The company would also be obligated to pay an expense reimbursement fee of $3 million if the deal does not close under certain other circumstances, while Garda stands to receive $12 million if the purchasers fail to close the deal first announced earlier this month.
The details were included in a proxy circular Friday that was issued ahead of a planned Oct. 24 ratification vote by shareholders.
The Garda (TSX:GW) board of directors has unanimously recommended shareholders approve the privatization deal for the company, which was founded by chief executive Stephan Cretier in 1995.
Under the proposed agreement, Crepax Acquisition — a joint venture between the Cretier Group and an Apax subsidiary — will pay $12 per share in cash for the shares they do not already hold and will assume $625 million of net debt.
Cretier, who owns a large stake in Garda, will retain a 24 per cent stake after the transaction, while Garda directors and key executives are also rolling over their shares for a total ownership stake of 27.2 per cent.
The CEO first learned about Apax's interest in Garda when a major Canadian bank approached him in early February. Cretier quickly met in Florida with Apax officials before agreeing to work together on a formal proposal that was submitted in July.
Cretier began developing a strategic plan to grow Garda in December, but concluded its capital structure and limited access to capital were roadblocks to achieving those plans.
"Mr. Cretier concluded that Garda would need a partner with a strong ability to fund the corporation’s growth plans in order to achieve these strategic initiatives," said the 154-page proxy circular send to shareholders.
Garda's board ultimately endorsed the transaction after Cretier indicated he would not support any alternative offer.
In the interim a special board committee hired outside experts, including UBS, which concluded the deal was fair from a financial point of view to shareholders other than those participating in the transaction.
Desjardins Capital Markets, which was paid $750,000 to review several other Canadian deals, pegged Garda's fair market value at between $10.75 and $12.25 per share.
The new owners have commitments from Bank of America and the Royal Bank of Canada to provide up to US$350 million of debt financing. Apax will provide $280 million to finance the transaction and the reverse termination fee.
Under an employment contract, Cretier would remain chief executive and retain his existing base salary of $600,000 a year. He would also be eligible for an annual cash bonus of up to $500,000 plus a semi-annual cash bonus of up to $500,000 for achieving certain performance objectives.
Moody's Investors Service has placed Garda's debt under review for possible downgrade while it examines potential changes to Garda's capital structure, its appetite for acquisitions as a private company and the impact the transaction would have on its liquidity.
Martin Landry of GMP Securities has called the transaction "opportunistic" given Garda's accelerating growth.
The company reported the highest EBITDA earnings growth in four years and its strongest organic revenue growth in more than five years.
Without the takeout offer, Landry said he would have expected Garda's share price to have performed well and profits to continue growing by at least double digits. But he added the offer represents full value given the low likelihood of competing bids.
Garda shares were unchanged at $11.93 on the Toronto Stock Exchange on Friday.
Note to readers: This is a corrected story. An earlier version incorrectly stated the amount that could be owed under the break fee.Suggest a correction