SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. 9)

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Filed by a Party other than the Registrant o

Check the appropriate box:

þ		Preliminary Proxy Statement

o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o		Definitive Proxy Statement

o		Definitive Additional Materials

o		Soliciting Material Pursuant to §240.14a-12

GENERAL FINANCE CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

o		No fee required.
þ		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

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Title of each class of securities to which transaction applies:

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Aggregate number of securities to which transaction applies:

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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

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Proposed maximum aggregate value of transaction: $102,200,000

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Total fee paid: $10,035.06

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o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

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GENERAL FINANCE CORPORATION
260 South Los Robles, Suite 217
Pasadena, California 91101

 

 

To the Stockholders of General Finance Corporation:

 

You are cordially invited to attend a special meeting of our stockholders to be held at 9:00 a.m., local time, on [l], 2007, at the offices of our legal counsel, Troy & Gould Professional Corporation, 1801 Century Park East, 16th Floor, Los Angeles, California.

 

At the meeting, you will be asked to consider and vote upon our proposed acquisition of all of the outstanding capital stock of RWA Holdings Pty Limited, an Australian company, or RWA. We refer to RWA and its subsidiaries collectively as “Royal Wolf.” Royal Wolf leases and sells portable storage containers, portable container buildings and freight containers in Australia. We are not aware of any published third-party analysis of the Australian portable container market. Based upon Royal Wolf’s own internal analysis, we believe Royal Wolf is the market leader in Australia for container-based storage and accommodation products. Royal Wolf operates customer service centers in every state in Australia, is represented in all major business centers in Australia, and, as such, is the only container leasing and sales company in Australia with a nationally integrated infrastructure and work force.

 

We will acquire the RWA shares through GFN Australasia Finance Pty Limited, or GFN Australasia, an indirect, wholly owned Australian subsidiary formed by us for this purpose. The purchase price for the RWA shares will be $57.6 million, plus $864,600 per month from March 29, 2007 until the closing. The purchase price includes deposits of $1,005,000 previously paid by us in connection with the acquisition. If the acquisition is not completed for any reason, we will forfeit the deposits. Assuming the closing occurs on July 31, 2007, we will pay the purchase price of the RWA shares, less the deposits, by a combination of cash of approximately $51.7 million and issuance of approximately 1,380 shares of capital stock of GFN U.S. Australasia Holdings, Inc., or GFN U.S., our wholly owned U.S. subsidiary, which will constitute 13.8% of the outstanding capital stock of GFN U.S. immediately following the acquisition. Assuming the closing occurs on July 31, 2007, the aggregate acquisition consideration will be approximately $102.2 million, including a total of $2.4 million in cash payable by us in two equal installments on the first and second anniversaries of the closing in exchange for a non-compete covenant. The aggregate consideration for Royal Wolf also includes the indebtedness under Royal Wolf’s existing credit facilities. There was $38.7 million, including accrued interest, of indebtedness outstanding under these facilities of March 31, 2007. The actual amount outstanding as of the closing will be different, but will in no event exceed $39.4 million of principal. As a result of the acquisition, RWA will become a direct, wholly owned subsidiary of GFN Australasia, and we will own indirectly 86.2% of Royal Wolf.

 

Enclosed is a notice of special meeting and proxy statement containing detailed information concerning the acquisition. Whether or not you plan to attend the meeting, we urge you to read these materials carefully.

 

Our board of directors has unanimously approved our acquisition of RWA and determined that it is in the best interests of us and our stockholders. Our board of directors also believes that the acquisition is fair to us and our stockholders. No fairness opinion was sought or obtained by our board of directors in making its determinations. Our board of directors unanimously recommends that you vote or give instruction to vote “FOR” approval of the acquisition.

 

Under our certificate of incorporation, we can complete the acquisition only if it is approved by the affirmative vote of the holders of a majority of the shares of our common stock present and entitled to vote at the special meeting with respect to the acquisition, as well as the holders of a majority of the shares of our common stock that were originally issued in our initial public offering, or IPO, that are voted. Notwithstanding these approvals, our certificate of incorporation provides that we cannot complete the acquisition if the holders of 20% or more of our IPO shares (1,725,000 or more shares) vote against it and demand that their shares be converted into the right to receive a pro rata portion of the funds presently held in the trust account established at the time of our IPO. If you exercise your conversion rights and the acquisition of Royal Wolf is completed, then you will be entitled to tender your share certificate to our transfer agent for cash of not less than approximately $7.88 per IPO share. If you wish to exercise your conversion rights, you must affirmatively vote against approval of the acquisition and follow the procedures described in detail beginning on pages xiii and 32 of the enclosed proxy statement. If the acquisition is completed, the foregoing provisions of our certificate of incorporation will no longer apply.

 

Our units, common stock and warrants are listed on the American Stock Exchange under the symbols “GFN.U,” “GFN” and “GFN.WS,” respectively. On July 2, 2007, the closing sale price of our common stock was $7.87. Our stockholders should verify the market price of our common stock prior to selling any common stock in the public market, since they may be able to receive greater proceeds from exercising their conversion rights than from selling their shares, assuming that the acquisition is completed.

 

Our officers and directors hold shares of our common stock acquired prior to our IPO that represent approximately 17.9% of our outstanding shares. They have agreed to vote these shares with respect to the acquisition as the holders of a majority of our IPO shares that are voted at the special meeting.

 

Your vote is important. Whether you plan to attend the special meeting or not, please sign, date and return the enclosed proxy card as soon as possible in the envelope provided.

 

I look forward to seeing you at the meeting.

 

Sincerely,

 

Ronald F. Valenta

Chief Executive Officer

GENERAL FINANCE CORPORATION
260 South Los Robles, Suite 217
Pasadena, California 91101

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [l], 2007

 

To the Stockholders of General Finance Corporation:

 

NOTICE IS HEREBY GIVEN that a special meeting of stockholders of General Finance Corporation, a Delaware corporation, will be held at 9:00 a.m., local time, on [l], 2007, at the offices of our legal counsel, Troy & Gould Professional Corporation, 1801 Century Park East, 16th Floor, Los Angeles, California, for the following purposes:

 

(1) to consider and vote upon a proposal to approve our acquisition of RWA Holdings Pty Limited, an Australian company, or RWA; and

 

(2) in the event that there are insufficient votes present at the meeting for approval of the RWA acquisition, to consider and act upon a proposal to grant our board of directors discretionary authority to adjourn the special meeting to solicit additional votes for approval of the acquisition.

 

These items of business are described in the attached proxy statement, which we encourage you to read in its entirety before voting. Only holders of record of our common stock at the close of business on June 11, 2007 are entitled to notice of and to vote at the meeting and any adjournment or postponement of the meeting.

 

All stockholders are cordially invited to attend the meeting in person. However, to ensure your representation at the meeting, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible. Proxy cards that are returned to us in time for the special meeting will be voted by the proxy holders named therein as instructed on the proxy cards. If no instructions are given, they will be voted “FOR” approval of the Royal Wolf acquisition and the other proposal described above. By returning the enclosed proxy card, you also will be granting the proxy holders discretionary authority to consider and act upon such other matters incident to the conduct of the meeting as may be properly presented at the meeting and any adjournment or postponement of the meeting.

 

The holders of shares of our common stock that were originally issued in our initial public offering, or IPO, are entitled to vote against approval of the acquisition and demand that their shares be converted into the right to receive a pro rata portion of the funds held in the trust account established at the time of the IPO. If you wish to exercise your conversion rights, you must affirmatively vote against approval of the acquisition and follow the procedures described in detail beginning on pages xiii and 32 of the enclosed proxy statement.

 

By Order of the Board of Directors

 

Ronald F. Valenta

Chief Executive Officer

 

June [l], 2007

 

 

 

 

GENERAL FINANCE CORPORATION
260 South Los Robles, Suite 217
Pasadena, California 91101

 

PROXY STATEMENT

 

This proxy statement is furnished in connection with the solicitation of proxies on behalf of the board of directors of General Finance Corporation for use at the special meeting of our stockholders to be held at 9:00 a.m., local time, on [l], 2007, at the offices of our legal counsel, Troy & Gould Professional Corporation, 1801 Century Park East, 16th Floor, Los Angeles, California. The accompanying notice of special meeting describes the purposes of the meeting. The proxies will be used at the meeting and at any postponement or adjournment of the meeting.

 

This proxy statement and accompanying proxy solicitation materials were first mailed on or about June [l], 2007 to our shareholders entitled to vote at the meeting.

 

TABLE OF CONTENTS

 

 

This Summary Term Sheet, together with the sections entitled “Questions and Answers About the Acquisition and the Special Meeting” and “Summary of the Proxy Statement,” summarizes certain material information contained in this proxy statement. You should carefully read this entire proxy statement for a more complete understanding of the matters to be considered at the special meeting of stockholders.

 

 

 

 

 

 

 

 

 

The following questions and answers address briefly some commonly asked questions regarding our proposed acquisition of RWA Holdings Pty Limited, or RWA, and the special meeting of our shareholders. These questions and answers may not address all questions that may be important to you as our stockholder. The answers below are qualified by reference to the more detailed information contained elsewhere in this proxy statement.

 

References in this proxy statement to “Royal Wolf” mean RWA and its subsidiaries, Royal Wolf Trading Australia Pty Limited and Hi-Tech Pty Limited.

 

References in this proxy statement to “GFN Australasia” mean GFN Australasia Finance Pty Ltd., a newly formed company organized by us under the laws of Australia and indirect, wholly owned subsidiary of GFN U.S. Australasia Holdings, Inc., or GFN U.S., our wholly owned U.S. subsidiary. References in this proxy statement to “we,” “us,” “our,” and “ours” mean General Finance Corporation and its subsidiaries, including Royal Wolf following the acquisition.

 

The shareholders from whom we will purchase the shares of RWA at the closing include Bison Capital Australia LP, a Delaware limited partnership, which we refer to in this proxy statement as Bison-GE. Bison-GE is affiliated with Bison Capital Management, LLC, a private equity firm, which we refer to in this proxy statement as Bison Capital, and GE Asset Management Incorporated on behalf of the General Electric Pension Trust, both of which are affiliates of General Electric Corporation, or GE. The other current shareholders of RWA are Cetro Pty Limited, FOMJ Pty Limited, FOMM Pty Limited, TCWE Pty Limited, which, along with Paul Jeffrey, James Warren, Michael Baxter and Peter McCann, who constitute the majority of the directors and executive officers of RWA, are referred to in this proxy statement as the management shareholders. Bison-GE and the management shareholders are sometimes referred to in this proxy statement as the sellers.

 

On September 12, 2006, we entered into an acquisition agreement, which is referred to in Australia as a share sale deed, with the management shareholders and Equity Partners Two Pty Limited, an Australian private equity firm, or Equity Partners, under which we agreed to purchase from them all of the shares of capital stock of RWA. On March 29, 2007, we entered into an amended acquisition agreement with Bison-GE, the management shareholders and Equity Partners, which superseded the September 12, 2006 acquisition agreement in its entirety. Pursuant to the amended acquisition agreement, Bison-GE acquired 80% of the RWA shares, consisting of all of the RWA shares owned by Equity Partners and approximately 50% of the RWA shares owned by the management shareholders, for purchase consideration equivalent to the consideration that was originally negotiated by us with the management shareholders and Equity Partners as set forth in the original acquisition agreement. We arranged for Bison-GE’s purchase of the RWA shares as an accommodation to us to avoid the possible termination of the original acquisition agreement and permit us time to complete the proxy statement review process with the Securities and Exchange Commission and present the proposed Royal Wolf acquisition to a vote of our stockholders. The terms our original acquisition agreement to purchase the RWA shares were determined by arm’s-length negotiations between us and the management shareholders and Equity Partners. The terms of Bison-GE’s participation and the other terms of the amended acquisition agreement and related agreements also were determined by arm’s-length negotiations among the parties.

 

References in this proxy statement to the acquisition agreement mean the amended acquisition agreement, unless the context indicates otherwise.

 

Some of the financial terms and provisions of the acquisition agreement are denominated in Australian dollars, as are the historical consolidated financial statements of RWA included in this proxy statement. However, for convenience, the financial terms and provisions of the acquisition agreement, as well as the dollar amounts included in the sections entitled “Consideration of the Acquisition” and “Information About Royal Wolf,” have been converted throughout the text of this proxy statement into U.S. dollars. Unless otherwise indicated, all amounts have been converted based upon the currency exchange rate in effect on March 1, 2007 of 0.788 U.S. dollar for one Australian dollar. The currency exchange rate in effect as of the closing of the acquisition or at any future date may differ. Because Royal Wolf’s business is presently conducted entirely within Australia, assuming the acquisition is completed, our future consolidated financial results stated in U.S. dollars will fluctuate in accordance with changes in currency exchange rates.

The Following Questions and Answers are of Interest to All Stockholders

 

 

 

 

 

 

All required third-party consents were obtained in connection with Bison-GE’s purchase of RWA shares pursuant to the acquisition agreement, and no further or additional consents are needed with respect to our purchase of Royal Wolf. ANZ and Bison-GE are in the process of preparing the subordination agreement between them relating to the senior subordinated promissory notes to be issued to Bison-GE. We expect that the subordination agreement will be in customary form and will be entered into only in conjunction with the closing of our acquisition of Royal Wolf, and not before the closing.

 

 

 

 

 

 

The Following Questions and Answers are of Interest Primarily to Stockholders Who May Wish to Exercise their Conversion Rights

 

 

 

 

SUMMARY OF THE PROXY STATEMENT

	•	Reviewed certain internal financial information relating to the business and financial prospects of Royal Wolf, including financial projections provided by Royal Wolf’s management that were not publicly available;
	•	Conducted discussions with members of the senior management of Royal Wolf concerning its business and financial prospects;
	•	Reviewed drafts of the acquisition agreement and certain other agreements related thereto; and
	•	Considered industry data and analyses and such other information as they and our management deemed appropriate.

	•	Discussions with our management regarding Royal Wolf’s established business, record of growth and potential for future growth, the industry in which it competes, and current industry conditions, all of which led our board of directors to conclude that the acquisition presented an opportunity for us and our stockholders to realize value through the acquisition;
	•	The experience of our management, in particular, Mr. Valenta, in building and consolidating similar businesses in the U.S. and Europe;
	•	The experience of Royal Wolf’s management, including Robert Allan, Royal Wolf’s Chief Executive Officer, and James Warren, its Chief Operating Officer in building and operating Royal Wolf’s business;
	•	Royal Wolf’s ability to execute its business plan using its own financing resources, since some of our stockholders may exercise their conversion rights in connection with the acquisition and thereby reduce the funds in the trust account available to us following the acquisition;
	•	Royal Wolf’s financial results, including revenue growth and expanding operating margins;
	•	The aggregate consideration for the acquisition represented an approximate run-rate adjusted earnings before interest, taxes and depreciation, or EBITDA, multiple of 7.3x Royal Wolf’s projected adjusted EBITDA for the twelve months ending December 31, 2007;
	•	The financial presentations of our management to our board of directors that, based upon and subject to the assumptions made, procedures followed, factors considered and limitations upon its review as of the date of the presentation, the fair value of Royal Wolf exceeded 80% of our net assets, which is one of the requirements for our initial business combination as described under “Satisfaction of 80% Test” below;
	•	The belief by our board of directors that we had paid the fair market value and the lowest price that the sellers were willing to accept, taking into account the terms resulting from extensive negotiations between the parties;
	•	The advice of our legal advisors, Troy & Gould Professional Corporation in the U.S. and Barnes & Wenden in Australia, and our due diligence advisors, Ernst & Young LLP Australia as to tax and structuring matters, La Rue, Corrigan and McCormick LLP as to accounting matters, and Consulting Earth Scientists as to environmental matters;
	•	The terms of the acquisition agreement, including:

	•	The inclusion of a “material adverse effect” clause in our favor, which includes any effect that results or is reasonably likely to result in a decline in Royal Wolf’s EBITDA of 15% or more in any twelve-month period; and
	•	The inclusion of customary representations and warranties of the sellers, non-compete, indemnification and escrow provisions in our favor;
	•	The need for Bison-GE to participate in the acquisition in order to avoid the possible termination of the original acquisition agreement and permit us to present the Royal Wolf acquisition to a vote of our stockholders, and the willingness of Bison-GE to participate pursuant to the acquisition agreement and related agreements;
	•	The fact that we will own indirectly 86.2%, rather than all, of Royal Wolf at the closing of the acquisition;
	•	The provisions of the shareholders agreement, including the fact that we may require Bison-GE to sell to us all of its GFN U.S. shares in the future at a price specified in the shareholders agreement to be entered into between us and Bison-GE;
	•	The costs and other potential disadvantages to us and our stockholders of abandoning the proposed acquisition, including the forfeiture of our deposits of $1,005,000, and seeking to identify and negotiate an alternative initial business combination; and
	•	The willingness of Ronald F. Valenta to facilitate our acquisition of Royal Wolf by agreeing to the backup purchase agreement, and the fact that Mr. Valenta will not be compensated for agreeing to the backup purchase agreement.

