was deeply concerning and, without the intervention of Mr. Janes, it is not clear what the result of that offer would have been. Having failed to buy the Fund at an excessively low price, SIR then stated on February 10, 2021 that "it does not intend to participate in any strategic process that may be undertaken by the independent Trustees of the Fund."
• SIR has incurred $12.875 million of new debt to which the Fund is now subordinated and the unitholders have received nothing in return. The result is that the Fund has moved from being the most secured party to now being subordinated to approximately $54 million in debt of SIR.
• SIR received consideration of $6 million in connection with the early termination of lease agreements for three restaurants, two of which were part of the Royalty Pool. Again, the unitholders received nothing.
• SIR has received significant funds from various government COVID-19 related programs (including the Canada Emergency Wage Subsidy and Canada Emergency Rent Subsidy). These amounts have not been disclosed to unitholders.
• Finally and perhaps most disturbing is the recent disclosure by SIR regarding Renegade Chicken. SIR has stated that Renegade Chicken currently operates out of 26 Jack Astor's locations and one pop up location at Duke's Refresher. They note that Renegade Chicken is not being promoted within or trading on the Jack Astor's brand; however, the "capital expense to launch Renegade Chicken ghost kitchen within SIR's current kitchens is minimal, and for the majority of locations, there is nominal additional equipment required". SIR has taken the positon that the revenues derived from this take-out service being provided by Jack Astor's is solely for its own benefit. Mr. Janes believes that unitholders are legally entitled to a royalty on sales of Renegade Chicken, or any other products, prepared in Jack Astor's kitchens with Jack Astor's staff and utilizing Jack Astor's point-of-sale processes

Lack of Transparency. Over the past few months, Mr. Janes and his advisors have been reviewing the disclosure of the Fund. Various concerns were raised with the Fund, including the failure to disclose material agreements and what Mr. Janes believes was misleading disclosure  made by SIR regarding possible liabilities facing the Fund with respect to taxation under the SIFT rules in the Income Tax Act (Canada). The liabilities were purportedly in respect of royalties payable but not yet received in the 2020 taxation year. The joint press release of SIR and the Fund and the numerous SEDAR filings on March 11, 2021 were in response to Mr. Janes' inquiries. It is obviously concerning that proper disclosure can only be obtained through a demand letter from counsel.

Information Concerning the Nominees

The Unitholder Nominees are Stephen Dewis, Michael Lee Fisher and Lembit Janes. The table below sets out, in respect of each Unitholder Nominee, his name, province or state and country of residence, his principal  occupation, business or employment within the five preceding years, and the number of units of the Fund beneficially owned, or controlled or directed, directly or indirectly, by such Unitholder Nominee.

Name, province or state and country of residence	Present principal occupation, business or employment and principal occupation, business or employment during the preceding five years	Number of units beneficially owned or controlled or directed (directly or indirectly)
Stephen Dewis Ontario, Canada	Retired (2020-present); Partner at Ernst & Young LLP (2004-2020)	Nil
Michael Lee Fisher Ontario, Canada	Retired (2020-present); Global Head of Trading for Fixed Income, Currencies and Commodities at BMO Capital Markets (1990-2020)	10,000 units
Lembit Janes Ontario, Canada	Retired	1,562,888 units

A brief biography for each of the Unitholder Nominees is set out below:

Stephen Dewis – Mr. Dewis is a retired Partner of Ernst & Young LLP (EY).  He spent 26 years at EY, the latter 23 years in the Transaction Advisory Services practice advising clients on mergers, acquisitions, divestitures, financing, and transaction strategy, where he specialized in the food and beverage industry.  Mr. Dewis is a Chartered Professional Accountant (CPA, CA) and a Chartered Business Valuator (CBV).  Mr. Dewis is a graduate of the Ivey Business School at Western University.

Michael Lee Fisher – Mr. Fisher is a recently retired executive from a major Canadian bank.  He holds a B.B.A in Finance from Bishop's University and an MBA in Marketing from McGill University.  In his 30 years in the capital markets, Mr. Fisher has held multiple trading and management roles, predominantly in the area of Canadian Fixed Income.  His last role was Global Head of Trading for Fixed Income, Currencies, and Commodities (FICC).  In that capacity, he supervised more than 100 traders in Europe, Asia and North America.  Mr. Fisher has served on the Investment Industry Association of Canada (IIAC) Debt Committee and the Bank of Canada's Canadian Fixed Income Forum (CFIF) and was Co-chair of the Board of Directors for Freedom Brokerage. Since retirement, he has focused on mentoring junior traders new to the field of money and risk management.

