Mr. Ghassan Halazon reports

EMERGE COMPLETES SALE OF WHOLESALEPET FOR US$9.25M, EXPECTS ADDITIONAL COST SAVINGS RELATED TO STREAMLINED BUSINESS; EMERGE COMPLETES SALE OF WHOLESALEPET FOR GROSS PROCEEDS OF US$9.25M

Emerge Commerce Ltd., further to its press release dated Jan. 24, 2024, has successfully completed the sale of its indirect subsidiary corporation, Retails Store Networks, Inc. (doing business as WholesalePet) (WSP), to Tiny Fund I, LP, pursuant to a share purchase agreement dated Jan. 23, 2024, between the buyer, WSP and Emerge US Holdings LLC, a subsidiary of the company, as amended by an amending agreement to the agreement dated Jan. 31, 2024, between WSP, the buyer, Emerge US and the company.

Ghassan Halazon, founder and chief executive officer 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 $5-million (U.S.) of operating income generated by our WholesalePet investment to date and the $9.25-million (U.S.) sale price, we have made a modest gain on a cash basis, however we expect the real benefit will come from our $10-million (Canadian) 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., for aggregate gross cash consideration of $9.25-million (U.S.), subject to certain closing and postclosing adjustments, payments, and obligations.

Go-forward business

Following the transaction, Emerge will retain four brands across two main verticals, grocery and golf, in Canada and the U.S., namely truLOCAL, Carnivore Club, UnderPar and JustGolfStuff.

Emerge expects further headquarter 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 Mr. Halazon.

TruLOCAL, the company's premium meat subscription/grocery brand, is Emerge's largest business by revenue. TruLOCAL experienced its most significant increase in profitability in 2023, following various cost-saving 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, its discounted experiences/tee-times business, and JustGolfStuff, its 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 $5.85-million (Canadian) from $15.85-million (Canadian) prior to the completion of the transaction, and $25-million (Canadian) originally. The company's interest expense savings following the aforementioned debt repayment is expected to be approximately $1.38-million (Canadian) annually.

Following the transaction, Emerge no longer has 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 premium e-commerce brand portfolio in Canada and the U.S. Its subscription and marketplace e-commerce properties provide members with access to unique offerings across grocery and golf 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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