	•	The risks relating to Royal Wolf’s business set out in this proxy statement in the section entitled “Risk Factors” beginning on page 20;
	•	That Royal Wolf has no current business or operations in the U.S. or outside of Australia;
	•	That Royal Wolf only recently began generating operating income;
	•	That Royal Wolf’s portable storage sales business is maturing and is not likely to grow at the same rate as its leasing business;
	•	That the provisions of the acquisition agreement will result in our forfeiture of $1,005,000 deposits if the acquisition is not completed for any reason;
	•	That delays in meeting the deadlines set forth in the original acquisition agreement for obtaining stockholder approval and other matters made it necessary to seek Bison-GE’s participation to allow more time to present the acquisition to vote of our stockholders, and the increased acquisition consideration and additional transaction costs associated with the amended acquisition agreement as compared to the original acquisition agreement; and
	•	The provisions of the shareholders agreement, including the fact that Bison-GE may require us to purchase all of its GFN U.S. shares in the future at a price specified in the shareholders agreement.

	•	If the acquisition is not completed and we fail by October 5, 2007 to enter into an agreement in principle or a definitive agreement with respect to another business combination, or having done so we fail to complete the business combination by April 5, 2008, we will be required to liquidate. In that event, the 1,875,000 shares of common stock held by our officers and directors that were acquired prior to the IPO for an aggregate purchase price of $250,000 will be worthless, because our officers and directors have waived all rights to receive any liquidation proceeds with respect to such shares. As of July 2, 2007, the aggregate market value of these shares of our common stock owned by our officers and directors was $14,756,250.

	•	Ronald F. Valenta, our Chief Executive Officer and a director, and John O. Johnson, our Chief Operating Officer, own warrants to purchase an aggregate of 1,491,333 shares of our common stock that they acquired for an aggregate purchase price of approximately $1,400,000, which also will become worthless upon our liquidation. As of July 2, 2007, the aggregate market value of these warrants was $2,833,533.

	•	Mr. Valenta has made available to us a line of credit under which we may borrow from him from time to time up to $3,000,000 at an annual interest rate equal to 8%. Our borrowings under the line of credit have been and will continue to be used by us to pay operating expenses, including deposits and expenses relating to the acquisition. At May 31, 2007, the outstanding amount of principal and accrued interest under the line of credit was $2,256,322. We will continue to borrow funds under the line of credit to pay expenses through the completion of the acquisition. If the acquisition is completed, Mr. Valenta will be repaid all outstanding principal and accrued interest under the line of credit. If, on the other hand, the acquisition or other business combination is not completed and we are required to liquidate as described above, Mr. Valenta will have no recourse against the funds held in the trust account for repayment of any amount owed to him under the line of credit.
	•	All of our current officers and directors will continue to serve as such following the acquisition. In addition, Robert Allan, the Chief Executive Officer of Royal Wolf, will be deemed to be one of our officers following the acquisition and Peter McCann and James Warren, Royal Wolf’s Chief Financial Officer and Chief Operating Officer, respectively, will be key employees. At present, we do not compensate our officers or directors other than Charles E. Barrantes, our Executive Vice President and Chief Financial Officer, whose employment commenced on September 11, 2006. We will have employment agreements with only Messrs. Barrantes and Allan. Mr. Barrantes receives a base annual salary of $200,000 and is eligible to receive an annual bonus each fiscal year of up to 35% of his base salary, provided that he is employed on the last day of such year. Mr. Allan receives a base annual salary of $236,400 and is eligible to receive an performance annual bonus not to exceed $78,800

		based upon the achievement of specified performance indicators. Ronald F. Valenta, our Chief Executive Officer and Secretary, John O. Johnson, our Chief Operating Officer, and Marc Perez, our Controller, are not currently compensated for their services; and both Mr. Valenta and Mr. Johnson have advised our board of directors that they will continue to serve in these capacities without compensation until at least the earliest of June 30, 2008 or such time as Royal Wolf achieves a annualized EBITDA of $20 million or we achieve a company-wide total annualized EBITDA of $40 million. If the acquisition is completed, we may modify the compensation to our officers and directors based upon the advice and recommendations of the Compensation Committee of our board of directors. Except as described above, there is no current understanding or arrangement with respect to any future compensation to our officers or directors.

	•	As an inducement to Bison-GE and the management shareholders to enter into the acquisition agreement, Mr. Valenta has entered into a backup purchase agreement with Bison-GE and the management shareholders under which he agrees that, if the acquisition agreement is terminated for any reason, he will purchase from Bison-GE and the management shareholders all of the RWA shares at a purchase price equivalent to the purchase price payable by us under the acquisition agreement. The terms of the backup purchase agreement were determined by arm’s-length negotiations among Mr. Valenta, Bison-GE and the management shareholders. Mr. Valenta will not be entitled to a fee or other compensation for the agreeing to the backup purchase agreement.

	•	The absence of any event that has a material adverse effect on Royal Wolf’s EBITDA over any 12-month period; and
	•	ANZ and Bison Capital entering into a subordination agreement with respect to the senior subordinated promissory notes of GFN Australasia to be issued to Bison Capital at the closing of the acquisition.

	•	By us, Bison-GE or the management sellers if the acquisition is not approved by our stockholders at the special meeting, or otherwise by September 1, 2007; and
	•	By Bison-GE or the management sellers if any other closing condition is not satisfied within 20 business days after approval of the acquisition by our stockholders (which termination right will be deemed to be waived unless Bison-GE or the management shareholders give us notice of the termination within 10 business days following expiration of such 20 business day period); and
	•	By any party after March 29, 2008 if any of the other conditions to the closing of the acquisition has not been satisfied and the terminating party has used reasonable efforts to satisfy the conditions.

 

We believe that some of the information in this proxy statement constitutes forward-looking statements within the definition of the Private Securities Litigation Reform Act of 1995, although the safe-harbor provisions of that act do not apply to statements made in this proxy statement. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. We have based these forward-looking statements on our current expectations about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us and Royal Wolf that may cause the actual future business and financial results of us and Royal Wolf to be materially different from prior results or any results expressed or implied by such forward-looking statements. Factors that might cause or contribute to such a difference include, but are not limited to, those described in the “Risk Factors” section and elsewhere in this proxy statement. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement.

 

All forward-looking statements included in this proxy statement are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this proxy statement or to reflect the occurrence of unanticipated events.

 

We are providing the financial information in this section to assist you in your analysis of the financial aspects of the acquisition. The information in this section is only a summary, and should be read in conjunction with the historical financial statements and related notes. The historical results included below and elsewhere in this proxy statement are not indicative of the future performance of us and our consolidated subsidiaries, including Royal Wolf, following the acquisition.

 

General Finance Corporation Selected Historical Information

 

The following table sets forth selected historical financial information derived from our unaudited consolidated financial statements for the period from October 14, 2005 (inception) to March 31, 2007 and for the quarters ended March 31, 2007 and 2006; and from our audited consolidated financial statements for the year ended December 31, 2006. The unaudited financial information includes all significant adjustments, consisting primarily of normal recurring adjustments, that we consider necessary for a fair presentation of our financial position and results of operations for the periods presented.

 

Statement of Operations Information:

 

 

The following table sets forth selected financial information derived from our unaudited consolidated financial statements as of March 31, 2007 and from our audited consolidated financial statements as of December 31, 2006.

 

Balance Sheet Information:

 

RWA Selected Historical Consolidated Financial Information

 

The following table sets forth, in Australian dollars, selected historical financial information of RWA derived from RWA’s unaudited consolidated financial statements as of and for the six months ended December 31, 2006 and 2005; the audited consolidated financial statements as of and for the year ended June 30, 2006, the six months ended June 30, 2005 and the year ended December 31, 2004 contained elsewhere in this proxy statement. The information as of and for the year ended December 31, 2003 was derived from the audited financial statements of Royal Wolf Trading Australia Pty Limited, or RWT, Royal Wolf’s principal operating subsidiary, contained elsewhere in this proxy statement. The information as of and for the years ended December 31, 2002 and 2001 was derived from the unaudited financial statements of RWT that are not contained in this proxy statement. RWA changed its fiscal year-end to June 30 from December 31 commencing with the six months ended June 30, 2005 and the fiscal year ended June 30, 2006. RWA’s unaudited consolidated financial statements as of and for the six months ended December 31, 2006 and 2005; the audited consolidated financial statements as of and for the year ended June 30, 2006 and December 31, 2004 and as of and for the six months ended June 30, 2005 were prepared in accordance with Australian accounting standards. International financial reporting standards, or IFRS, form the basis of Australian accounting standards, and are referred to in this proxy statement as Australian equivalents to IFRS, or AIFRS, to distinguish them from Australian generally accepted accounting principles, or AGAAP, which were in effect for periods prior to 2004. AIFRS became effective for accounting periods beginning on or after January 1, 2005. Royal Wolf’s first financial statements prepared in accordance with AIFRS were for the six months ended June 30, 2005, with comparative information for the year ended December 31, 2004 restated accordingly. The other financial statements of RWT referred to above were prepared in accordance with AGAAP. AIFRS and AGAAP are not comparable, and both AIFRS and AGAAP differ in some respects from U.S. generally accepted accounting principles, or U.S. GAAP, and are not comparable to U.S. GAAP. However, a reconciliation to U.S. GAAP of the consolidated financial results of RWA and the December 31, 2003 financial statements of RWT is set forth in the notes to the respective consolidated financial statements of RWA and the financial statements of RWT included in this proxy statement.

 

The consolidated financial statements of RWA for each period presented and the financial statements of RWT for the year ended December 31, 2003 have been restated due to a correction of an error in accounting for income taxes as set forth in the notes to the respective consolidated financial statements of RWA and the financial statements of RWT included in this proxy statement.

 

The summarized information below should be read together with the historical financial statements and accompanying notes contained elsewhere in this proxy statement.

 

Consolidated Statement of Operations Information:

 

Consolidated Balance Sheet Information:

 

 

The following summary unaudited pro forma condensed combined financial information is designed to show how our acquisition of RWA might have affected our historical financial statements if the acquisition had been completed at an earlier time. The following summary unaudited pro forma condensed combined financial information was prepared based on the historical financial results of us and RWA. The historical results for RWA have been adjusted to conform with U.S. GAAP and converted to U.S. dollars at the average exchange rate during the periods presented in the statements of income and at March 31, 2007 for the balance sheets. The following should be read in connection with “Unaudited Pro Forma Condensed Combined Financial Statements” and the historical financial statements of RWA that are contained elsewhere in this proxy statement.

 

The unaudited pro forma balance sheet data assumes that the acquisition took place on March 31, 2007 and combines RWA’s March 31, 2007 unaudited consolidated balance sheet data with our unaudited March 31, 2007 balance sheet data. The unaudited pro forma statements of operations data for the three months ended March 31, 2007 and for the twelve months ended December 31, 2006 gives effect to the acquisition as if it had occurred on January 1, 2007 and on January 1, 2006, respectively, and combines the results of operations of us and RWA for the periods indicated.

 

The summary unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of our combined financial condition or results of operations for future periods or the combined financial condition or results of operations that actually would have been realized had we acquired and owned RWA during these periods:

 

 

 

 

 

The following table sets forth audited historical and unaudited pro forma per share ownership information of us after giving effect to the acquisition, assuming both no conversions and maximum conversions by our stockholders. You should read this information in conjunction with our selected historical financial information. The unaudited pro forma per share information is derived from, and should be read in conjunction with, the “Unaudited Pro Forma Condensed Combined Financial Statements” and related notes included elsewhere in this proxy statement.

 

The unaudited pro forma condensed earnings per share information below does not purport to represent the earnings per share that would have been achieved had we acquired and owned RWA during the periods presented, nor earnings per share for any future date or period. The unaudited pro forma book value per share information below does not purport to represent what our value would have been had we acquired and owned RWA.

 

 

 

 

 

 

Our units, common stock and warrants are listed on the American Stock Exchange under the symbols “GFN.U,” “GFN” and “GFN.WS,” respectively. The following table sets forth the range of high and low sales prices for the units, common stock and warrants for the periods indicated since the units commenced public trading on April 10, 2006, and since the common stock and warrants commenced public trading separately on June 13, 2006:

 

 

The closing sales prices for our units, common stock and warrants as reported on the American Stock Exchange on July 2, 2007 were $9.70, $7.87 and $1.90, respectively. Holders of our units, common stock, and warrants should obtain current market quotations for their securities. The market price of our units, common stock, and warrants may vary at any time before the closing of the acquisition.

 

Holders

 

As of June 11, 2007, the record date for the special meeting, there was one holder of record of our units and our warrants and there were eight holders of record of our common stock. We believe that there are hundreds of beneficial holders of our common stock, units and warrants.

 

Dividends

 

We have not paid any dividends on our common stock to date and do not intend to pay dividends prior to the completion of a business combination.

 

It is the present intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly, our board of directors does not anticipate declaring any dividends in the foreseeable future. The payment of dividends subsequent to a business combination will be within the discretion of our then board of directors and will be contingent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of a business combination.

 

You should carefully consider the following risk factors, together with all of the other information included in this proxy statement, before you vote or instruct your vote with respect to the approval of the acquisition.

 

Risks Related to Our Business and Operations Following Our Acquisition of Royal Wolf

 

General or localized economic downturns or weakness may adversely affect Royal Wolf’s customers, in particular those in the mining and moving and storage industries, which may reduce demand for Royal Wolf’s products and services to decline and negatively impact our future revenues and results of operations.

 

A significant portion of Royal Wolf’s revenues is derived from customers who are in industries and businesses that are cyclical in nature and subject to changes in general economic conditions, including the mining and moving and storage industries, which constituted approximately 9% and 6%, respectively, of Royal Wolf’s revenues in the fiscal year ended June 30, 2006. Although the variety of Royal Wolf’s products, the breadth of its customer base and its geographic diversity throughout Australia limits its exposure to economic downturns, general economic downturns or localized downturns in markets where its operates could reduce demand for Royal Wolf’s products and negatively impact our future revenues and results of operations.

 

Royal Wolf faces significant competition in the portable buildings industry and regional competition in the portable storage market. Royal Wolf also faces potentially significant competition from modular industry companies who have portable storage offerings, especially from several national competitors in Australia who have greater financial resources and pricing flexibility than Royal Wolf does. If Royal Wolf is unable to compete successfully, it could lose customers and our future revenues could decline.

 

Although Royal Wolf’s competition varies significantly by market, the portable buildings markets in which Royal Wolf competes is dominated by three or four large participants and is highly competitive. In addition, Royal Wolf competes with a number of large to mid-sized regional competitors, as well as many smaller, full and part-time operators in many local regions. The modular space industry is highly competitive and almost all of the competitors have portable storage product offerings. The primary modular national competitors with portable storage offerings are less leveraged than Royal Wolf, and have greater financial resources and pricing flexibility than Royal Wolf does. If they focus on portable storage, Royal Wolf could lose customers and our future revenues could decline. If Royal Wolf is unable to compete successfully, it could lose customers and our future revenues could decline.

 

Because Royal Wolf has depended to a large extent on the success of its leasing operations, the failure of Royal Wolf to effectively and quickly remarket lease units that are returned could materially and adversely affect our results of operations.

 

Royal Wolf’s average monthly lease fleet utilization has historically exceeded 80%, with the typical lease being for an average period of over twelve months. The high utilization rate and the length of the average lease has provided Royal Wolf with a predictable revenue stream. However, should a significant number of Royal Wolf’s lease units be returned during any short period of time, Royal Wolf would have to re-lease a large supply of units at similar rates in order to maintain historic revenues from these operations. Royal Wolf’s failure to effectively remarket a large influx of units returning from leases could have a material adverse effect on our results of operations.