Lembit Janes - Mr. Janes is a retired business executive and investor. He holds a B. Sc. from McGill and an MBA from York University. He spent most of his 40-year career working at Janes Family Foods, where he was the Chair and Chief Executive Officer and major shareholder of the corporation. The business was very successful and the Janes retail brand became one of the largest frozen food brands in Canada. The business was sold in 2012 to Sofina Foods. Mr. Janes has been a director in numerous industry and trade association boards. He is a long-time supporter and a director of Sheena's Place, a not-for-profit organization dedicated to helping individuals, families and friends affected by eating disorders.

To the knowledge of Mr. Janes, no Unitholder Nominee is, as at the date hereof, or has been, within ten (10) years before the date hereof: (a) a director, chief executive officer or chief financial officer of any company that (i) was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation that was in effect for a period of more than thirty (30) consecutive days (each, an "order"), in each case that was issued while the Unitholder Nominee was acting in the capacity as director, chief executive officer or chief financial officer, or (ii) was subject to an order that was issued after the Unitholder Nominee ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer; (b) a director or executive officer of any company that, while such Unitholder Nominee was acting in that capacity, or within one (1) year of such Unitholder Nominee ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (c) someone who became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or became subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of such Unitholder Nominee.

To the knowledge of Mr. Janes, as at the date hereof, no Unitholder Nominee has been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation, or by a securities regulatory authority, or has entered into a settlement agreement with a securities regulatory authority; or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a Unitholder Nominee.

To the knowledge of Mr. Janes, none of the Unitholder Nominees or their respective associates or affiliates, has: (a) any material interest, direct or indirect, in any transaction since the commencement of the Fund's most recently completed financial year or in any proposed transaction which has materially affected or will materially affect the Fund or any of its subsidiaries; or (b) any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted on at the Meeting, other than the election of trustees.

Additional Information
The information contained in this press release does not and is not meant to constitute a solicitation of a proxy within the meaning of applicable securities laws. Although Mr. Janes intends to nominate the Unitholder Nominees and reconstitute the Board, unitholders are not being asked at this time to execute a proxy in favour of the Unitholder Nominees or any other resolution. In connection with the Meeting, Mr. Janes has not decided whether he will file a dissident information circular.

Mr. Janes is voluntarily providing the disclosure required under section 9.2(4) of National Instrument 51-102 – Continuous Disclosure Obligations in accordance with securities laws applicable to public broadcast solicitations. This press release and any solicitation made by Mr. Janes in advance of the Meeting is, or will be, as applicable, made by Mr. Janes, and not by or on behalf of the management of the Fund. All costs incurred for any solicitation will be borne by Mr. Janes (directly or indirectly), provided that, subject to applicable laws, Mr. Janes may seek reimbursement from the Fund for his out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with a successful reconstitution of the Board.

Mr. Janes is not soliciting proxies in connection with the Meeting at this time, and unitholders are not being asked at this time to execute proxies in favour of the Unitholder Nominees (in respect of the Meeting) or any other resolution. Any proxies solicited by Mr. Janes in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian securities laws will be conveyed by way of public broadcast, including press release, speech or publication, and by any other manner permitted under applicable Canadian laws. In addition, such solicitation may be made by mail, telephone, facsimile, email or other electronic means as well as by newspaper or other media advertising and in person by Mr. Janes or his associates or affiliates.

A registered unitholder who has given a proxy may revoke the proxy (i) by completing a proxy signed by the unitholder or by the unitholder's attorney authorized in writing bearing a later date and depositing it with the transfer agent of the Fund; (ii) by depositing an instrument of revocation in writing executed by the unitholder or by the unitholder's attorney authorized in writing: * at the head office of the Fund (namely, Suite 200, 5360 South Service Road, Burlington, Ontario L7L 5L1) at any time up to and including the last business day preceding the day of the Meeting, or any adjournment of the Meeting, or (y) with the Chairperson at the Meeting, prior to the exercise of the proxy; or (iii) in any other manner permitted by law. A non–registered unitholder may revoke a form of proxy or voting instruction form given to an intermediary at any time by written notice to the intermediary in accordance with the instructions given to the non-registered unitholder by its intermediary. Non-registered unitholders should contact their broker for assistance in ensuring that forms of proxies or voting instructions previously given to an intermediary are properly revoked. None of Mr. Janes, or, to his knowledge, any of his associates or affiliates, has any material interest, direct or indirect, in any transaction since the commencement of the Fund's most recently completed financial year, or in any proposed transaction which has materially affected or will materially affect the Fund or any of its subsidiaries. None of Mr. Janes or, to its knowledge, any of his associates or affiliates, has any material interest, direct or indirect, by way of beneficial ownership of securities or  otherwise, in any matter to be acted upon at the Meeting, other than as set out herein.

