- EMERGE completes sale of WholesalePet for gross proceeds of
US$9.25M
- In conjunction, EMERGE pays down the majority of its senior
credit facility on closing, in addition to fully satisfying the
deferred payment owed to WholesalePet
- The Company retains 4 brands across
2 main verticals, grocery and golf
- Additional cost savings expected from reduced HQ overheads
required to service the go forward portfolio
TORONTO, Jan. 31,
2024 /CNW/ - EMERGE Commerce Ltd. (TSXV: ECOM)
("EMERGE", or the "Company"), a premium e-commerce
brand portfolio, is pleased to announce that, further to its press
release dated January 24, 2024, it
has successfully completed the sale of its indirect subsidiary
corporation, Retails Store Networks, Inc. (dba "WholesalePet.com")
("WSP" or "WholesalePet") to Tiny Fund I, LP (the
"Buyer") pursuant to a share purchase agreement (the
"Agreement") dated January 23,
2024 between the Buyer, WSP and Emerge US Holdings LLC
("Emerge US"), a subsidiary of the Company, as amended by an
amending agreement to the Agreement (the "Amending
Agreement") dated January 31,
2024 between WSP, the Buyer, Emerge US and the Company (the
"Transaction").
Ghassan Halazon, Founder and CEO of
EMERGE commented, "While we remain big fans of
WholesalePet, we believe there is no larger priority than paying
down debt and reducing interest expense to position the Company for
long-term success, with a focus on growing our go forward
businesses. Between over US$5M of
operating income generated by our WholesalePet investment to date
and the US$9.25M sale price, we have
made a modest gain on a cash basis, however we expect the real
benefit will come from our CA$10M debt paydown and subsequent
interest savings ahead. We wish Tiny all the best with this
long-standing pet brand, and with the terrific WholesalePet team
that continues on with them."
Transaction Overview
Pursuant to the terms of the Agreement and the Amending
Agreement, Emerge US transferred all of the issued and outstanding
shares in the capital of WSP to the Buyer, a private partnership of
Tiny Ltd. ("Tiny"), for aggregate gross cash consideration
of US$9,250,000, subject to certain
closing and post-closing adjustments, payments and obligations.
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.
EMERGE expects further HQ cost reductions, given the reduced
overheads required to service the go-forward brand portfolio.
"Looking ahead, we are optimistic about our go forward grocery
and golf businesses, as we shift our focus to driving organic
growth in 2024 and beyond. In parallel, we plan to extract
additional savings in the near-term, as we reduce HQ costs in
relation to servicing WholesalePet, and generally, with this more
focused vertical strategy," continued Halazon
truLOCAL, our premium meat subscription / grocery brand,
is EMERGE's largest business by revenue. truLOCAL 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.
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
EMERGE has utilized the majority of the Transaction proceeds to
pay down its senior credit facility with its existing lender , the
principal balance of which has been 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 no longer has 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 (TSXV: ECOM) is a premium e-commerce brand portfolio in
Canada and the U.S. Our
subscription and marketplace e-commerce properties provide our
members with access to unique offerings across grocery and
golf verticals. Our grocery businesses include truLOCAL.ca, our
premium meat subscription brand, and Carnivore Club, our artisanal
/ cured meat brand. Our golf businesses include UnderPar, our
discounted tee-times/ experiences business, and JustGolfStuff, our
golf products & apparel brand.
To learn more visit https://www.emerge-commerce.com/
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.
Follow
EMERGE:
LinkedIn | Twitter | Instagram | Facebook
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 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, expected interest rate
savings as a result of any interest rate reductions and/or the
paydown of debt in connection with the Company's existing credit
facility, including the reference to interest expense savings of
approximately C$1.38 million
annually, which is based on a principal repayment of C$10,000,000 and an annual interest rate of
13.75% over a period of 12 months, the operation of the business of
the Company following the Transaction, the purchase price of the
Transaction due to the remaining adjustments to be calculated by
the Buyer and the Company, changes to the business and lending
environment generally, 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. 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,
macro-economic factors including interest rate changes, 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, changes
to general economic factors which may be outside of the Company's
control, 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.