A Red Deer-based income trust with extensive holdings in the gaming and hospitality industries has announced its intention to convert to a corporation.
Gamehost Income Fund said in a news release on Wednesday that it’s entered into an agreement with a company to acquire a subsidiary of that company that’s listed on the Toronto Stock Exchange.
Craig Thomas, Gamehost’s chief financial officer, said the transaction is essentially a reverse-takeover. Gamehost will obtain a shell company with which to become a publicly traded, dividend-paying corporation.
Upon completion, the new Gamehost Inc. is expected to pay to its shareholders monthly dividends equal to the monthly cash distributions Gamehost Income Fund currently pays its unitholders. The shareholders will receive a dividend tax credit.
The release cited a number of benefits related to the conversion, including possible improved access to capital and removal of some restrictions related to acquisitions, better liquidity resulting in higher trading volumes, and access to tax advantages that could assist with acquisitions.
“We’re trying to build shareholder value through this process,” said Thomas. “That’s why we’re doing it.”
The arrangement agreement is subject to a number of conditions, including regulatory approvals and the consent of Gamehost unitholders. A vote by unitholders is expected to take place in April. The conversion could occur shortly thereafter.
Income trusts pass most of their taxable cash out to unitholders, who then pay income tax on those receipts.
In October 2006, Federal Finance Minister Jim Flaherty announced that new income trusts would be taxed the same as corporations, and existing trusts would be treated in a similar fashion after four years. Since then, a number of income trusts have converted into corporations.
Gamehost owns and operates Boomtown Casino in Fort McMurray and Great Northern Casino, Service Plus Inns & Suites and a strip mall in Grande Prairie. It is also a 40 per cent joint venture partner in Deerfoot Inn & Casino in Calgary.