 

Royal Wolf operates with a high amount of debt, a substantial portion of which is secured by all or substantially all of the company’s assets and is subject to variable interest rates.

 

As of March 31, 2007, Royal Wolf had outstanding approximately $38.7 million, including accrued interest, of indebtedness under its existing credit facilities with ANZ, which bears interest at variable rates ranging from 6.57% to 8.75% per annum. Royal Wolf’s debt obligations require it to dedicate a significant portion of its cash flow from operations to payments on this indebtedness, which could reduce the availability of cash flow for future working capital, capital expenditures, acquisitions and other general corporate purposes. In addition, Royal Wolf’s debt load increases its vulnerability to general adverse economic and industry conditions, limits its flexibility in planning for,

or reacting to, changes in its business and its industry, and subjects it to certain restrictive covenants that influence its operations and its ability to borrow additional funds. These periodic interest rate adjustments could expose Royal Wolf’s operating results and cash flows to periodic fluctuations. Although Royal Wolf uses interest rate hedging arrangements and swap agreements to limit its exposure to interest rate volatility, no assurance can be given that Royal Wolf will not remain subject to unexpected interest expenses. Failing to comply with its debt service obligations and the debt covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on our business, financial condition and results of operations. In addition, since Royal Wolf’s bank loans are secured by a lien on all or substantially all of Royal Wolf’s container fleet and other assets, a default under Royal Wolf’s bank debt could result in the foreclosure of all of these assets, which would materially and adversely affect Royal Wolf’s operations and ability to continue its current operations.

 

The supply and cost of used ocean-going containers fluctuates, which fluctuation could affect Royal Wolf’s pricing and our ability to grow.

 

Royal Wolf currently purchases, refurbishes and modifies used ocean-going containers in order to replenish and expand its lease fleet. Various freight transportation companies, freight forwarders and commercial and retail storage companies also purchase used ocean-going containers. Many of these other companies have greater financial resources than Royal Wolf does. As a result, if the number of available containers for sale decreases, these competitors may be better able to absorb an increase in the cost of containers. If used ocean-going container prices increase substantially, Royal Wolf may not be able to purchase enough new units to maintain or increase the size of its fleet. These price increases also could increase Royal Wolf’s acquisition costs and operating expenses and adversely affect our results of operations and reduce our earnings. Conversely, an oversupply of used ocean-going containers may cause container prices to fall, which may result in competitors then lowering the lease rates on their storage units. As a result, Royal Wolf may need to lower its lease rates to remain competitive, which would cause our future revenues to decline.

 

Sales of storage units constitute a significant portion of Royal Wolf’s revenues. Failure to continue to sell units at historic rates could adversely affect our ability to grow Royal Wolf’s lease fleet.

 

Sales of storage units constituted approximately 59% and 56% of Royal Wolf total revenues for the six months ended December 31, 2006 and the year ended June 30, 2006, respectively. Revenues from sales of storage units have been used to fund increases in the size of our lease fleet. As a result, the failure to continue to sell a significant number of units may adversely affect our ability to increase the size of Royal Wolf’s lease fleet or to otherwise take advantage of business and growth opportunities available to it.

 

Governmental regulations could impose substantial costs and restrictions on Royal Wolf’s operations that could harm our future results of operations.

 

Royal Wolf is subject to various Australian federal, state and local environmental, transportation, health and safety laws and regulations in connection with its operations. Any failure to comply with these laws or regulations could result in capital or operating expenditures or the imposition of severe penalties or restrictions on its operations. In addition, these laws and regulations could change in a manner that materially and adversely affects Royal Wolf’s ability to conduct its business. More burdensome regulatory requirements in these or other areas may increase our general and administrative costs. If Royal Wolf is unable to pass these increased costs on to its customers, our future operating results could be negatively impacted.

 

Royal Wolf may not be able to facilitate its growth strategy by identifying or completing transactions with attractive acquisition candidates, which could impair the growth and profitability of its business.

 

Since December 2005, Royal Wolf has completed four acquisitions. An important element of our growth strategy for Royal Wolf is to continue to seek additional acquisitions in order to add new customers within existing geographic markets and branch locations, and to expand Royal Wolf’s operations into new markets. Any future growth through acquisitions will be partially dependent upon the continued availability of suitable acquisition candidates at favorable prices, upon advantageous terms and conditions and upon successful integration of the acquired businesses. However, future acquisitions may not be available at advantageous prices or upon favorable

terms and conditions. In addition, acquisitions involve risks that the businesses acquired will not perform in accordance with expectations, that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove incorrect, that the acquired businesses may not be integrated successfully and that the acquisitions may strain Royal Wolf’s management resources. Future acquisitions and any necessary related financings also may involve significant transaction-related expenses. If Royal Wolf is unable to complete additional acquisitions or successfully integrate any businesses that it does acquire, our future growth and operating results would be adversely impacted.

 

Before we entered into the original acquisition agreement, we entered into confidentiality agreements and conducted preliminary due diligence with respect to a number of other possible initial business combinations. We and Royal Wolf also previously entered into a confidentiality agreement and conducted preliminary due diligence with respect to one smaller Australian equipment leasing company that Royal Wolf considered to be a suitable acquisition for it. We are not in current discussions or negotiations, or currently conducting due diligence, regarding any of the entities with which we signed confidentiality agreements prior to entering into the Royal Wolf acquisition agreement, and neither we nor Royal Wolf has any present understandings, arrangements or commitments with respect to any possible future acquisition. There is no assurance that we or Royal Wolf will be able to identify, negotiate or complete any future acquisitions, or, if completed that any such acquisitions will be successful.

 

Failure to retain key personnel could adversely affect Royal Wolf’s operations and could impede our ability to execute our business plan and growth strategy.

 

After the completion of the acquisition, Royal Wolf will continue to be managed largely by its existing officers, including Robert Allan, its Chief Executive Officer, Peter McCann, its Chief Financial Officer, and James Warren, its Chief Operating Officer. The continued success of Royal Wolf will depend largely on the efforts and abilities of these executive officers and certain other key employees, many of who have over eight years of experience with Royal Wolf. These officers and employees have knowledge and an understanding of Royal Wolf and its industry that cannot be readily duplicated. Each of Messrs. Allan, McCann and Warren has an employment agreement which is terminable under certain circumstances upon notice to him. The loss of any member of Royal Wolf’s senior management team could impair our ability to execute our business plan and growth strategy, cause a loss of customers, reduce revenues and adversely affect employee morale.

 

Any failure of Royal Wolf’s management information systems could disrupt our business and result in decreased rental or sale revenues and increased overhead costs, which could negatively impact our results of operations.

 

Royal Wolf depends on its management information systems to actively manage its lease fleet, control new unit capital spending and provide fleet information, including leasing history, condition and availability of our units. These functions enhance Royal Wolf’s ability to optimize fleet utilization, rentability and redeployment. The failure of Royal Wolf’s management information systems to perform as we anticipate could disrupt its business and could result in, among other things, decreased leases or sales and increased overhead costs, which could negatively impact our results of operations.

 

A write-off of all or a part of our goodwill would hurt our operating results and reduce our stockholders’ equity.

 

As a result of four acquisitions completed by Royal Wolf since December 2005, we will have significant intangible assets related to goodwill, which represents the excess of the total purchase price of the acquisitions over the fair value of the net assets acquired. We are not permitted to amortize goodwill under the U.S. accounting standards and instead are required to review goodwill at least annually for impairment. In the event impairment is identified, a charge to earnings would be recorded. Although it does not affect our cash flow, a write-off in future periods of all or a part of our goodwill would hurt our operating results and stockholders’ equity. We are unable to currently estimate if and when it may become necessary to write-off goodwill or the effect such a write-off may have on our financial results or the market prices of our securities.

Significant increases in raw material costs could increase our operating costs significantly and harm our stockholders’ equity.

 

Royal Wolf purchases raw materials, including metals, lumber, siding and roofing and other products, to perform periodic refurbishment of its units and to modify containers to its customers’ requirements. During periods of rising prices for raw materials, and in particular when the prices increase rapidly or to levels significantly higher than normal, we may incur significant increases in our operating costs and may not be able to pass price increases through to our customers in a timely manner, which could harm our future results of operations.

 

Failure by Royal Wolf’s Chinese manufacturers to sell and deliver products to Royal Wolf in timely fashion may harm Royal Wolf’s reputation and our financial condition.

 

Royal Wolf currently purchases new container products directly from container manufacturers in China. Although Royal Wolf is not dependent on any one manufacturer and is able to purchase products from a variety of suppliers, the failure of one or more of its suppliers to timely manufacture and deliver containers to Royal Wolf could adversely affect its operations. Royal Wolf purchases new container products under purchase orders issued to container manufacturers, which the manufacturers may or may not accept or be able to fill. Royal Wolf has no contracts with any supplier. If these suppliers do not timely fill Royal Wolf’s purchase orders, or do not properly manufacture the ordered products, our reputation and financial condition also could be harmed.

 

Royal Wolf’s growth plan includes a possible expansion of Royal Wolf’s operations into markets outside of Australia, including Asia/Pacific markets. Such international expansion may not prove successful, and may divert significant capital, resources and management’s time and attention and adversely affect Royal Wolf’s on-going operations in Australia.

 

To date, Royal Wolf has conducted all of its business within Australia. However, Royal Wolf has plans to enter international markets, including the Asia/Pacific market, in the future, which will require meaningful amounts of management time and attention. Royal Wolf’s products and its overall marketing approach may not be accepted in other markets to the extent needed to make its international expansion profitable. In addition, the additional demands on its management from these activities may detract from Royal Wolf’s efforts in the Australian market and adversely affect its operating results in its principal market. Any international expansion will expose Royal Wolf to the risks normally associated with conducting international business operations, including unexpected changes in regulatory requirements, changes in foreign legislation, possible foreign currency controls, currency exchange rate fluctuations or devaluations, tariffs, difficulties in staffing and managing foreign operations, difficulties in obtaining and managing vendors and distributors, potential negative tax consequences and difficulties collecting accounts receivable.

 

Royal Wolf’s planned growth could strain our management resources, which could disrupt our development of new Royal Wolf customer service centers.

 

Our future performance will depend in large part on our ability to manage Royal Wolf’s planned growth. Royal Wolf’s growth could strain our existing management, human and other resources. To successfully manage this growth, we must continue to add managers and employees and improve Royal Wolf’s operating, financial and other internal procedures and controls. We also must effectively motivate, train and manage Royal Wolf’s employees. If we do not manage Royal Wolf’s growth effectively, some of its new customer service centers and acquisitions may lose money or fail, and we may have to close unprofitable locations. Closing a customer service center would likely result in additional expenses that would adversely affect our future operating results.

 

We will incur indebtedness in connection with the acquisition of Royal Wolf, and we may need additional debt or equity financing to sustain our growth. We do not have commitments for any such financing.

 

In conjunction with our acquisition of Royal Wolf, we will incur $15.76 million of indebtedness to Bison Capital or its affiliate to be evidenced by senior subordinated promissory notes of GFN Australasia. The notes will bear interest at the annual rate of 13.5%, payable quarterly in arrears, will mature 66 months from the date of issuance, and generally will not be prepayable, or will be prepayable only at a premium, prior to maturity. We will

rely on cash flow from operations of Royal Wolf to make payments under this subordinated indebtedness, and there is no assurance that Royal Wolf’s cash flow will be sufficient to service both Royal Wolf’s indebtedness and this subordinated indebtedness of GFN Australasia. Payment of interest and other expenses relating to this indebtedness may adversely affect our financial condition and results of operations.

 

We also may finance Royal Wolf’s growth through a combination of borrowings, cash flow from operations and equity financing. The ability of Royal Wolf to grow will depend in part on our ability to obtain either additional debt or equity financing to fund the costs of such growth. The availability and terms of any debt and equity financing will vary from time to time, and will be influenced by Royal Wolf’s performance and by external factors, such as the economy generally and developments in the market, that are beyond our control. Also, additional debt financing or the sale of additional equity securities may adversely affect the market price of our securities. If we are unable to obtain additional debt or equity financing on acceptable terms, we may have to curtail Royal Wolf’s growth by delaying new customer service center openings or expansion of its lease fleet.

 

Some zoning laws restrict the use of Royal Wolf’s storage units and therefore limit its ability to offer its products in all markets.

 

Most of Royal Wolf’s customers use Royal Wolf’s storage units to store goods on their own properties. Local zoning laws in some of Royal Wolf’s geographic markets prohibit customers from maintaining portable storage units on their properties or require that portable storage units be located out of sight from the street. If local zoning laws in one or more of Royal Wolf’s geographic markets were to ban or restrict portable storage units stored on customers’ sites, Royal Wolf’s business in that market will suffer.

 

Unionization by some or all of Royal Wolf’s employees could cause increases in operating costs.

 

Royal Wolf’s employees are not presently covered by collective bargaining agreements. However, from time to time various unions have attempted to organize some of Royal Wolf’s employees. We are unable to predict the outcome of any continuing or future efforts to organize Royal Wolf’s employees, the terms of any future labor agreements, or the effect, if any, those agreements might have on our operations or financial performance.

 

Risks Related to the Acquisition

 

In performing its valuation analyses of Royal Wolf, our management relied on projections for Royal Wolf provided by its management. No assurance can be made that the projections our management used in its analyses will be achieved.

 

Royal Wolf did not publicly disclose its internal management projections provided to our management in connection with our management’s analysis of the acquisition, and the projections were not prepared with intent for public disclosure or prepared in accordance with generally accepted accounting principles, the published guidelines of the Securities and Exchange commission or the American Institute of Certified Public Accountants’ guidelines for projections or forecasts. These projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of our management, including, without limitation, factors related to general economic and industry conditions and competitive activity. Actual results could vary significantly from those set forth in the projections used by our management. For all of these reasons, stockholders should not place undue reliance on these projections as summarized elsewhere in this proxy statement.

 

We obtained no fairness opinion in connection with our acquisition of Royal Wolf and it is possible that stockholders could challenge our determinations regarding the value of Royal Wolf.

 

Our board of directors approved our acquisition of Royal Wolf and determined that it is in the best interests of us and our stockholders, and believes that the acquisition is fair to us and our stockholders. Our board also determined that the fair market value of Royal Wolf exceeds 80% of our net assets. As set forth in the prospectus relating to our IPO, we are not required to obtain an opinion from an investment banking firm as to the fair market value if our board determines that the Royal Wolf acquisition meets the 80% threshold. In making its determinations, our board of directors relied upon the portable storage industry and deal-making experience of our officers and directors, including Ronald F. Valenta, our Chief Executive Officer and a director, and John O. Johnson, our Chief Operating Officer. Our

board of directors did not seek or obtain a fairness opinion from an independent advisor to support its determinations, and it is possible that stockholders could challenge our board’s determinations regarding the value of Royal Wolf.

 

There are indicators that the fair market value of Royal Wolf is below the 80% threshold, and we may be subject to stockholder claims that our board’s valuation determinations are contrary to our IPO prospectus.

 

Our board of directors determined that the fair market value of Royal Wolf at the time we entered into the September 12, 2006 acquisition agreement was between $75 million and $95 million, which exceeded 80%, or approximately $52 million, of our net assets as of September 30, 2006. A minority of the valuation measurements indicated that the fair market value of Royal Wolf may be below 80% of our net assets. By one measure, based upon a comparison of selected transactions and utilizing the actual cash flow of Royal Wolf for the fiscal year ended June 30, 2006, the entire range of values was below the 80% threshold. Our board of directors updated its original valuations when we entered into the March 29, 2007 amended acquisition agreement, and determined that the updated fair market value of Royal Wolf was between approximately $90 million and $120 million, which exceeded 80%, or approximately $54 million, of our net assets as of December 31, 2006. A minority of the updated measurements also indicated a fair market value of Royal Wolf below the 80% threshold at the low end of the range of values only. The majority of both the initial and updated valuation measurements, however, indicated that Royal Wolf’s fair market value exceeded the 80% threshold, and our board of directors determined that these majority measurements, including the measurements based upon the projected results of operations of Royal Wolf for the fiscal year ending June 30, 2007 and twelve months ending December 31, 2007, were better indicators of the fair market value of Royal Wolf.

