Atlas Engineered Products Enters Into Definitive Agreement to Acquire South Central Building Systems and Closes Second Trance of Private Placement Financing

NANAIMO, BC, Dec. 6, 2018 /CNW/ - ATLAS ENGINEERED PRODUCTS LTD. ("Atlas" or the "Company") (TSX-V: AEP, OTC Markets: APEUF) a leading supplier of trusses, engineered wood products and building components, is pleased to announce that it has entered into a definitive agreement to purchase all of the issued and outstanding shares of South Central Building Systems Ltd. ("South Central") of Carman, Manitoba and that it has closed Tranche 2 of its private placement financing.

South Central Building Systems

To acquire South Central, Atlas has agreed to pay an aggregate purchase price of $3,400,000, consisting of $2,500,000 payable on closing in the form of cash and assumption of debt, 1,000,000 common shares of Atlas valued at an agreed upon price of $0.40 per share, and $500,000 payable in five equal monthly installments (the "Installment Payments"), with the first Installment Payment due in the third month following closing. South Central's shareholders may elect to receive the Installment Payments in Atlas common shares at a price of $0.40 per share, provided that, at the time the election is made, it is made with respect to his or her pro rata share of the full remaining balance of the Installment Payments still payable.

The purchase price for South Central is based on it having working capital of $400,000 at closing, and is subject to adjustment post-closing based on the actual working capital amount. Mr. Bill Woods, CFO for Atlas said, "South Central has a solid track record of aggressive double-digit revenue growths over the last number of years, and most recently in fiscal 2018 revenues grew 35% over 2017 to $3.5 million, delivering an impressive 23% EBITDA margin. The business is nimble, generates good cash flows, and quite frankly impressive controls."

"This is a SMART acquisition for Atlas", commented CEO & President, Dirk Maritz. "With the acquisitions we've completed to date, Atlas is on track to deliver close to $50 million top-line revenues this year – only one year into its consolidation strategy. With our focus on efficiencies, productivity, economies-of-scale and buying power optimization we are confident we can deliver on our profitability targets as well. This deal fits squarely within our acquisition strategy and will bring an energetic, high-performance team to Atlas, best-in-class, efficient automation, capacity to significantly increase output, a loyal and growing customer base and EBITDA margins to be proud of. South Central is based in the middle of over 25+ growing communities in Southern Manitoba, can easily reach nearby Winnipeg, and huge potential into the northern parts of Minnesota and Dakota. Strategically, we have clearly defined our desired footprint locations, growth potential, revenue, profitability, quality of assets and people expectations – South Central, has checked every box, and we are excited to now be in the Prairies. The Atlas growth story continues."

Closing of the South Central acquisition remains subject to customary closing conditions, financing, TSX Venture Exchange approval and satisfactory completion of Atlas' due diligence investigations.

Please follow the attached link to view Mr. Dirk Maritz's and Mr. Lindsey Boeve's interview with Proactive Investors:

https://www.youtube.com/watch?v=HfawNK_SSic&feature=youtu.be

Closing of Private Placement Financing

Atlas also announces that it has closed the second tranche of its non-brokered private placement financing (the "Offering"), issuing a total of 832,500 units (each a "Unit") for aggregate gross proceeds of $333,000. The closing of this tranche of the Offering brings the total amount sold under the Offering to 10,330,000 Units for total aggregate gross proceeds of $4,132,000. The Offering is now closed.

Each Unit under the Offering consists of one Atlas common share and one-half of one warrant (each a "Warrant"). Each whole Warrant entitles the holder thereof to purchase one additional Atlas common share at a price of $0.60 per share for a period of two years from the date of issuance. Atlas has the right to accelerate the expiry date of the Warrants if its common shares trade at a volume weighted average price greater than $0.80 per share for 20 consecutive trading days. If exercised, the expiry date of the Warrants will be accelerated to the date that is 30 days after Atlas issues a news release announcing the exercise of the acceleration right.

