- EMERGE has entered into a definitive agreement to sell
WholesalePet for US$9.25M in cash to
Tiny Fund I, LP
- In conjunction, EMERGE expects to pay down the majority of its
senior credit facility on closing, in addition to fully satisfying
the deferred payment owed to WholesalePet
- Following the Transaction, the Company will retain 4
brands across 2 main verticals, Grocery and Golf
- Additional cost savings expected from reduced HQ overheads
TORONTO, Jan. 24,
2024 /CNW/ - EMERGE Commerce Ltd. (TSXV: ECOM)
("EMERGE", or the "Company"), a diversified acquirer
and operator of niche e-commerce brands, announces that Emerge US
Holdings LLC ("EMERGE US") and Retail Store Networks, Inc.
(dba "WholesalePet.com") ("WSP" or the "Target"), a
direct and indirect subsidiary of the Company respectively, have
entered into a share purchase agreement (the "Agreement")
dated January 23, 2024, with Tiny
Fund I, LP (the "Buyer"), an arm's length third party to the
Company and a private partnership of Tiny Ltd. ("Tiny"),
Emerge US and the Target, pursuant to which EMERGE US intends to
sell to the Buyer all of the issued and outstanding shares in the
capital of WSP (the "Transaction").
Ghassan Halazon, Founder and CEO of
EMERGE commented, "Consistent with the strategy we laid
out in 2023 to prioritize debt paydown by exploring all strategic
options available to the Company, the sale of WSP marks our most
substantial transaction to date, eliminating the majority of our
debt, saving us an estimated $1.38M
in annual interest expense, and paving the way for a refresh
scenario to double down on our profitable grocery and golf
businesses, with a focus on driving organic growth in 2024. We
anticipate additional HQ savings in relation to servicing a more
focused set of brands, and we plan to continue to explore strategic
opportunities that further strengthen our foundation,"
Transaction Overview
Pursuant to the Agreement and in consideration for the
Transaction, the Buyer has agreed to pay to EMERGE US, cash
consideration of US$9,250,000 on
closing of the Transaction ("Closing"), subject to certain
transaction closing adjustments.
Subject to the satisfaction of all conditions precedent to the
completion of the Transaction, including receipt of TSXV approval,
Closing is expected to occur prior to the end of January, 2024 or
such other date as EMERGE US, the Target and the Buyer may mutually
agree.
Go Forward Business
Following the Transaction, EMERGE will retain
4 brands across 2 main verticals, Grocery
and Golf, in Canada and the U.S.,
namely truLOCAL, Carnivore Club, UnderPar and
JustGolfStuff.
truLOCAL, our premium meat subscription/ grocery brand,
is EMERGE's largest business by revenue. truLOCAL has also
experienced our most significant increase in profitability in 2023,
following our various cost savings initiatives and gross margin
improvements over the last 15 months. Carnivore Club, a premium
artisanal subscription brand, is housed under truLOCAL.
In addition, EMERGE also operates a golf vertical, across
Canada and the U.S., which
includes UnderPar, our discounted experiences/ tee-times
business, and JustGolfStuff, our fast-growing golf products
and apparel business.
Debt Paydown
In conjunction with the sale of WSP, EMERGE expects to utilize
the majority of the transaction proceeds to pay down its senior
credit facility on closing, which is expected to be reduced to
C$5.85M from C$15.85M prior to the completion of the
Transaction, and C$25M originally.
The Company's interest expense savings following the aforementioned
debt repayment is expected to be approximately C$1.38M annually.
Following the transaction, EMERGE will no longer have any
deferred payment obligations owed to WSP shareholders.
INFOR Financial Inc. acted as the exclusive financial advisor to
EMERGE in connection with the Transaction.
About EMERGE
EMERGE is a diversified acquirer and operator of niche
e-commerce brands in Canada and
the U.S. Our subscription and marketplace e-commerce properties
provide our members with access to offerings across a variety of
verticals.
About Tiny
Tiny is a Canadian-based investment company focused primarily on
investing and acquiring majority stakes in businesses that it
expects to hold over the long-term.
To learn more visit https://www.emerge-commerce.com/
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EMERGE:
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Cautionary notice
Neither TSX Venture Exchange nor
its Regulation Services Provider (as that term is defined in
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
Notice regarding forward-looking
statements
This press release may contain certain forward-looking
information and statements ("forward-looking information") within
the meaning of applicable Canadian securities legislation, that are
not based on historical fact, including, without limitation,
statements related to the closing of the Transaction and the timing
thereof, the satisfaction of all conditions precedent to the
closing of the Transaction, including, without limitation, TSXV
approval in respect of the Transaction and any benefit that may be
derived by the Company from the Transaction, including, without
limitation, any material benefit to the working capital or
financial position of the Company as a result of the Transaction,
interest savings, including the reference to interest expense
savings of approximately C$1.38
million annually, which is based on a principal repayment of
$10,000,000 and an annual interest
rate of 13.75% over a period of 12 months, and the ability of the
Company to pay down its senior credit facility, as well as other
statements containing the words "believes", "anticipates", "plans",
"intends", "will", "should", "expects", "continue", "estimate",
"forecasts" and other similar expressions. Readers are cautioned to
not place undue reliance on forward-looking information. Actual
results and developments may differ materially from those
contemplated by these statements. There is no guarantee the
Transaction will be completed as contemplated or at all, and the
forward-looking information contained herein is based on the
assumptions of management of the Company as of the date hereof
including, without limitation, assumptions with respect to the
financial position and working capital of the Company and the
Target, the ability of the Company to obtain TSXV approval for the
Transaction and the satisfaction of any other conditions thereto,
and the conditions of the financial markets and the e-commerce
markets generally, among others. The Company undertakes no
obligation to comment on analyses, expectations or statements made
by third-parties in respect of the Company, its securities, or
financial or operating results (as applicable). Although the
Company believes that the expectations reflected in forward-looking
information in this press release are reasonable, such
forward-looking information has been based on expectations, factors
and assumptions concerning future events which may prove to be
inaccurate and are subject to numerous risks and uncertainties,
certain of which are beyond the Company's control, including risks
related to the disposition of a operating business by the Company,
risks that the benefits derived from the Transaction may not be as
expected or that the Company may not see any benefit from the
Transaction, risks that each party to the Agreement may not satisfy
its obligations or covenants, risks that the Company may be subject
to litigation as a result of the Transaction including allegations
of misrepresentation or breach of conditions or covenants, risks
that the TSXV may not approve the Transaction, as well as the risk
factors discussed in the Company's MD&A, and other public
disclosure filings which are available through SEDAR+ at
www.sedarplus.ca. The forward-looking information contained in this
press release are expressly qualified by this cautionary statement
and are made as of the date hereof. The Company disclaims any
intention and has no obligation or responsibility, except as
required by law, to update or revise any forward-looking
information, whether as a result of new information, future events
or otherwise.
On Behalf of the Board
Ghassan Halazon
Director, President, and CEO
SOURCE EMERGE Commerce Ltd.