 

Our IPO prospectus states that the 80% test relates to the fair market value of the target business in our initial business combination. The IPO prospectus did not describe specifically how the 80% threshold would apply if we acquired less than all of the equity interests in the target business, and it is possible that investors could conclude that the 80% test should relate instead only to the value of our equity interest in the target business. At $75 million and $90 million, the low end of the range of Royal Wolf’s fair market value as determined by our board of directors in September 2006 and March 2007, respectively, the fair market value of our 86.2% ownership interest in Royal Wolf exceeds the 80% threshold; however, a minority of the updated valuation measurements considered by our board of directors indicated that the fair market value of our 86.2% ownership interest in Royal Wolf was below the 80% threshold. It is possible, therefore, that stockholders could challenge our board’s determination that the Royal Wolf acquisition satisfies the 80% test described in our IPO prospectus. In this event, we could incur substantial legal fees and other costs and expenses in defending our board’s determination. If such claims were asserted, and if we were unsuccessful in defending the claims, we also could be subject to damages that could have a material adverse effect on our financial condition or results of operations. Such claims also would divert the time and attention of our management and board of directors, which could adversely affect our business and operations.

 

All of our valuation determinations were based upon an analysis of the fair market value of the entirety of Royal Wolf’s business and operations. In considering the 80% threshold as it relates to our 86.2% ownership interest in Royal Wolf, we multiplied 86.2% by the entire fair market value of Royal Wolf, and we did not attempt to otherwise value our 86.2% ownership interest in Royal Wolf.

 

Our working capital will be reduced to the extent our stockholders exercise their conversion rights. This would reduce our cash reserves after the acquisition.

 

We are not permitted to complete the acquisition if holders of 20% or more of our IPO shares exercise their conversion rights. Based upon the funds held in the trust account as of May 31, 2007, the amount of funds that could be disbursed to our stockholders upon the exercise of their conversion rights is approximately $13.6 million, or approximately 20% of the funds then held in the trust account after deduction of the taxes on earned interest. To the extent our stockholders exercise their conversion rights, there will be a corresponding reduction in the amount of funds available to us following the acquisition. Depending on the net price paid by our various stockholders for the outstanding IPO shares and other financial considerations, it may be in the best interests of some stockholders to convert their shares or to permit the liquidation of this company. Since we cannot currently predict how many stockholders will exercise their conversion rights, we do not know if the acquisition of Royal Wolf will be effected, and if so, what amount of funds will be disbursed to stockholders who exercise their conversion rights.

The purchase price we will pay for the RWA shares may increase due to currency exchange rate fluctuations.

 

The purchase price of the RWA shares to be purchased from the management shareholders, as well as the payments to the management shareholders and Equity Partners for their non-compete covenant, will be payable in Australian dollars. The exchange rate between the U.S. dollar and the Australian dollar is subject to market fluctuations, and the U.S. dollar generally has weakened recently compared to the Australian dollar. In the event that the value of the Australian dollar appreciates compared to the U.S. dollar prior to our payment of these amounts the, the amount of U.S. dollars that we will have to exchange into Australian dollars at that time could be significantly higher, thereby making the actual amount of these payments higher. (The actual amount of the these payments will be lower if the Australian dollar depreciates compared to the U.S. dollar.) We have not entered into any hedge agreements to limit our exposure to currency rate fluctuations, and no assurance can be given that the currency exchange rate between the U.S. dollar and the Australian dollar will not be less favorable to us when these payments are made.

 

Our directors and officers own shares of common stock and have interests in the acquisition that are different from yours. If the acquisition is not approved, the shares of common stock acquired by them prior to our IPO may become worthless.

 

Our directors and officers own 1,875,000 shares of our common stock purchased by them for an aggregate purchase price of $250,000 prior to our IPO as to which they have waived any right to receive any of the cash proceeds that may be distributed upon our liquidation. If the acquisition is not completed and we fail by October 5, 2007 to enter into an agreement in principle or a definitive agreement with respect to another business combination, or having done so we fail to complete the business combination by April 5, 2008, we will liquidate and such shares held by our officers and directors will become worthless. As of July 2, 2007, the aggregate market value of these shares of our common stock owned by our officers and directors was $14,756,250.

 

Ronald F. Valenta, our Chief Executive Officer and a director, and John O. Johnson, our Chief Operating Officer, own warrants to purchase an aggregate of 1,491,333 shares of our common stock that they acquired for an aggregate purchase price of approximately $1,400,000. These warrants also will become worthless if the acquisition is not completed and we fail to enter into an agreement in principle or a definitive agreement with respect to another business combination, or fail to complete another business combination, as described above. As of July 2, 2007, the aggregate market value of these warrants was $2,833,533.

 

Mr. Valenta has made available to us a line of credit under which we may borrow from him from time to time up to $3,000,000 at an annual interest rate equal to 8%. Our borrowings under the line of credit have been and will continue to be used by us to pay operating expenses, including deposits and expenses relating to the acquisition. At May 31, 2007, the outstanding amount of principal and accrued interest under the line of credit was $2,256,322. We will continue to borrow funds under the line of credit through the closing of the acquisition. If the acquisition is completed, Mr. Valenta will be repaid all outstanding principal and accrued interest under the line of credit. If, on the other hand, the acquisition is not completed and we are required to liquidate as described above, Mr. Valenta will have no recourse against the funds held in the trust account for repayment of any amounts outstanding under the line of credit.

 

As an inducement to Bison-GE and the management shareholders to enter into the acquisition agreement, Mr. Valenta has entered into a backup purchase agreement with Bison-GE and the management shareholders under which he agrees that, if the acquisition agreement is terminated for any reason, he will purchase from Bison-GE and the management shareholders all of the RWA shares at a purchase price equivalent to the purchase price payable by us under the acquisition agreement. The terms of the backup purchase agreement were determined by arm’s-length negotiations among Mr. Valenta, Bison-GE and the management shareholders. Mr. Valenta will not be entitled to a fee or other compensation for the agreeing to the backup purchase agreement.

 

These financial interests of our directors and officers may have influenced their decision to approve our acquisition of Royal Wolf. In considering the recommendations of our board of directors for approval of the acquisition, you should consider these interests.

We have not established the compensation of some of our officers or our directors, so stockholders will not have this information in deciding how to vote.

 

Ronald F. Valenta, our Chief Executive Officer and Secretary, John O. Johnson, our Chief Operating Officer, and Marc Perez, our Controller, are not currently compensated for their services; and both Mr. Valenta and Mr. Johnson have advised our board of directors that they will continue to serve in these capacities without compensation until at least the earliest of June 30, 2008 or such time as Royal Wolf achieves annualized EBITDA of $20 million or we achieve a company-wide total annualized EBITDA OF $40 million.

 

If the acquisition is completed, we may modify the compensation to our officers and directors based upon the advice and recommendations of the Compensation Committee of our board of directors. Except as described above, there is no current understanding or arrangement with respect to any such compensation, and our stockholders will have no information with respect to any such future compensation in deciding how to vote their shares with respect to the acquisition.

 

Bison-GE may require us to purchase all of its GFN U.S. shares in the future at a specified price, which price may exceed the value of the GFN U.S. shares.

 

Immediately following the acquisition, we will own 86.2% and Bison-GE will own 13.8% of the outstanding shares of GFN U.S. At the closing of the acquisition, we will enter into a shareholders agreement with Bison-GE under which, among other things, Bison-GE will have the right to require us to purchase all, but not less than all, of its GFN U.S. shares at any time after the second anniversary of the closing at a cash price specified in the shareholders agreement. This price will not necessarily bear any relation to the market value or fair value of the GFN U.S. shares, and Bison-GE is likely to require us to purchase its GFN U.S. shares, if at all, at a time when the value of the GFN U.S. shares is less than the price that we are required to pay under the shareholders agreement. We also will have the right to require Bison-GE to sell us its GFN U.S. shares after the second anniversary of the closing at a price specified in the shareholders agreement, but there is no assurance that the specified price will not exceed the market value or fair value of the GFN U.S. shares. As a result, we may choose not to purchase the GFN U.S. shares owned by Bison-GE.

 

If we do not complete our acquisition of Royal Wolf, we will forfeit our deposits and bear substantial costs, and we may not be successful in identifying another suitable business combination.

 

If we do not complete the acquisition, we will forfeit deposits of $1,005,000 and bear substantial transaction costs and immediately resume our search for another suitable business combination to present to our stockholders for their approval. We have no commitments or understandings with respect to any other business combination, and there is no assurance that whether or on what terms we may be able to negotiate another business combination. Because of the costs incurred in connection with the proposed acquisition of Royal Wolf and other expenses, the $3,000,000 revolving line of credit that we have been using to fund our operations may be fully utilized, thereby reducing our ability to fund another acquisition. At May 31, 2007, we have the capacity to borrow an additional $820,000 under our line of credit and, as of May 31, 2007, we had current accounts payable and accrued expenses of approximately $677,500.

 

If we do not complete our acquisition of Royal Wolf and are forced to dissolve and liquidate, third parties may bring claims against us and, as a result, the proceeds held in our trust account could be reduced and the per-share liquidation price received by our public stockholders could be less than $7.84 per share.

 

If we fail to complete the acquisition of Royal Wolf and also fail by October 5, 2007 to enter into an agreement in principle or a definitive agreement with respect to another business combination, or having done so we fail to complete another business combination by April 5, 2008, we will be required by our certificate of incorporation to initiate proceedings to dissolve and liquidate the assets held in our trust account to the holders of our IPO shares.

 

Based upon the funds held in the trust account as of May 31, 2007, the per-share liquidation price as of that date would have been approximately $7.88, or $0.12 less than the per-unit offering price of $8.00 in our IPO. This compares to the closing sale prices of our common stock of $7.87 as reported on the American Stock Exchange on July 2, 2007. Our stockholders should verify the market price of our common stock prior to selling any common

stock in the public market, since they may be able to receive greater proceeds from exercising their conversion rights than from selling their shares assuming that the acquisition is completed. The proceeds deposited in the trust account could, however, become subject to the claims of our creditors, and there is no assurance that the actual per-share liquidation price will not be less than $7.86 due to such claims.

 

Creditors may seek to interfere with the distribution of the trust account pursuant to federal or state creditor and bankruptcy laws, which could delay the actual distribution of such funds or reduce the amount ultimately available for distribution to our public stockholders. If we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the funds held in our trust account will be subject to applicable bankruptcy law and may be included in our bankruptcy estate and senior to claims of our public stockholders.

 

If we do not complete our acquisition of Royal Wolf and are forced to dissolve and liquidate, payments from the trust account to our public stockholders may be delayed.

 

If we are forced to initiate our dissolution as a result of our failure to complete the acquisition of Royal Wolf or of another business by the deadline of October 5, 2007 or April 5, 2008, as applicable, we will be unable to liquidate the trust account and distribute the proceeds to our public stockholders unless and until our stockholders approve our plan of dissolution and liquidation following our compliance with procedures mandated by the Delaware General Corporation Law and the federal securities laws. Among other things, we will be required to prepare and file with the Securities and Exchange Commission a proxy statement regarding our plan of dissolution and liquidation. Accordingly, there will be a delay (which may be substantial) beyond October 5, 2007 or April 5, 2008, as the case may be, in our liquidation and the distribution to our public stockholders of the funds in our trust account as part of any plan of dissolution and liquidation.

 

If the acquisition is not completed and Mr. Valenta is unable to satisfy his obligation to indemnify us for claims of creditors, the amounts in our trust account available for distribution to our public stockholders would be reduced.

 

If the acquisition is not completed and we dissolve and liquidate prior to the consummation of a business combination, Mr. Valenta has agreed, pursuant to a written agreement executed in connection with the IPO, that he will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of various vendors that are owed money by us for services rendered or products sold to us and target businesses who have entered into written agreements with us and who have not waived all of their rights to make claims against the proceeds in the trust account. Some of our creditors, including our legal counsel and our independent public accounting firm (for certain non-attest services rendered and subsequently paid), have waived in writing their rights to make claims against the proceeds in the trust account. Amounts owing to these creditors totaled $329,000 at May 31, 2007. Other creditors have not been willing to waive such rights, and we cannot assure you that there will be no claims of creditors against the proceeds in the trust account at the time of any dissolution and liquidation. Amounts owing to these creditors totaled $348,500 at May 31, 2007. At May 31, 2007, we had borrowed $2,180,000 under our $3,000,000 line of credit provided by Mr. Valenta, and we have available credit of $820,000. Mr. Valenta also has agreed under his indemnification agreement to satisfy all such claims, and our board of directors would have a fiduciary obligation to seek indemnification from Mr. Valenta. As an inducement to Bison-GE and the management shareholders to enter into the acquisition agreement, Mr. Valenta has entered into a backup purchase agreement with Bison-GE and the management shareholders under which he agrees that, if the acquisition agreement is terminated for any reason, he will purchase from Bison-GE and the management shareholders all of the RWA shares at a purchase price equivalent to the purchase price payable by us under the acquisition agreement. If the Royal Wolf acquisition is not completed and we dissolve and liquidate, the satisfaction of Mr. Valenta’s obligations under the backup purchase agreement could make it difficult, or impossible, for Mr. Valenta to satisfy his indemnity obligations to us. If Mr. Valenta were not able financially to indemnify us, and if pursuing indemnification therefore would be futile and costly, our board of directors might determine not to seek to enforce our rights to indemnification. If Mr. Valenta were unable financially to satisfy all claims of our creditors, his indemnification agreement may not effectively mitigate the risk of creditors’ claims reducing the amounts in the trust account.

Our stockholders may be held liable for claims by third parties to the extent of liquidation distributions received by them.

 

All claims by creditors and other third parties must be paid or provided for prior to any distributions to any stockholders upon dissolution and acquisition, and under Sections 280 through 282 of the Delaware General Corporation Law, our stockholders may be held liable for claims by third parties against us to the extent of distributions received by the stockholders in connection with our dissolution. Pursuant to Section 280, if the corporation complies with certain procedures intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of each such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. Although we will seek stockholder approval to liquidate the trust account to our public stockholders as part of our plan of dissolution and liquidation, we will seek to conclude this process as soon as possible and as a result do not intend to comply with those procedures. As a result, our stockholders would potentially be liable for any claims to the extent of distributions received by them in connection with our dissolution and any liability of our stockholders may extend beyond the third anniversary of the dissolution.

 

A substantial number of our shares will become eligible for future resale in the public market after the acquisition, which could result in dilution and an adverse effect on the market price of those shares.

 

If the acquisition is completed, our outstanding warrants to purchase 10,708,333 shares of common stock, including warrants issued in connection with the IPO, will become exercisable upon the closing of its acquisition. Moreover, 1,875,000 shares of our common stock purchased by our directors and officers prior to the IPO will be released from escrow one year after the completion of the acquisition and be eligible for resale in the public market, subject to compliance with applicable laws. Consequently, at various times after completion of the acquisition, a substantial number of additional shares of our common stock will be eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market prices of our securities.

 

The proposed acquisition of Royal Wolf may result in additional Sarbanes-Oxley Act of 2002 costs, issues and control procedures of our combined reporting company.

 

Royal Wolf is a private Australian company that to date has not been subject to the requirements of the Sarbanes-Oxley Act of 2002. Royal Wolf’s existing internal controls and procedures are not compliant with the Act, in general, or Section 404 of the Act, in particular. Although we are not aware of any significant weaknesses in internal controls and procedures or in the disclosure controls and procedures of Royal Wolf, it is possible that such weaknesses may exist. We understand, for example, that there were adjustments proposed by the auditors and made to the audited financial statements included elsewhere in this proxy statement and a restatement of previously released financial statements. Also, management of Royal Wolf may not have the expertise or time to properly document, assess, test and remedy the control structure of Royal Wolf, to timely identify any material control weaknesses or to disclose to us any such weaknesses in time to comply with our reporting requirements under the Act. We expect to incur significant costs in implementing additional controls and procedures at Royal Wolf in order to comply with the Act.

 

We may have difficulty establishing adequate management, legal and financial controls over Royal Wolf.

 

The internal financial and accounting staff at Royal Wolf currently does not have the ability to prepare financial statements in accordance with U.S. GAAP. Accordingly, we will have to establish U.S. financial reporting concepts and practices at Royal Wolf, as well as implement public company financial control systems. We may have difficulty in hiring, training and retaining a sufficient number of qualified employees with the required expertise. In addition, no assurance can be given that Royal Wolf will be able to prepare and deliver to us the quarterly and annual financial information necessary for us to prepare consolidated financial statements in time to meet the Security and Exchange Commission filing deadlines.