Directors and officers purchased 345,000 Units under the Offering. The sale of securities to Atlas' directors and officers is exempt from the formal valuation and minority approval requirements of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions as the fair market value of the securities purchased in the Offering by Atlas' directors and officers is less than 25% of Atlas' market capitalization. A material change report was not filed in respect of the participation by Atlas' directors and officers as, in the opinion of management, such participation does not constitute a "material change" as defined in National Instrument 51-102 – Continuous Disclosure Obligations.

The securities issued in the second tranche under the Offering are subject to a four month and one day hold period expiring on April 4, 2019. The securities issued under the Offering have not been registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws. Accordingly, any securities issued under the Offering to United States purchasers may not be offered or sold within the United States except in compliance with the registration requirements of the U.S. Securities Act and any applicable state securities laws, or pursuant to exemptions therefrom. Atlas does not intend to file a registration statement in the United States with respect to the securities issued in the Offering. This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities to, or for the account or benefit of, persons in the United States. 

Proceeds of the private placement were used to acquire Tandelle Specialty Inc. and Pacer Building Components Inc. of Ilderton, Ontario, completed in November, with the balance planned for use in financing future acquisitions and for general working capital purposes.

About Atlas Engineered Products Ltd.

Atlas Engineered Products is a leading supplier of trusses and engineered wood products. Atlas was formed over 18 years ago and operates manufacturing and distribution facilities in British Columbia and Ontario to meet the needs of residential and commercial builders. Atlas has expert design and engineering teams, multiple-shift state-of-the-art truss manufacturing operations, and large inventories of engineered beam and flooring components. Atlas aims to grow its base of business across Canada by pursuing an aggressive acquisition and consolidation and product diversification strategy. Atlas will bring its construction industry partners across Canada unparalleled excellence in service, product, and support and is committed to supplying them with the full array of components and assemblies they might require for their projects – from design to lockup.

Non-IFRS Financial Measures and Management Prepared Financial Information

Readers are cautioned that the financial results of South Central for the 2017 and 2018 fiscal years were prepared by management, and have not been audited or reviewed by an independent auditor.

EBITDA, adjusted EBITA and EBITDA margent are measures not recognized under IFRS. However, Atlas' management believes that most shareholders, creditors, other stakeholders and investment analysts prefer to have these measures included as reported measures of operating performance, a proxy for cash flow, and to facilitate valuation analysis. EBITDA is defined as earnings before interest income, interest expense, taxes, depreciation and amortization. Adjusted EBITDA is calculated as net income less total interest expense, income taxes, depreciation and amortization and non-cash charges for share based compensation. EBITDA margin is EBITDA as a percentage of total revenue. Management believes EBITDA, adjusted EBITDA and EBITDA margin are useful measures that facilitate period to-period operating comparisons. EBITDA, adjusted EBITDA and EBITDA margin do not have standardized meanings prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Readers are cautioned that EBITDA, adjusted EBITDA and EBITDA margin are not alternatives to measures determined in accordance with IFRS and should not, on their own, be construed as indicators of performance, cash flow or profitability.

CONTACT: Atlas Engineered Products Ltd., Dirk Maritz, CEO and President, Phone: 1-250-754-1400, Email: info@atlasep.ca, Unit 102, 6551 Aulds Road, Nanaimo, BC V9S 5X9, www.atlasengineeredproducts.com; Atlas Engineered Products Ltd, Bill Woods, CFO, Phone: 1-250-754-1400, Email: info@atlasep.ca, Unit 102, 6551 Aulds Road, Nanaimo, BC V9S 5X9, www.atlasengineeredproducts.com; For investor relations please contact: Rob Gamley, Phone: 1-604-689-7422, Email: rob@contactfinancial.com, Contact Financial Corp., 810 - 609 Granville St., Vancouver, BC V7Y 1G5

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