The units owned or controlled by Mr. Janes were acquired for investment purposes only. Depending on market conditions and other factors, Mr. Janes or his affiliates may in the future increase or decrease their control or direction over securities of the Fund through open market transactions, private agreements or otherwise. Mr. Janes is committed to pursuing any and all alternatives that can maximize value for all unitholders of the Fund, including, without limitation, speaking with certain unitholders and other persons and continuing discussions with the trustees of the Fund.

Mr. Janes' address is c/o Janes Acquisition Corp., 181 Bay Street, Suite 4400, Brookfield Place, Toronto, Ontario, M5J 2T3. The Fund's principal and head office is located at 5360 South Service Road, Suite 200, Burlington, Ontario, L7L 5L1.

This press release is being issued, in part, pursuant to National Instrument 62-103 – The Early Warning System and Related Take-Over Bid and Insider Reporting Issuers, which requires a report to be filed under the Fund's profile on SEDAR (www.sedar.com) containing additional information respecting the foregoing matters. A copy of such report may be obtained by contacting Mr. Lembit Janes at 416-882-7392 or by email at [e-mail].  

FORWARD-LOOKING STATEMENTS
Certain statements contained in this press release, including statements regarding the restoration of distributions in the near term, more transparency and unitholder engagement and the maximization of unitholder value, contain "forward-looking statements" and are prospective in nature. Forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events, and are therefore subject to risks and uncertainties that could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "expects", "intends", "anticipates", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Although Mr. Janes believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Material factors or assumptions that were applied in formulating the forward-looking information contained herein include the assumption that the negative impact of the COVID-19 pandemic on the business and economic conditions affecting SIR's and the Fund's operations will abate over the short term, that the Board will be reconstituted by Mr. Janes at the Meeting, that there will be no further unplanned material changes to SIR's facilities, operations and customer and employee relations and that neither SIR nor the Fund will take any action to restrict rights currently held by unitholders. Mr. Janes cautions that the foregoing list of material factors and assumptions is not exhaustive. Many of these assumptions are based on factors and events that are not within the control of Mr. Janes and there is no assurance that they will prove correct. Important factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements include, among other things, the impact of the COVID-19 pandemic; breaches of material agreements entered into by SIR, the Fund or their respective affiliates; industry risk and other risks inherent in the running of the business of SIR and the Fund; changes in demographic trends; weather; changing consumer preferences and discretionary spending patterns; changes in consumer confidence; changes in national and local business and economic conditions; pandemics or other material outbreaks of disease or safety issues affecting humans or animals or food products; changes in tariffs and international trade; changes in foreign exchange; changes in availability of credit; legal proceedings and challenges to intellectual property rights; dependence of the Fund on the financial condition of SIR; legislation and governmental regulation, including the cost and/or availability of labour as it relates to changes in minimum wage rates or other changes to labour legislation and forced closures of restaurants and bars; and laws affecting the sale and use of alcohol (including availability and enforcement).These are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of Mr. Janes' forward-looking statements. Other unknown and unpredictable factors could also impact its results. Many of these risks and uncertainties relate to factors beyond Mr. Janes' ability to control or estimate precisely. Consequently, there can be no assurance that the actual results or developments anticipated by Mr. Janes will be realized or, even if substantially realized, that they will have the expected consequences for, or effects on, the Fund or SIR and their respective future results and performance. Forward-looking statements in this press release are based on Mr. Janes' beliefs and opinions at the time the statements are made, and there should be no expectation that these forward-looking statements will be updated or supplemented as a result of new information, estimates or opinions, future events or results or otherwise, and Mr. Janes disavows and disclaims any obligation to do so, except as required by applicable law.

SOURCE Janes Acquisition Corp.

© Canada Newswire, source Canada Newswire English