 

General

 

We are furnishing this proxy statement to our stockholders in connection with the solicitation of proxies by our board of directors for use at the special meeting of stockholders and at any adjournment or postponement of the meeting. This proxy statement provides you with the information we believe you should know to be able to vote or instruct your vote at the special meeting.

 

Date, Time and Place

 

The special meeting of stockholders will be held on [l], 2007 at 9:00 a.m., local time, at the offices of our legal counsel, Troy & Gould Professional Corporation, 1801 Century Park East, 16th Floor, Los Angeles, California.

 

Purpose of the Special Meeting

 

At the special meeting, we are asking stockholders to:

 

 

Recommendation of Our Board of Directors

 

Our board of directors:

 

 

No fairness opinion was sought or obtained by our board of directors in reaching its determination to approve the acquisition.

 

Record Date; Who is Entitled to Vote

 

We have fixed the close of business on June 11, 2007, as the record date for determining the stockholders entitled to notice of and to attend and vote at the special meeting. As of the close of business on June 11, 2007, there were 10,500,000 shares of our common stock outstanding. Each share of our common stock is entitled to one vote with respect to each of the matters to be acted upon at the special meeting.

 

Quorum

 

The presence, in person or by proxy, of a majority of the shares of our common stock outstanding as of the record date constitutes a quorum for the transaction of business.

 

Abstentions and Broker Non-Votes

 

Proxies that are marked “abstain” and proxies relating to “street name” shares that are returned to us but marked by brokers as “not voted” with respect to the acquisition or other proposal will be treated as shares present for purposes of determining the presence of a quorum on all matters. The latter, however, will not be treated as shares entitled to vote any proposal to which authority to vote is withheld by the broker. If you do not give the broker voting instructions, under the rules of the National Association of Securities Dealers, Inc., your broker may not vote your shares with respect to the acquisition. Since stockholders must affirmatively vote against approval of the acquisition in order to exercise their conversion rights, stockholders who fail to vote, or who abstain from voting, may not exercise their conversion rights. Beneficial holders of shares held in “street name” that are voted against approval of the acquisition may exercise their conversion rights. See the information set forth under “Special Meeting — Conversion Rights” below.

Vote of Our Stockholders Required

 

The approval of the acquisition will require the approval of the holders of a majority of the shares of our common stock present and entitled to vote at the meeting with respect to the acquisition, as well as the holders of a majority of our IPO shares voted with respect to the acquisition. Notwithstanding these approvals, our certificate of incorporation provides that we cannot complete the acquisition if the holders of 20% or more of our IPO shares (1,725,000 or more shares) exercise their conversion rights.

 

The approval of the proposal to grant our board of directors discretionary authority to adjourn the special meeting to solicit additional votes for approval of the acquisition in the event that there are insufficient votes for its approval present at the special meeting will require the affirmative vote of the holders of a majority of our common stock present and entitled to vote at the meeting. Abstentions are deemed entitled to vote on this proposal. Therefore, they will have the same effect as a vote against the proposal. Broker non-votes, however, are not deemed entitled to vote on this proposal and will have no effect on the outcome of the vote on this proposal.

 

Voting Your Shares

 

Each share of our common stock that you own in your name entitles you to one vote. Your proxy card shows the number of shares of our common stock that you own.

 

There are two ways to vote your shares of our common stock at the special meeting:

 

 

Proxies must be received prior to the voting at the special meeting. Any proxies or other votes received after this time will not be counted in determining whether the acquisition has been approved. Furthermore, any proxies or other demand received after the voting at the special meeting will not be effective to exercise conversion rights.

 

Revoking Your Proxy

 

If you give a proxy, you may revoke it at any time before it is exercised by doing any one of the following:

 

 

Who Can Answer Your Questions About Voting Your Shares

 

If you have any questions about how to vote or direct a vote in respect of your shares of our common stock, you may call John O. Johnson, our Chief Operating Officer, at (626) 795-0040. You also may call MacKenzie Partners, Inc. at (800) 322-2885.

 

Adjournment

 

In the event there are an insufficient number of shares of our common stock present in person or by proxy at the special meeting to approve our acquisition of Royal Wolf, our board of directors intends to adjourn the special meeting to a later date provided a majority of the shares present and voting on the motion vote is in favor of such

adjournment. The place and date to which the special meeting would be adjourned would be announced at the special meeting. Proxies voted against the approval of the acquisition will not be voted to adjourn the special meeting. Abstentions and broker non-votes also will not be voted on this matter. If it is necessary to adjourn the special meeting and the adjournment is for a period of not more than 30 days from the original date of the special meeting, no notice of the time and place of the adjourned meeting need be given to our stockholders, other than by an announcement made at the special meeting.

 

The effect of any such adjournment would be to permit us to solicit additional proxies for approval of the acquisition. Such an adjournment would not invalidate any proxies previously filed as long as the record date remains the same for the subsequent meeting. We do not anticipate that we would change the meeting’s record date if we seek an adjournment of the special meeting. In the unlikely event that our board of directors exercised its right under the Delaware General Corporation Law to set a new record date for the meeting, we would mail notices of the new meeting date to our stockholders of record.

 

No Additional Matters May Be Presented at the Special Meeting

 

The special meeting has been called only to consider the approval of our acquisition of Royal Wolf and the related proposal described in this proxy statement. Under our by-laws, other than procedural matters incident to the conduct of the meeting, no other matters may be considered at the special meeting.

 

By signing and returning the enclosed proxy card, you will be deemed to grant the proxy holders discretionary authority to consider and act upon such other matters as may properly presented incident to the conduct of the meeting and any adjournment or postponement of the meeting.

 

Conversion Rights

 

Any stockholder holding shares of our common stock originally issued in our IPO who affirmatively votes “against” approval of our acquisition of Royal Wolf may demand that we convert such shares into a pro rata portion of the funds held in the trust account pursuant to Article Sixth of our certificate of incorporation. If demand is made and the acquisition is consummated, we will convert these shares into a pro rata portion of the funds held in the trust account, including earned interest (net of taxes on such interest), as of the date two business days prior to the closing of the acquisition. Stockholders who seek to exercise their conversion rights must affirmatively vote against the acquisition.

 

The closing sale price of our common stock as reported on the American Stock Exchange on July 2, 2007, the record date, was $7.87. The funds held in the trust account on May 31, 2007 were approximately $7.88 per IPO share after deduction of the taxes on earned interest. Our stockholders should verify the market price of our common stock prior to selling any common stock in the public market, since they may be able to receive greater proceeds from exercising their conversion rights than from selling their shares assuming that the acquisition is completed.

 

If the holders of 20% or more of our IPO shares (1,725,000 or more shares) exercise their conversion rights, we cannot complete the acquisition notwithstanding its approval by our stockholders at the special meeting.

 

Exercise of Conversion Rights

 

If you wish to exercise your conversion rights, you must:

 

 

Any action that does not include an affirmative vote against approval of the acquisition will be insufficient to exercise your conversion rights.

If you exercise your conversion rights, then you will be exchanging your shares of our common stock for cash and will no longer own those shares. If the acquisition is not completed, these shares will not be converted into cash.

 

No Appraisal Rights

 

Stockholders of have no appraisal rights in connection with the acquisition under applicable Delaware corporation law or otherwise.

 

Proxy Solicitation Costs

 

We are soliciting proxies on behalf of our board of directors. This solicitation is being made by mail, but also may be made by telephone or in person. We and our directors, officers and employees may also solicit proxies in person, by telephone or by other electronic means. These persons will not be compensated for these solicitation activities.

 

We have engaged Mackenzie Partners, Inc. to assist in the mailing of this proxy statement and responding to questions from stockholders. For these services, we will pay Mackenzie Partners, Inc. a fee of $5,000, plus reasonable out-of-pocket charges. Such costs will be paid initially with borrowings under the line of credit made available to us by Mr. Valenta, which borrowings will be repaid to Mr. Valenta if the acquisition (or other business combination) is completed.

 

We will ask banks, brokers and other institutions, nominees and fiduciaries to forward our proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. We will reimburse them for their reasonable expenses.

 

Householding of Special Meeting Materials

 

Some banks, brokers, and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of this notice and proxy statement may have been sent to multiple stockholders in your household. If you would prefer to receive separate copies of a proxy statement or annual report either now or in the future, please contact your bank, broker or other nominee. Upon written or oral request to John O. Johnson, our Chief Operating Officer, at General Finance Corporation, 260 South Los Robles, Suite 217, Pasadena, California 91101, (626) 795-0040, we will provide a separate copy of the annual reports and proxy statements. In addition, stockholders sharing an address can request delivery of a single copy of annual reports or proxy statements if you are receiving multiple copies upon written or oral request to our Chief Operating Officer at the address and telephone number stated above.

 

Voting Agreement

 

As of the record date, Ronald F. Valenta, John O. Johnson, James B. Roszak, Lawrence Glascott, Manuel Marrero, David M. Connell, and Marc Perez, each of whom is our director or executive officer, owned an aggregate of 1,875,000 shares of our common stock, or approximately 17.9% of our outstanding shares. In connection with our IPO, they agreed to vote these shares with respect to our initial business combination as the holders of a majority of the IPO shares that are voted. Our officers and directors own beneficially 13,500 IPO shares.

 

YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU MAY OWN. WE SINCERELY DESIRE YOUR PRESENCE AT THE SPECIAL MEETING. HOWEVER, SO THAT WE MAY BE SURE THAT YOUR VOTE WILL BE INCLUDED, PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED AT THE SPECIAL MEETING.

 

Stockholders who have questions concerning the proposed acquisition or any other aspect of the special meeting should contact John O. Johnson at (626) 584-9722 or MacKenzie Partners, Inc. at (800) 322-2885.

 

On September 12, 2006, we entered into an acquisition agreement with the management shareholders and Equity Partners under which we agreed to purchase from them all of the shares of capital stock of RWA. On March 29, 2007, we entered into an amended acquisition agreement with Bison-GE, the management shareholders and Equity Partners, which superseded its September 12, 2006 acquisition agreement in its entirety. Pursuant to the amended acquisition agreement, Bison-GE acquired 80% of the RWA shares, consisting of all of the RWA shares owned by Equity Partners and approximately 50% of the RWA shares owned by the management shareholders for purchase consideration equivalent to the consideration that was originally negotiated by us with the management shareholders and Equity Partners as set forth in the original acquisition agreement. The terms our original acquisition agreement to purchase the RWA shares were determined by arm’s-length negotiations between us and the management shareholders and Equity Partners. The terms of Bison-GE’s participation and the other terms of the amended acquisition agreement and related agreements also were determined by arm’s-length negotiations among the parties. The following is a summary of our consideration of the acquisition.

 

Background

 

We are a special-purpose acquisition company organized on October 14, 2005 to effect an acquisition, capital stock exchange, asset acquisition or other similar business combination with an operating business. In April 2006, we completed our initial public offering, or IPO, from which we derived net proceeds of approximately $65.55 million. Of the net proceeds, $65 million, along with proceeds of $700,000 from the private placement of securities to our Chief Executive Officer and Chief Operating Officer, were placed in a trust account. Such funds, together with the interest earned thereon, will be released to us upon completion of our initial business combination, less any amount payable to our stockholders who exercise their conversion rights in connection with the business combination and less the contingent underwriting fee payable to the underwriters of our IPO. If we fail by October 5, 2007 to enter into an agreement in principle or a definitive agreement with respect to a business combination, or having done so we fail to complete the business combination by April 5, 2008, then, in accordance with our certificate of incorporation, we must take all actions necessary to dissolve and liquidate as soon as reasonably practicable.

 

Original Acquisition Agreement

 

As we represented in the prospectus relating to our IPO, we had no specific business combination under consideration and did not contact any third parties or have any discussions, directly or indirectly, in this regard prior to the effectiveness of our IPO registration statement and completion of the initial distribution and sale our IPO securities on April 5, 2006. We also did not engage in any other activities, directly or indirectly, prior to our IPO regarding specific business targets or combinations, including the possible acquisition of Royal Wolf. Prior to the April 5, 2006 effective date of our IPO registration statement, Messrs. Valenta and Johnson received several unsolicited voice-mail messages and telephone calls from persons who either identified themselves as, or whom Messrs. Valenta and Johnson understood to have been, business brokers or investment bankers interested in discussing with General Finance the possibility of being engaged by us to find a target or introduce a target to us. None of these contacts related to Royal Wolf or RWA. We did not respond to any of the voice-mail messages, and Messrs. Valenta and Johnson advised those persons with whom they spoke on the telephone that they were not in a position to discuss any possible acquisitions and were not interested in engaging anyone to find target companies. No specific business opportunities were identified in any of the unsolicited telephone calls or voice-mail messages that we received prior to the effectiveness of our IPO registration statement, and we never returned any of the calls or messages. We also never engaged an investment banker, finder or broker in connection with the Royal Wolf acquisition or any other possible initial business combination or transaction.

 

After the effectiveness of our IPO registration statement, we began contacting investment bankers, private equity firms and other business contacts in order to generate ideas about a suitable business combination and also received unsolicited inquiries from several investment banking firms, including CIBC, Inc., RBC Dain Rauscher and Jump Securities, LLC, private equity firms such as LightYear Capital and Guiliani Partners, LLC, and other business intermediaries. These sources regularly track the progress of registered public offerings by special purpose acquisition companies such as ours, as well as Securities and Exchange Commission filings by other public companies that indicate that the filers will be seeking to accomplish an acquisition or other strategic transaction. We informed these contacts that, as described in the prospectus relating to our IPO, we were seeking an operating

business in the specialty finance area for our initial business combination. We also asked the lead underwriter of our IPO, Morgan Joseph & Co. Inc., to tell us of any candidates that it might view as appropriate for our initial business combination. We did not retain an investment banking firm or fairness or valuation advisor to conduct a formal search for an initial business combination, and we did not maintain a complete list of all of the potential target businesses. In general, however, we followed up with potential business targets until they were deemed either unsuitable or potentially too expensive. Criteria for suitability included our management’s assessment of the competitive strengths and weaknesses of the potential business targets, the outlook for the sectors in which the targets operated, the strength of the management team, and the quality of the assets to be acquired. Certain potential targets were considered unsuitable because they operated in sectors of the specialty finance industry that our management believed did not have good economic potential. Other targets were considered by management to have too great a level of business risk due to poor asset quality or poor or erratic financial results.

 

Through these contacts, we identified and reviewed information with respect to more than 20 target companies, including a number that were based outside of the U.S. We signed nondisclosure agreements in order to obtain confidential information regarding 19 possible target companies in addition to Royal Wolf. These contacts and communications continued through August of 2006. Apart from these confidentiality agreements, we did not enter into agreements with any of these contacts other then Royal Wolf. We have not, and will not, pay any finder’s fees to any of these contacts or other persons. We provided four of these companies, including three based in Germany, with written indications of interest or verbal indications of value as follows:

 

 

At the effective date of our IPO on April 5, 2006, we did not have any specific business combination under consideration, and neither we nor anyone on our behalf had contacted any prospective target business or had any discussions, formal or otherwise, with respect to a business combination transaction. We also did not have any specific business combination under consideration, and neither we nor anyone on our behalf had contacted any prospective target business or had any discussions, formal or otherwise, with respect to a business combination transaction, during the period between the April 5, 2006 effective date of our IPO and the closing of the sale of the IPO securities on April 10, 2006.

 

On April 11, 2006, one day after the closing of the sale of our IPO securities, Ronald F. Valenta, our Chief Executive Officer and a director, was contacted by telephone by Michael Baxter, a founder and Executive Director of RWA, who introduced himself to Mr. Valenta. Mr. Baxter told Mr. Valenta that he had been referred to Mr. Valenta by, Robert Skinner, the Chief Executive Officer of Royal Wolf Holdings, the former U.S. parent company of Royal Wolf and a subsidiary of Triton Corporation. Mr. Skinner has been employed by Royal Wolf Holdings since, 2002, and served as a director of RWA from 2002 until early 2004. Mr. Baxter worked with Mr. Skinner while Royal Wolf was owned by Royal Wolf, Inc., and the two men remained acquaintances after RWA purchased Royal Wolf in December 2003. Except as referred to above, there is no business or other relationship between Mr. Baxter and Mr. Skinner, or any other relationship between Mr. Skinner and RWA. According to Mr. Baxter, in or about March 2006, Mr. Skinner telephoned Mr. Baxter, and the two men had a casual conversation in which, among other things, Mr. Skinner informed Mr. Baxter that we had filed a registration statement relating to our IPO. None of our officers, directors or affiliates previously was acquainted or had any connection with Mr. Baxter, and there were no contacts, directly or indirectly, between us or our officers, directors or affiliates and Mr. Skinner regarding us or our IPO or Royal Wolf or other possible initial business combination or transaction by us. Mr. Skinner has no financial interest, directly or indirectly, in Royal Wolf, and will not benefit, directly or indirectly, from our acquisition of Royal Wolf.

