Mr. Ghassan Halazon reports

EMERGE ANNOUNCES SIGNING OF DEFINITIVE AGREEMENT TO SELL WHOLESALEPET FOR US$9.25M, AND PLANS MAJOR DEBT REDUCTION

Emerge Commerce Ltd.'s Emerge US Holdings LLC and Retail Store Networks Inc. (doing business as WholesalePet.com), a direct and indirect subsidiary of the company respectively, have entered into a share purchase agreement dated Jan. 23, 2024, with Tiny Fund I LP, an arm's-length third party to the company and a private partnership of Tiny Ltd., 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.

Ghassan Halazon, founder and chief executive officer 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 $1.38-million 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 $9.25-million (U.S.) on closing of the transaction, subject to certain transaction closing adjustments.

Subject to the satisfaction of all conditions precedent to the completion of the transaction, including receipt of TSX Venture Exchange 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 four brands across two main verticals, grocery and golf, in Canada and the United States, namely truLOCAL, Carnivore Club, UnderPar and JustGolfStuff.

truLOCAL, the premium meat subscription/grocery brand, is Emerge's largest business by revenue. truLOCAL has also experienced the most significant increase in profitability in 2023, following 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, its discounted experiences/tee-times business, and JustGolfStuff, its 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 $5.85-million from $15.85-million prior to the completion of the transaction, and $25-million originally. The company's interest expense savings following the aforementioned debt repayment are expected to be approximately $1.38-million 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 adviser to Emerge in connection with the transaction.

About Emerge Commerce Ltd.

Emerge is a diversified acquirer and operator of niche e-commerce brands in Canada and the U.S. Its subscription and marketplace e-commerce properties provide its 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.

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