An anonymous trustee of Keg Royalties reports

THE KEG ROYALTIES INCOME FUND ENTERS INTO A LETTER OF INTENT IN RESPECT OF A PROPOSED ACQUISITION OF ALL ISSUED AND OUTSTANDING UNITS AT $18.60 PER UNIT

The Keg Royalties Income Fund has entered into a letter of intent, pursuant to which one or more affiliates of Fairfax Financial Holdings Ltd. would acquire all of the issued and outstanding units of the fund other than those units already owned by Fairfax (including any units issuable in respect of securities exchangeable into units) at a purchase price of $18.60 per unit, payable in cash.

The offer price represents a 30.8-per-cent premium to the closing price for the units on May 2, 2025, and a 34.7-per-cent premium to the 20-day volume-weighted average trading price as of the end of trading on May 2, 2025. The proposed transaction would not be subject to any financing condition.

The letter on intent was entered into following negotiations between Hamblin Watsa Investment Counsel Ltd. (HWIC), in its capacity as investment manager on behalf of Fairfax, and the board of trustees of the fund, each of whom is independent. The trustees determined to enter into the letter on intent after carefully evaluating the financial terms of the proposed transaction and receiving advice from the fund's independent financial and legal advisers.

The largest holder of outstanding units (without taking into account any exchangeable units held by Fairfax), which currently holds 14.6 per cent of the issued and outstanding units on an undiluted basis (representing 9.9 per cent of the units on a fully diluted basis, including the exchangeable units), has entered into an agreement with HWIC, in its capacity as investment manager on behalf of Fairfax, to support the proposed transaction, subject to certain customary conditions.

In connection with their continued review of the proposed transaction, the trustees have retained an independent valuator to prepare a formal valuation of the units, as required under Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions, and provide an opinion that, subject to the assumptions, limitations and qualifications to be set forth in any written opinion, the consideration to be received by the holders of units (other than Fairfax) pursuant to the proposed transaction is fair, from a financial point of view, to the holders of units (other than Fairfax).

The letter on intent is not a definitive agreement with respect to the proposed transaction, and the execution of a definitive agreement in respect of the proposed transaction, if any, remains subject to, among other things: (i) the negotiation and execution of a definitive agreement on terms satisfactory to the fund and Fairfax; (ii) the final approval of the proposed transaction by the trustees; and (iii) the receipt of the formal valuation and fairness opinion satisfactory to the trustees. The consummation of the proposed transaction would be subject to various conditions customary for transactions of this nature, including, among others: (i) the receipt of any required regulatory, court and stock exchange approvals; and (ii) the approval of the proposed transaction at a special meeting of the holders of units entitled to vote on the proposed transaction, including minority shareholder approval, as defined under MI 61-101.

Unitholders of the fund do not need to take any action at this time in respect of the proposal from Fairfax pursuant to the letter on intent and should await further information from the Trustees in respect of the proposed transaction.

While the trustees have determined to enter into the letter on intent with respect to the proposed transaction, the letter on intent does not bind the trustees or the fund to enter into the proposed transaction, or any agreement in respect thereof, all of which remains subject to final approval by the trustees. There can be no assurance that the fund and Fairfax will enter into a definitive agreement in respect of the proposed transaction or that the proposed transaction will occur as proposed or at all. The fund does not expect to make further public comment regarding the matters contemplated herein until a definitive agreement in respect of the proposed transaction is entered into or the proposed transaction is abandoned.

Advisers

Capital West Partners and Lawson Lundell LLP are acting as financial adviser and legal adviser, respectively, to the trustees in respect of the proposed transaction. Torys LLP is acting as legal adviser to Fairfax in respect of the proposed transaction.

About The Keg Royalties Income Fund

The fund is a limited-purpose, open-ended trust established under the laws of Ontario that, through The Keg Rights LP, a subsidiary of the fund, owns certain trademarks and other related intellectual property used by Keg Restaurants Ltd. (KRL). Vancouver-based KRL is the leading operator and franchisor of steakhouse restaurants in Canada and has a substantial presence in select regional markets in the United States.

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