Mr. Valenta has known Mr. Skinner for more than 15 years. His acquaintance with Mr. Skinner has been limited primarily to polite conversations at industry and trade associations, and Mr. Valenta recalls meeting Mr. Skinner in person on approximately three occasions and speaking with him by telephone on many occasions. Since our IPO was conceptualized in on about mid-2005, Mr. Valenta spoke with Mr. Skinner only in December 2005. At that time, Mr. Valenta contacted Mr. Skinner on behalf of Mobile Services Group, Inc., the holding company of Mobile Storage Group, Inc., a privately held portable storage company which was founded by Mr. Valenta and a majority interest in which was sold to Windward Capital Management LLC and its affiliates in 2000. Mr. Valenta was asked by the board of directors and management of Mobile Services Group, Inc. to contact Mr. Skinner regarding Triton Holding’s possible sale of its U.S. and U.K. portable container storage businesses. Mr. Valenta approached Mr. Skinner in this regard strictly in his capacity as a director of Mobile Services Group, Inc., and not on our behalf. Following Mr. Valenta’s introduction, management of Mobile Services Group, Inc., with Mr. Valenta’s participation, negotiated with Triton Holding regarding the possible acquisition of one or both of these businesses, but the negotiations were unsuccessful. Triton Holding subsequently sold its U.S. and U.K. portable storage container businesses to Mobile Mini, Inc., a publicly held competitor of Mobile Services Group, Inc. Mr. Valenta never discussed with Mr. Skinner, or anyone else at Triton Holding, our IPO or any possible initial business combination or other transaction by us on this or any other occasion. Mr. Valenta has not spoken with Mr. Skinner since January 2006, when discussions broke off between Mobile Services Group, Inc. and Triton Holding. None of our other officers or directors previously was acquainted or had any connection with Mr. Skinner. There also is no affiliation between us and RWA or our respective officers, directors or affiliates. Prior to Mr. Baxter’s unsolicited telephone call to Mr. Valenta on April 11, 2006, none of our directors or officers had any contacts or dealings with Mr. Baxter or any of Royal Wolf’s other officers, directors affiliates or representatives, and Mr. Baxter took no actions regarding a possible transaction with us prior to his telephone call to Mr. Valenta on April 11, 2006. We are not aware if Mr. Skinner may have taken any actions regarding a possible transaction with us prior to or after his call to Mr. Baxter in March 2006 or Mr. Baxter’s telephone call to Mr. Valenta on April 11, 2006. No finder’s fee or other compensation has been or will be paid to Mr. Skinner in connection or related to our acquisition of RWA, and we do not have, and have never had, any contracts or agreements with Mr. Skinner. Mr. Valenta is not acquainted with any other current or former Royal Wolf employee. He is acquainted on a casual business basis with Edward Schneider, the President and Chief Executive Officer of Triton Holding, the parent of Royal Wolf, Inc., which formerly owned Royal Wolf. Mr. Valenta has not had any conversations with Mr. Schneider regarding RWA, and Mr. Schneider has had no direct or indirect involvement, and has no interest, in RWA or our dealings with RWA. Mr. Valenta also is casually acquainted with Terry Nakashima, a branch manager, and Karl Obertik, the Chief Operating Officer, of A Royal Wolf Portable Storage, Inc., a subsidiary of Royal Wolf, Inc. Mr. Valenta has not had any contact with either of these individuals within at least the past two years. Mr. Valenta has not had any contacts and is not acquainted with any other affiliate of either RWA or the former parent of RWA.

 

Mr. Baxter has advised us that the purpose of his telephone call to Mr. Valenta on April 11, 2006 was to find out more about our business plan. During the telephone call, Mr. Valenta explained to Mr. Baxter that he had extensive experience in the portable services industry, and that we intended to focus our search for an initial business combination on companies in the specialty financing industry. Mr. Baxter discussed briefly with Mr. Valenta Royal Wolf’s plans to introduce new products and seek to acquire businesses or assets in Australia in order to grow Royal Wolf and position it for a possible sale or other strategic transaction. Mr. Baxter indicated, however, that Royal Wolf was not for sale and was perhaps a year away from considering any strategic transaction.

 

Following April 11, 2006, Mr. Valenta had several follow-on telephone calls with Mr. Baxter. During these calls, Mr. Valenta became interested in the possibility of acquiring Royal Wolf in our initial business combination and asked Mr. Baxter to share with us more information regarding Royal Wolf’s business and prospects. Mr. Baxter initially expressed reluctance to share confidential information based upon his previous advice that Royal Wolf was perhaps a year away from considering a possible strategic transaction, but he eventually agreed to do so. On May 2, 2006, we executed a non-disclosure agreement with Royal Wolf and began exchanging information with RWA.

 

On May 8 and 9, 2006, Mr. Valenta met in the Sydney, Australia, offices of Equity Partners, the private equity sponsor and majority shareholder of RWA, with Mr. Baxter, Dr. Richard Peter Gregson, Managing Director of Equity Partners, Mr. Rajeev Dhawan, Executive Director of Equity Partners, Paul Henry Jeffery, Non-Executive Director of RWA and James Warren, Chief Operating Officer of RWA. The representatives discussed their

respective companies and the valuation parameters of a potential transaction. Following this meeting, Mr. Valenta advised Mr. Baxter that we were interested in continuing discussions relating to a possible acquisition of RWA.

 

On May 11, 2006, we convened a telephonic meeting of our board of directors at which, among other things, management reviewed with our directors the status of our discussions with RWA regarding a possible acquisition of RWA. At the meeting, management conveyed its preliminary view that Royal Wolf was a leading company in its sector and geographic market with a strong management team and significant growth potential.

 

Over the next several days, Messrs. Baxter and Dhawan and Mr. Peter McCann, Chief Financial Officer of RWA, had several communications with Mr. Valenta regarding our preliminary due diligence requests and a due diligence timetable.

 

On May 15, 2006, we delivered a preliminary non-binding indication of interest to Messrs. Gregson and Dhawan. After several subsequent communications between Messrs. Dhawan and Baxter and Mr. Valenta, on May 23, 2006, we delivered a revised non-binding indication of interest, which was executed on May 26, 2006.

 

On June 26, 2006, we engaged LaRue, Corrigan and McCormick LLP, or LCM, to review the audit work papers of Royal Wolf’s auditors and undertake other specific financial accounting due diligence procedures.

 

On July 3, 2006, LCM began its due diligence procedures at Equity Partners’ headquarters in Sydney, Australia. On July 7, 2006, we engaged Ernst & Young LLP Australia to perform tax due diligence and advise us with respect to structuring of the possible acquisition. During these procedures, management of Royal Wolf provided us with the following financial estimates and summary projections for Royal Wolf’s fiscal year ending June 30, 2007. These summary projections were provided in connection with the valuation of the transaction only, and these results may not actually be obtained. For this reason, stockholders should not place undue reliance upon such projections:

 

 

 

 

On July 10, 2006, we engaged Barnes & Wenden as our Australian legal counsel in connection with the acquisition.

 

On July 11, 2006, Mr. Valenta and John O. Johnson, our Chief Operating Officer, met with senior managers of Royal Wolf at the offices of Equity Partners to review our preliminary due diligence findings and discuss various aspects of a possible acquisition. Over the course of approximately one week, succeeding drafts of a non-binding term sheet were prepared in response to comments and suggestions of the parties and their respective counsel, with management and counsel for both companies engaging in numerous telephonic conferences and negotiating sessions. On July 18, 2006, we engaged Consulting Earth Scientists, an environmental services firm, to conduct environmental site assessments on each of the leased facilities of RWA.

 

On July 28, 2006, our board of directors met to discuss the proposed acquisition of RWA. Present at the meeting were all of our directors, as well as Mr. Johnson, Marc Perez, our Controller, and Alan B. Spatz of Troy & Gould Professional Corporation, our corporate counsel. Prior to the meeting, financial, operational and descriptive information about Royal Wolf was sent to each of our directors. Messrs. Valenta and Johnson described Royal Wolf’s business and operations and the structure of the possible acquisition, and led a discussion among the directors and our outside counsel. Messers. Valenta and Johnson indicated that their due diligence and the on-site presentation by Royal Wolf’s management reinforced their preliminary view expressed in the May 11 board meeting, and they recommended proceeding with the possible acquisition on this basis. Following the discussion,

our board of directors directed Messrs. Valenta and Johnson to continue pursuing the acquisition as outlined and to keep the board of directors apprised of their progress.

 

Following the July 28, 2006 board meeting, our management and legal advisors continued to negotiate with representatives of RWA. On August 3, 2006, we signed a non-binding term sheet by which RWA granted us an exclusive period extending through August 31, 2006 to perform more in-depth due diligence and to discuss the terms of a definitive acquisition agreement. Several conversations took place over the next several days between us, RWA and our respective legal advisors regarding the outline of a definitive acquisition agreement.

 

From August 14 to August 16, 2006, Mr. Johnson was present in Sydney, Australia, to conduct further due diligence with respect to potential tax and corporate structure with Ernst & Young LLP Australia, to review the legal due diligence with Mr. Barnes of Barnes & Wenden and the environmental due diligence with Consulting Earth Scientists, and to continue to evaluate financial and accounting information of Royal Wolf. During this same three-day period, several negotiations were held between Barnes & Wenden and counsel to the sellers, resulting in the preparation of a draft definitive acquisition agreement.

 

On August 29, 2006, a special meeting of our board of directors was convened in Glendale, California, at which our board reviewed the internal valuation analyses of Royal Wolf prepared by our management and discussed the various terms of the draft definitive acquisition agreement. Representatives of the sellers also were present at the beginning of the meeting, and presented Royal Wolf’s 2007 business plan and answered questions posed by our directors prior to the directors’ deliberations regarding approval of the acquisition. After further review and discussion, the acquisition agreement was unanimously approved by our board of directors, subject to modifications to be negotiated to address the directors’ comments on the draft agreement.

 

Additional negotiations regarding adjustments to the definitive acquisition agreement took place in person on August 30, 2006 and telephonically over the several days after that, which discussions resulted in the preparation of the proposed final definitive agreement.

 

On September 1, 2006, a telephonic meeting of our board took place at which the board was updated regarding ongoing developments and approved the final modifications to the terms of the acquisition agreement.

 

The parties signed the original acquisition agreement on September 12, 2006. On September 12, 2006, we issued a press release and filed a Current Report on Form 8-K announcing the signing of the acquisition agreement and certain other matters.

 

The original acquisition agreement was amended in certain immaterial respects by amendments entered into on January 19 and March 9, 2007, respectively.

 

Amended Acquisition Agreement

 

The original acquisition agreement, as amended, entitled the management shareholders and Equity Partners to terminate the agreement if, among other things, we did not obtain Securities and Exchange Commission clearance to mail this proxy statement by February 26, 2007 or the acquisition was not approved by our stockholders by March 26, 2007.

 

Our board of directors met on February 20, 2007. At the meeting, our management briefed our board on the status of the Securities and Exchange Commission proxy statement review. Our management reported that it appeared increasingly unlikely that we would complete the proxy statement review process by the deadline set forth in the original acquisition agreement, and that the RWA shareholders were becoming concerned about the delay in the proxy statement review process and the implications for the acquisition. Also at the February 20, 2007 meeting, our board of directors approved a non-binding term sheet from Bison Capital to provide mezzanine financing in connection with the Royal Wolf acquisition, and authorized our management to sign the term sheet.

 

As the February 26, 2007 deadline approached for mailing this proxy statement, we informed the management shareholders and Equity Partners that we did not anticipate completing the Securities and Exchange Commission proxy statement review process by the deadline, and that we would need an extension of the deadlines relating to the mailing of this proxy statement and approval of the acquisition by our stockholders. Equity Partners informed us that it was not willing to consider any extension of the deadlines unless we agreed that our previous deposits of

$1,005,000 in connection with the acquisition were no longer refundable under any circumstance if the closing did not occur by the March 26, 2007 deadline. Equity Partners also indicated that it was willing to extend the deadlines for not more than 14 days, and only if we agreed to amendments to the original acquisition agreement that would have:

 

 

Our management informed Equity Partners and the management shareholders that we were willing to consider its suggested changes to the economic terms of the original acquisition agreement, but that a 14-day extension of the deadlines for obtaining Securities and Exchange Commission clearance to mail this proxy statement and stockholder approval of the acquisition would not allow sufficient time to complete the proxy statement review process with the Securities and Exchange Commission, mail the definitive proxy statement, and convene the special meeting of our stockholders a reasonable number of days after the final proxy statement was furnished to them. Equity Partners indicated, however, that it had several other unidentified potential buyers for Royal Wolf and that it believed that Royal Wolf’s current value exceeded the value of the acquisition consideration that we had agreed to pay under the original acquisition agreement. Equity Partners also told us that Royal Wolf would be the first portfolio company sold by Equity Partners, and that it desired to complete the sale soon in order to facilitate the formation and funding of its second private equity fund. For these reasons, according to Equity Partners, it was not willing to grant us an extension in excess of 14 days from the original deadlines under the original acquisition agreement.

 

Based upon Equity Partners’ position that it was unwilling to postpone the sale of its RWA shares for more than 14 days, our management undertook to consider whether we should abandon the Royal Wolf acquisition altogether, forfeit our deposits of $1,005,000, and undertake to seek to identify another possible initial business combination. Our management also considered possible means of avoiding abandoning the acquisition.

 

On March 1, 2007, Mr. Valenta contacted Douglas B. Trussler of Bison Capital to discuss with him the status of the Securities and Exchange Commission proxy statement review process and our management’s conclusion that we were not likely to be able to meet the deadlines set forth in the original acquisition agreement. Mr. Valenta also discussed with Mr. Trussler the fact that Equity Partners was unwilling to give us a sufficient extension of the time to complete the proxy statement review process and present the Royal Wolf acquisition to a vote of our stockholders, and whether Bison Capital might be willing to participate in our acquisition of Royal Wolf in an effort to resolve these matters.

 

Bison Capital is a Los Angeles-based private equity firm affiliated with General Electric Corporation, or GE. Ronald F. Valenta has known Douglas B. Trussler, one of the founders of Bison Capital, since 1999, when Mr. Trussler was employed by Windward Capital Management LLC, an affiliate of Windward Capital Partners II, L.P., a private equity fund. In April 2000, Mr. Valenta, the founder, Chief Executive Officer and a shareholder of Mobile Storage Group, Inc., and other Mobile Storage shareholders sold a majority interest in Mobile Storage Group, Inc. to Windward Capital Partners II, L.P. Mr. Trussler subsequently left Windward Capital Partners II, L.P. in December 2000 to found Bison Capital in May 2001. James K. Hunt, the other co-founder of Bison Capital, was appointed by Windward Capital Partners II, L.P. to the board of directors of Mobile Storage Group, Inc. in 2002.

 

Messrs. Valenta and Trussler have kept in contact since their direct involvement in the investment by Windward Capital Partners II, L.P. in Mobile Storage Group, Inc. In May 2006, in one such contact, Mr. Valenta informed Mr. Trussler that we had recently raised approximately $70 million in our IPO, and that we were seeking to identify our initial business combination. Mr. Trussler indicated that Bison Capital might have an interest in financing a potential acquisition, or providing financing to a business that we might acquire, given that Bison Capital was in the business of providing such financing and given Mr. Trussler’s successful dealings with Mr. Valenta in connection with Windward Capital’s investment in Mobile Storage Group, Inc.

