Information Services Corporation (TSX:ISV) (ISC) said it has reached an agreement with the Province of Saskatchewan to extend its exclusive master service agreement (MSA) until 2053.
The extension grants ISC the exclusive right to manage and operate several key registries in the province, including the Saskatchewan Land Registry and the Saskatchewan Personal Property Registry.
Under the terms of the extension, ISC will make an upfront cash payment of $150 million by July 28, 2023, followed by five annual cash payments of $30 million starting in July 2024. In addition, ISC may make annual contingent payments to the province after 2033 if there is volume growth in certain land registry transactions.
The extension is expected to have a positive financial impact on ISC. The company has been granted the right to introduce and enhance fees on certain transactions, which is estimated to result in incremental annual revenue and adjusted EBITDA of $17 million and $16 million, respectively.
ISC projects an increase of $7 million in revenue and $6 million in adjusted EBITDA for 2023. The extension is also expected to generate attractive returns for ISC shareholders, with a plus-10% unlevered internal rate of return and a plus-30% accretion to net asset value per share.
In a statement, Shawn Peters, president and CEO of ISC, expressed his satisfaction with the agreement, commenting: "This extension of our master service agreement with the province has been an important priority for us ...This agreement is beneficial for all stakeholders, including the province, the people of Saskatchewan, and ISC's long-standing and extremely supportive shareholders."
Donna Harpauer, Saskatchewan deputy premier and minister of finance, praised ISC's track record and the value it brings to the province, saying: "ISC's history in our province of providing quality services to people and businesses drove the extension of this agreement ...The payments we will receive from ISC and the ability to participate in the company's growth will help our government continue to invest in the priority programs, services, and infrastructure Saskatchewan people value."
The extension of the MSA reinforces ISC's position as a leading registry operator and provides a stable source of long-term cash flow. ISC plans to make meaningful investments to enhance the core registries and expand its growth strategy.
The company also aims to maintain a prudent and flexible capital structure while focusing on deleveraging, dividend growth, and new investments.
Contact the author at jon.hopkins@proactiveinvestors.com