In September 2006, Mr. Valenta contacted Mr. Trussler to discuss with him our recently announced proposal to acquire Royal Wolf and to determine whether Bison Capital might have an interest in providing mezzanine financing at or after the transaction. Mr. Valenta informed Mr. Trussler that, although we had sufficient cash to complete the purchase of Royal Wolf without financing, we may be interested in establishing a relationship with Bison Capital or its affiliates as a long-term capital partner. Following the discussion between Messrs. Valenta and Trussler, Bison Capital submitted to us a preliminary non-binding indication of the terms of possible mezzanine financing for the Royal Wolf acquisition, and in October 2006 Mr. Trussler visited the Royal Wolf facilities in Australia. Bison Capital subsequently submitted a non-binding letter of intent to provide acquisition financing to Royal Wolf, which we entered into after the February 20, 2007 meeting of our board of directors described above. As part of its due diligence relating to the letter of intent, Bison Capital revisited Royal Wolf in February 2007. On March 1, 2007, not long after that visit, as described above, Mr. Valenta contacted Mr. Trussler to discuss the Securities and Exchange Commission proxy statement review process and timing relative to the commitments in our original acquisition agreement to purchase Royal Wolf.

 

In his discussions with Mr. Valenta on March 1, 2007, Mr. Trussler indicated to Mr. Valenta that, based upon Bison Capital’s prior due diligence and familiarity with Royal Wolf, Bison Capital might be willing to buy Equity Partners’ RWA shares if we would commit to repurchase the RWA shares from Bison Capital on economic and other terms satisfactory to Bison Capital and if we subsequently received stockholder approval of the Royal Wolf acquisition. Mr. Trussler indicated that the transaction would have to be consistent with Bison Capital’s usual investment criteria, and that Mr. Valenta, personally, would have to agree to buy all or a portion of Bison Capital’s RWA shares if we were not able to do so for any reason. Mr. Trussler suggested as a possible structure that the original acquisition agreement be assigned by us to Bison Capital, and that we and Bison Capital work jointly with the shareholders of Royal Wolf to seek their consent to the assignment and to the terms and provisions of the restructured acquisition.

 

Following the March 1, 2007 discussion between Mr. Valenta and Mr. Trussler, our management continued to discuss with Bison Capital the possible terms on which it might be willing to participate in the Royal Wolf acquisition as set forth in draft term sheets circulated between us and our legal advisors and Bison Capital and its legal advisors.

 

On March 6, 2007, at a meeting of our board of directors called for this purpose, our management briefed our directors on the discussions with Bison Capital and the possible restructuring of the acquisition agreement to accomplish an extension of the various deadlines under the acquisition agreement with Bison Capital’s participation. At the meeting, our management discussed the costs and other disadvantages to us and our stockholders of abandoning the Royal Wolf acquisition and seeking another initial business combination, including the risk that we could not identify and negotiate another initial business combination, complete the Securities and Exchange Commission proxy statement review process, and present the alternative business combination to our stockholders before April 5, 2008, the date by which we must dissolve our company if we have not completed our initial business combination. Management and our board also discussed the risks associated with proceeding with the acquisition of Royal Wolf on the terms proposed by Equity Partners, including the fact that management, in consultation with Troy & Gould, our outside counsel, believed that we would require more than 14 days to complete the proxy statement review process with the Securities and Exchange Commission. Mr. Valenta and Mr. Johnson reported to our board that they continued to believe that Royal Wolf was an attractive initial business combination, and that we should proceed with the acquisition, if feasible. At the March 6, 2007 meeting, our board authorized management to develop a proposal to accomplish the Royal Wolf acquisition, but on a schedule that would allow us time to complete the proxy statement review process, including any additional review that might be necessitated by any changes in the terms and provisions of the original acquisition agreement.

 

On March 9, 2007, our board of directors met to consider our management’s discussions with Equity Partners and Bison Capital. Our management explained that Equity Partners and the management shareholders were entitled under the original acquisition agreement to terminate the acquisition agreement given the passage of the February 26, 2007 deadline for obtaining Securities and Exchange Commission clearance to mail this proxy statement, but that they were willing not to terminate the acquisition agreement if we would agree to make our deposits nonrefundable. After discussion, our board authorized our management to enter into an amendment to the

acquisition agreement making our $1,005,000 of deposits nonrefundable if the closing does not occur. We entered into such an amendment later that same day.

 

On March 13, 2007, John O. Johnson, our Chief Operating Officer, traveled to Australia to address with the RWA shareholders the possibility of restructuring the acquisition with Bison Capital’s participation. Over the following two days, March 14 and March 15, 2007, Mr. Johnson, with the participation by telephone and email of our other management and legal advisors in the U.S. and Australia, negotiated with the RWA shareholders the terms of the possible restructured acquisition. During his meetings in Australia, Royal Wolf management also furnished Mr. Johnson with updated internal projected results of operations of Royal Wolf for the twelve months ended December 31, 2006 and the twelve months ending December 31, 2007, and discussed with Mr. Johnson recent developments and the current status of Royal Wolf’s business and operations. Management of Royal Wolf confirmed that, through December 31, 2007, Royal Wolf was performing according to the management projections previously provided to us. Management also reported on the increased capital expenditures for Royal Wolf’s container fleet and management’s expectation that these additional expenditures would further improve Royal Wolf’s operating results for 2007.

 

The RWA management team provided us, at our request, with trailing twelve month December 31, 2006 financials as well as projected December 31, 2007 numbers so that we could more accurately compare them with our U.S. comparable companies that use a calendar year end period. These summary projections were provided in connection with our management’s evaluation of the transaction only, and these results may not actually be obtained. For this reason, stockholders should not place undue reliance upon such projections:

 

 

 

 

On March 15, 2007, Bison Capital submitted to our management a term sheet outlining an agreement in principle under which Bison Capital or its affiliate would agree on not later than March 29, 2007 to purchase all of the RWA shares of Equity Partners and a portion of the management shareholders’ RWA shares for consideration equivalent in all material respects to the aggregate acquisition consideration that we originally agreed to as set forth in the original acquisition agreement. Under the term sheet, we would agree at a subsequent closing to be held after completion of the proxy statement review process, and assuming that the acquisition is approved by our stockholders, to purchase the remaining RWA shares held by the management shareholders and a portion of the RWA shares owned by Bison Capital and its affiliates, such that we would own, directly or indirectly, approximately 86.2% of the outstanding capital stock of RWA as of the subsequent closing and Bison Capital or its affiliates would own, directly or indirectly, not less than 13.8% of the outstanding RWA shares. The subsequent closing would be subject to the closing condition relating to approval of the acquisition by our stockholders as contemplated by the original acquisition agreement, as well as new closing conditions relating to the maintenance of Royal Wolf’s existing credit facilities with ANZ and our agreement to cause GFN Australasia to sell and issue approximately $15.7 million of senior subordinated promissory notes to Bison Capital or its affiliates at the subsequent closing.

 

Later in the day on March 15, 2007, our management arranged a conference telephone call with our board of directors to discuss the terms of the Bison Capital term sheet. At the meeting, our board discussed the prospects for avoiding the termination of the original acquisition agreement without Bison Capital’s participation, the terms and provisions of the Bison Capital term sheet, including the funding to be provided by Bison Capital and its affiliates to accomplish the purchase of the RWA shares prior to March 30, 2007 and the purchase price that would be payable

by us for those shares at the subsequent closing, our payment of costs and expenses, including legal fees and expenses, incurred by Bison Capital and its affiliates in connection with these transactions, the terms of the subordinated indebtedness to be issued by GFN Australasia, and the terms of Mr. Valenta’s agreement to make whole Bison Capital and its affiliates if we do not purchase the RWA shares. Our board also discussed the need for updated due diligence and valuation analyses from our management prior to approving a definitive amended acquisition agreement. During the March 15, 2007 conference call, our board agreed that our management should seek to negotiate an amended acquisition agreement for Royal Wolf on the terms outlined in the Bison Capital term sheet, and directed management to update its due diligence and prepare an updated analysis of the fair value of Royal Wolf in order to present these updates at a subsequent meeting of our board tentatively scheduled for approximately one week later on March 23, 2007.

 

Over the weekend following March 15 and throughout the week of March 19, our management, together with our legal advisors at Troy & Gould in the U.S. and Barnes & Wenden in Australia, negotiated with Equity Partners, the management shareholders, Bison-GE, and their respective legal advisors the terms and provisions of the restructured acquisition and prepared drafts of the related legal documentation. As a result of these negotiations, it was agreed, among other things, that the original acquisition agreement would be amended as set forth in the amended acquisition agreement, that we and Bison-GE would enter into the shareholders agreement, and that Mr. Valenta would enter into the backup purchase agreement with Bison-GE and the management shareholders.

 

Our board of directors met on March 23, 2007 to review and consider the terms and provisions of the definitive amended acquisition agreement, the shareholders agreement, the backup purchase agreement, and related agreements, and to hear from our management regarding its updated due diligence and valuation analyses. At the March 23, 2007 meeting, our management summarized for the directors the events since the meeting of our board of directors held on March 15, 2007. A representative of Troy & Gould, our U.S. legal advisor, summarized for the directors the material terms and provisions of the draft amended acquisition agreement, including the changes from the terms and provisions of the original acquisition agreement. The Troy & Gould representative and our management also summarized the terms and provisions of the proposed shareholders agreement and Mr. Valenta’s backup purchase agreement. Mr. Johnson presented to the directors our management’s updated financial and valuation analyses and discussed changes from the original financial and valuation analyses considered by our board of directors in connection with its evaluation and approval of the original acquisition agreement. Following discussion, our board of directors directed management to proceed to try and finalize the amended acquisition agreement and related agreements along the lines discussed at the meeting and to respond to the directors’ questions and comments at a follow-on board meeting tentatively scheduled for Monday, March 26, 2007. At the meeting on March 23, 2007, our management also discussed with our board of directors the advisability of seeking from Mr. Valenta an increase in his line of credit from $2,000,000 to $3,000,000. Mr. Valenta indicated that he was willing to agree to the increase, and our board determined to table the matter until the next board meeting.

 

Our management and our legal advisors here in the U.S. and Australia continued to work over the weekend of March 24 and March 25 and on Monday, March 26, 2007, to further revise the amended acquisition agreement and related agreements prior to the follow-on board meeting.

 

Our board of directors met in the afternoon of Monday, March 26, 2007, to review the final terms and provisions of the amended acquisition agreement and related documents and consider our management’s final valuation analysis. A representative of Troy & Gould also participated in the meeting and summarized the final terms of the amended acquisition agreement and related agreements, including any changes from the terms considered by the directors at the March 23, 2007 board meeting.

 

The following summarizes the material changes effected by the amended acquisition agreement, as they affect us:

 

 

 

After further review and consideration, our board of directors unanimously approved the amended acquisition agreement and related agreements and authorized our management to finalize and execute and deliver the agreements on our behalf, subject to any modifications deemed appropriate by our management in consultation with our legal advisors in the U.S. and Australia. Our board established April 20, 2007 as the tentative record date and May 29, 2007 as the tentative meeting date for the special meeting of our stockholders. At the meeting, our board of directors also authorized an increase in the line of credit from Mr. Valenta to $3,000,000.

 

Over the next several days, our management and legal advisors finalized the amended acquisition agreement and related agreements, and on March 29, 2007 the parties signed the amended acquisition agreement, which superseded the September 12, 2006 acquisition agreement in its entirety, and Bison-GE purchased 80% of the RWA shares under the amended acquisition agreement. On March 29, 2007, we and Mr. Valenta also signed an amendment to his line of credit agreement to increase the line of credit to $3,000,000. On March 30, 2007, we issued a press release and filed a Current Report on Form 8-K relating to the signing of the amended acquisition agreement and the establishment of the new record date and meeting date for the special meeting of stockholders.

 

Subsequently, we and Bison-GE agreed that Bison-GE’s 13.8% ownership interest in Royal Wolf would be in the form of shares of capital stock of GFN U.S.

 

Our Board of Directors’ Reasons for the Approval of the Acquisition

 

Based upon its evaluation, our board of directors has unanimously approved our acquisition of RWA and determined that it is in the best interests of us and our stockholders. Our board of directors also believes that the acquisition is fair to us and our stockholders. No fairness opinion was sought or obtained by our board of directors in making its determinations.

 

In the prospectus relating to our IPO, we stated our intention to focus our pursuit of a business combination on targets in the specialty finance industry and in areas where our management has significant expertise. We believe that the RWA acquisition meets these investment objectives.

 

Our board of directors also considered a wide variety of other factors in connection with its evaluation of the acquisition. In light of the complexity of those factors, our board of directors did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it considered in reaching its

decision. In addition, individual members of our board of directors may have given different weight to different factors.

 

Our board of directors considered the nature of RWA’s business and assets, its current capitalization and resulting operating losses, the extent of the liabilities to be assumed and the factors below, in addition to the factors discussed in the section entitled “Risk Factors” described beginning on page 20, in reaching its conclusion that the acquisition agreement is fair to and in the best interests of GFN’s stockholders and to approve the acquisition and enter into the acquisition agreement.

 

In considering the acquisition, our board of directors gave considerable weight to the following positive factors:

 

Royal Wolf’s established business, strong management team, record of growth and potential for future growth

 

Our board of directors considered it to be important that our initial business combination target have an established business and significant growth potential. Royal Wolf has been in business since 1995, has strong current business operations and is a market leader in the Australian domestic portable storage and container industries. It has achieved significant historical growth, both internally and through acquisitions, and has in place its infrastructure to support additional growth with minimal additional overhead investments. Royal Wolf has been successful in developing new applications for portable containers, and has grown revenues from $30.8 million in fiscal 2003 to $53.1 million in fiscal 2006 and $62.1 million for the twelve months ended December 31, 2006. Royal Wolf also has completed four acquisitions since December 2005, demonstrating its ability to grow through acquisitions. Our board of directors believes that Royal Wolf will be able to continue to grow domestically within Australia, because:

 

 

Our board also believes that Royal Wolf can grow by expanding into new geographic markets in the Asia-Pacific, and that our capital resources may be used to facilitate this growth.

 

The experience of our management

 

Our board of directors considered the experience of our management in building and consolidating specialty finance businesses in the U.S. and Europe. Mr. Valenta, in particular, has extensive management experience in the portable storage industry that lends itself to the planned growth of Royal Wolf’s business and operations.

 

The experience of Royal Wolf’s management

 

Another important criteria to our board of directors was that the company have a seasoned management team. Royal Wolf’s management has extensive experience in the container, transportation and portable storage industries. Mr. Robert Allan and Mr. Warren each have more than 30 years of experience managing companies in related industries and more than ten years each as Regional Directors of U.S.-based container leasing companies. Mr. McCann has nearly three years of experience at Royal Wolf, and many of Royal Wolf’s operating managers also have long tenure with Royal Wolf or other companies in the portable storage and container industry. The management team has demonstrated its ability to grow both internally and through acquisition and is capable of managing this industry segment globally for us.

 

Royal Wolf’s ability to execute its business plan after the acquisition using its own financing resources, since part of the cash held in our trust account may be used to pay our stockholders who exercise their conversion rights

 

Our board of directors considered the fact that our stockholders may exercise their conversion rights in connection with the acquisition, and thereby reduce the amount of cash available to us following the acquisition. If the acquisition is completed, a portion of the funds held in the trust account established at the time of our IPO will be

used to pay the cash portion for the acquisition and costs of the acquisition, which we estimate will be approximately $43.0 million, and to repay the outstanding principal balance, which we estimate will be $3,000,000, plus accrued interest, under our line of credit with Mr. Valenta. This amount includes the deposits of $1,005,000 made in connection with the acquisition. Based upon the amount of funds held in the trust account as of May 31, 2007, this would leave available in the trust account after the acquisition a maximum of approximately $21.0 million, assuming no exercise of conversion rights, and a minimum of approximately $7.8 million, assuming the maximum conversion rights are exercised. Our board of directors believes that Royal Wolf will be able to fully implement its business plan, even if not all the funds currently in the trust account are available to us after the acquisition.

 

Financial results

 

Our board of directors reviewed Royal Wolf’s historical revenue and profitability. Royal Wolf achieved $53.1 million in revenue for the fiscal year ended June 30, 2006. Royal Wolf’s gross profit on an absolute basis improved from $13.5 million to $16.7 million from 2004 to 2006, although it declined as a percentage of revenue in 2006, because of new product introductions. This improvement reflects the operating leverage in Royal Wolf’s business model, the overhead structure being utilized more efficiently, and a $0.5 million reduction in depreciation due to a revision of the useful lives and residual values of certain fixed assets. This is supported by revenues and operating profit for the twelve months ended December 31, 2006 of $62.1 million and $4.9 million, respectively, and gross profit for the same period of $22.7 million. Our board of directors also considered Royal Wolf’s historic lack of profitability, which is attributable to its leveraged capital structure and investment in infrastructure.

 

Favorable industry dynamics

 

Our board of directors considered positive long-term capital spending trends in Australia, such as the growing demand for portable services in the mining and construction industries. Our board of directors believes that similar trends underway in developing Asia-Pacific markets are favorable to the expansion of Royal Wolf’s business into new geographic markets.

 

Competitive position and acceptance of its services

 

Royal Wolf’s leading market share in Australia, reputation in its industry and among its clients, and its involvement in high-profile projects were considered by our board of directors to be favorable factors in approving the acquisition.

 

Barriers to entry

 

Duplicating Royal Wolf’s nationwide consumer service center network would require a large cadre of experienced industry personnel, which we believe is not readily available to a potential entrant in the Australian portable storage industry and represents a competitive advantage of Royal Wolf.

 

Regulatory environment of the industry

 

Royal Wolf’s business currently is not subject to burdensome regulatory requirements, although these requirements are subject to future change and could worsen. We believe that Royal Wolf has satisfactory regulatory compliance procedures in place.

 

Costs associated with effecting the business combination

 

Our board of directors determined that the transactions costs of acquiring RWA are of the same order of magnitude as would be encountered with other possible business combinations, and reasonable in relation to the total acquisition consideration. In determining that the transaction costs are reasonable, our board of directors also considered the costs to us of abandoning the Royal Wolf acquisition. A favorable factor was that RWA’s historical financial statements were audited in accordance with practices applicable to Australian private companies by a reputable and experienced accounting firm, and that RWA was able to furnish the financial and other information

required for the preparation of this proxy statement in accordance with Securities and Exchange Commission requirements.

 

Bison-GE’s participation in the amended acquisition agreement

 

Under the original acquisition agreement approved by our board of directors, we were to own after the closing all of the equity interest in Royal Wolf. Although our board considered seeking acquisition financing from third parties such as Bison Capital, it did not consider seeking an equity partner to acquire a minority interest in Royal Wolf. In our negotiations with Bison Capital that led to Bison-GE’s participation in the amended acquisition agreement, we proposed to pay the purchase price of Bison-GE’s RWA shares, as with the RWA shares to be purchased from the management shareholders, all in cash at the closing, consistent with the structure of the original acquisition agreement. Based, however, upon its own due diligence and evaluation of the business, operations and prospects of Royal Wolf, Bison-GE negotiated for the right to retain a minority equity interest in Royal Wolf by receiving 13.8% of the capital stock of GFN U.S. in payment of a portion of the purchase price payable by us at the closing for Bison-GE’s RWA shares. Bison-GE agreed that the GFN U.S. shares would be valued for this purpose at the same price that we agreed to pay the RWA shareholders under the original acquisition agreement. Our board of directors considered Bison Capital’s insistence on acquiring a significant equity interest in Royal Wolf on the same terms that we had agreed to in the original acquisition agreement as supporting our board’s conclusion that Royal Wolf is an attractive initial business combination and that the acquisition is fair to us and our stockholders.

 

The terms of the acquisition agreement contain customary provisions for transactions of this type.

 

Our board of directors believes that the acquisition agreement contains customary provisions for transactions of this type, including customary representations and warranties, non-compete, and indemnification and escrow provisions in our favor. It was important to our board of directors that the acquisition agreement include these customary provisions to protect us against the risks associated with possible unknown liabilities or similar potential problems at Royal Wolf. The sellers’ willingness to agree to an escrow of a portion of the acquisition consideration to satisfy potential indemnification claims by us was viewed favorably by our board.

 

Material Negative Factors Considered by Our Board of Directors

 

Our board of directors believes that each of the above factors supports its determination and recommendation to approve the acquisition. Notwithstanding these positive factors, our board of directors also considered negative factors and potential risks in its deliberations, including the following:

 

 

 

Our board of directors gave no particular weight to the foregoing negative factors, but believes that they are outweighed by the positive factors it considered. Our board of directors did not consider other possible negative factors, or consider further these negative factors.

 

Due Diligence and Valuation

 

Several members of our management or board of directors have extensive experience in due diligence evaluations of acquisition targets and in valuing companies. Ronald A. Valenta, our Chief Executive Officer and a director, has been a board member of ten other companies in a number of industries, and has extensive experience in the portable services industry and as a private investor. John O. Johnson, our Chief Operating Officer, has extensive experience as an investment analyst, investment banker and financial advisor. Other members of the board, including David Connell and James Roszak, are experienced in the investment, securities and capital management industries.

 

In determining to approve the original acquisition agreement relating to Royal Wolf, as well as the amended acquisition agreement, our board of directors relied on financial, industry, customer, capital markets (equity valuations), product, business and legal information relating to Royal Wolf compiled by our management and upon the advice of our legal advisors, Troy & Gould Professional Corporation in the U.S. and Barnes & Wenden in Australia, and our due diligence advisors, Ernst & Young LLP Australia as to tax and structuring matters, La Rue, Corrigan and McCormick LLP as to accounting matters, and Consulting Earth Scientists as to environmental matters. In addition to reviewing financial information of RWA and the portable storage and container industry, in general, our board of directors reviewed publicly-available information of companies with business and operations that the board considered to be similar to those of Royal Wolf and publicly-available information related to acquisition or merger transactions similar to the acquisition. None of the companies reviewed were identical to RWA, nor were any of the transactions reviewed identical to the acquisition. In fact, the companies reviewed are all based in the U.S., whereas Royal Wolf is based and operates exclusively in Australia. Our board of directors nonetheless believes that such companies and transactions were relevant in analyzing the acquisition, because they involved companies that operate primarily in the portable storage and container industry and because we are a U.S.-based company. Stockholders should note that analyses of comparable companies and comparable transactions are not purely mathematical, but involve subjective business judgments concerning the differences between those companies and transactions and Royal Wolf and the acquisition.

 

Further, the estimates contained in these analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. In addition, analyses relating to the value of businesses or assets neither purport to be appraisals nor do they necessarily reflect the prices at which businesses or assets may actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty, and cannot anticipate future events. Management believes that its analyses must be considered as a whole and that selecting portions of its analyses or the factors it considered, without considering all analyses and factors collectively, could

create an incomplete and misleading view of the process underlying the analyses performed by management in connection with the preparation of its conclusion.

 

Our board of directors did not rely on any single analysis or single valuation measurement, or upon any one particular set of industry information, in evaluating the acquisition, but reviewed the totality of the information presented to it, including, among other items, the valuation analyses done by our management. Further, based on our board of directors’ belief that its members have the skill and experience to properly evaluate the acquisition, our board determined that obtaining a valuation or fairness opinion was unnecessary.

 

Initial Valuation Analyses

 

The following is a summary of the material valuation analyses performed by our management in connection with entering into the September 12, 2006 acquisition agreement. We performed the valuation analyses in accordance with our undertaking in the prospectus relating to our IPO that the business acquired by us in our initial business combination would have a fair market value equal to at least 80% of our net assets at the time of the transaction, including the funds held in the trust account. Based upon our total net assets, including funds held in the trust account, of approximately $65 million as of September 30, 2006, 80% of our net assets at the time of the September 12, 2006 acquisition agreement was approximately $52 million. As discussed below, as part of its analysis management compared the twelve components of the three valuation methods against the 80% test. The range of values produced by one of the twelve components, LTM EBITDA — Selected Transactions, was entirely below the 80% level, while two other components, LTM Revenue — Selected Transactions and LTM EBITDA — Selected Companies, were below the 80% level at the low end of the range of values. See “Satisfaction of 80% Requirement” below in this section for further discussion of our determinations with respect to the 80% test.

 

The following summary does not purport to be a complete description of the analyses performed by our management, and the order of analyses described below does not necessarily represent the relative importance or weight given to those analyses by our management. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data and currency exchange notes as they existed on or before August 29, 2006 and is not necessarily indicative of current market conditions.

 

In performing its analyses, our management relied on projections for Royal Wolf as provided by its management as summarized below:

 

 

 

 

No assurance can be made that the Royal Wolf projections our management used in its analyses will be achieved. Further, Royal Wolf did not publicly disclose internal management projections of the type provided to our management in connection with our management’s analysis of the acquisition, and the projections utilized were not prepared with intent for public disclosure or prepared in accordance with generally accepted accounting principles, the published guidelines of the Securities and Exchange Commission or the American Institute of Certified Public Accountants’ guidelines for projections or forecasts. These fiscal 2007 projections were based on numerous variables and assumptions

that are inherently uncertain and may be beyond the control of management, including without limitation, factors related to general economic and industry conditions and competitive activity and the following:

 

 

Actual results could vary significantly from those set forth in the projections used by our management. For all of these reasons, stockholders should not place undue reliance on these projections.

 

Our management used the following valuation methodologies:

 

 

The following factors, among others, were considered in determining Royal Wolf’s earning power for each methodology employed:

 

 

 

 

Although not necessary in order to evaluate the satisfaction of the 80% test, our board of directors considered the relative valuation multiples implied by the actual total consideration to be paid by us compared to both historical and projected revenues and EBITDA for Royal Wolf. This comparison formed a part of our board of director’s determination that the acquisition was fair to us and our shareholders. The resulting implied multiples for Royal Wolf from this analysis were as follows, assuming $85 million initial aggregate consideration at the time of the September 12, 2006 acquisition agreement (based upon the 0.7239 exchange rate utilized in the board presentation) and that the aggregate consideration equals EV:

 

 

“EV” means “enterprise value.” For public companies referenced herein, EV is the fully diluted equity value plus straight and convertible debt, less cash, options and warrant proceeds. “LTM” means last twelve months, “FY” means fiscal year, and “EBITDA” means earnings before interest, taxes, depreciation and amortization. EBITDA is a non-GAAP financial measure that is used because of its wide acceptance as a measure of operating profitability and financial performance before nonoperating expenses (interest and taxes) and non-cash charges (depreciation and amortization), exclusive of transaction costs.

The expected aggregate value or enterprise value at closing represents 7.9 times Royal Wolf’s EBITDA and 1.3 times Royal Wolf’s projected revenues for the fiscal year ended June 30, 2007. Our management and board of directors relied in its initial valuation analyses upon that the projected adjusted 2007 EBITDA amount more than the actual adjusted 2006 EBITDA, because they believed that the financial results in 2006 and 2005 were adversely impacted by certain factors, such as the introduction of several new products at one time combined with heavy infrastructure costs and buildout, which they considered to be unusual events or not likely to recur in fiscal 2007. In addition, fiscal 2007 will include the full benefits of the competitor fleet acquisitions made during that later part of fiscal 2006.

 

As part of its initial analysis regarding the fairness of the Royal Wolf acquisition to us and our stockholders, our management compared the multiples in the table above with those of other selected comparable public companies and with selected comparable transactions (see “Selected Companies Analysis” and “Selected Transactions Analysis” below”).

 

Discounted Cash Flow Analysis.

 

Management utilized a discounted cash flow analysis, an income valuation approach, for the purpose of calculating the estimated present value of projected future cash flows of Royal Wolf.

 

A discounted cash flow analysis estimates present value based upon a company’s projected future unlevered after-tax free cash flow, typically for a period of five years, discounted at a rate of return reflecting risks inherent in its business and capital structure. Unlevered free cash flow represents the amount of cash generated and available for principal, interest and dividend payments as well as for growth capital investments after providing for ongoing business operations. To account for the value of the enterprise at the end of the projection period and beyond, a terminal value is calculated and discounted to the present and then added to the value of the discounted unlevered free cash flows derived from the projections.

 

While the discounted cash flow analysis is the most scientific of the methodologies used, it is dependent on projections and is further dependent on numerous industry-specific and macroeconomic factors.

 

The discounted cash flow analysis determines a net present value of future cash flows (including a theoretical terminal value) of Royal Wolf. This analysis starts with a net cash flow for each year of the projection period (through 2010) equal to Royal Wolf’s EBITDA less cash taxes, capital expenditures and changes in working capital, which we refer to as unlevered free cash flows. In addition, a terminal value is computed in 2010 as a multiple of 2010 EBITDA using the range of the low to the mean (7x to 9x) of the public comparable LTM EBITDA multiples. The annual net cash flow and terminal value are converted into a present value as of June 30, 2006 using a discount rate of 15% to 20%, which our management believed to be a reasonably conservative range based upon the risk characteristics of Royal Wolf. Cash balances are added and debt balances are subtracted as of June 30, 2006 from the present value to arrive at net equity value of Royal Wolf.

 

In using the 15% to 20% discount rate, management first considered the long-term interest rates on risk-free securities, generally considered to be those obligations backed by the full faith and credit of the U.S. government. To this “risk free” rate, management added a premium to reflect the fact that an investment in Royal Wolf is not without risk(s) and would represent the risks of an investment in equity securities, as well as the specific risks of an investment in Royal Wolf, including these described under the caption “Risk Factors” in this proxy statement. The determination of the discount rate is an estimate only, based upon required rates of return that management has witnessed in similar transactions in which it participated either as an investor or as an advisor, and in some cases as an informed observer of transactions completed by other parties. While the estimate of the discount rate involves certain subjective judgements, it should be noted that utilizing higher discount rates would result in lower net present values.

 

Our management extended the summary 2007 projections provided by Royal Wolf as set forth above to forecast free cash flows for the business over the five-year period from 2006 through 2010. The projections

represented Royal Wolf management’s judgement as of the date the information was provided to us (late June 2006), and our management’s extension of these projections, and incorporated the following principal assumptions:

 

 

 

 

Our management believed that these assumptions were reasonable based upon its knowledge of the industry and its due diligence with respect to Royal Wolf’s business operations.

 

Our management discounted Royal Wolf’s future free cash flows through 2010 using discount rates reflecting RWA’s weighted-average cost of capital ranging from 15% to 20% and a terminal-year EBITDA of $22.5 million multiplied by a terminable-year EBITDA multiple of 7 to 9 times, which is within the low to mid-point of public comparable valuations. This resulted in an estimated enterprise value of Royal Wolf in the range of $66.7 million to $99.1 million and an average enterprise value of $82.9 million.

 

Selected Companies Analysis.

 

Our management utilized the selected comparable company analysis, a market valuation approach, for the purposes of compiling guidelines for comparable company statistics and developing valuation metrics based on prices at which stocks of similar companies are trading in a public market.

 

Our management reviewed and compared financial information of Royal Wolf to corresponding financial information, ratios and public market multiples for the publicly-traded companies that were selected because they have operations that we considered reasonably similar to the operations of Royal Wolf. All three of these companies, however, are profitable and larger than Royal Wolf, and our management and board of directors did not do a comparison of these companies to Royal Wolf based on either profitability or asset size. While our management did not necessarily include all companies or businesses that could be deemed comparable to Royal Wolf and all of the companies are of greater (and some are substantially greater) size than Royal Wolf, our management believes that this list provides the most meaningful information from which to imply a valuation for the Royal Wolf transaction. Additionally, for these selected companies, while not comparable to Royal Wolf based solely on size or net income, were considered by management to be comparable based on industry profile, and because the stock of these companies are generally widely held and actively traded, they were believed by management to present a reasonable indication of how investors value companies in the storage container and modular/container building sectors. The companies our management selected for its analyses were:

 

 

 

 

 

Our management calculated and compared financial information and various financial market multiples and ratios of the selected companies based on historical information it obtained from Securities and Exchange Commission filings and consensus estimates from publicly available sources reporting such data. With respect to Royal Wolf and each of the selected companies, our management calculated:

 

 

Historical LTM financial results utilized by our management for purposes of this analysis were based upon information contained in the applicable company’s most recent publicly available financial statements prior to August 1, 2006. For the selected companies, “LTM” refers to the last twelve-month period available from the most recently publicly available financial information prior to August 1, 2006. “FY1” refers to the first fiscal year to be completed after August 2006

 

All companies were selected because they served the modular building or container rental/leasing markets. However, all of the companies operate exclusively or primarily in the U.S. and all are profitable and have substantially more assets than Royal Wolf. As a result, any conclusions from this analysis must involve complex considerations and judgments concerning differences in financial and operating characteristics of the companies selected and other factors that would affect the market values of publicly-traded companies. At the lower end of the range of value indicated by one measurement, LTM EV to EBITDA, the fair value of Royal Wolf was less than 80% of our net assets as of September 30, 2006.

 

The results of these analyses are summarized in the following tables: