Mr. Skip Bourdo reports

NEIGHBOURLY ENTERS INTO DEFINITIVE AGREEMENT TO GO PRIVATE WITH ITS CONTROLLING SHAREHOLDER PERSISTENCE CAPITAL PARTNERS

Neighbourly Pharmacy Inc. and Persistence Capital Partners (PCP) have entered into a definitive arrangement agreement, pursuant to which T.I.D. Acquisition Corp., a newly formed entity controlled by PCP, would acquire all of the common shares in the capital of Neighbourly, other than those common shares already owned by PCP or its affiliates, for $18.50 per common share in cash plus one contingent value right (CVR) per common share, which will entitle the holder thereof to an additional cash payment of 61 cents per CVR if the company's pro forma adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) target for the 2026 fiscal year is achieved, as further described as follows. The transaction is expected to close by March 29, 2024, subject to the satisfaction of customary closing conditions.

The cash portion of the consideration payable under the arrangement agreement and the combined cash and CVR consideration (assuming the full payment of the CVR) represent premiums of approximately 52.6 per cent and 57.7 per cent, respectively, to the closing price of $12.12 on the Toronto Stock Exchange on Oct. 2, 2023, the date prior to the announcement of PCP's initial, non-binding proposal, and of approximately 32.6 per cent and 36.9 per cent, respectively, to the 20-day volume-weighted average price per share on the TSX of $13.96 as of the end of trading on Oct. 2, 2023.

Today's announcement is the culmination of the negotiations that took place following the announcement of PCP's initial proposal on Oct. 3, 2023. The signing of the arrangement agreement followed the unanimous recommendation of a committee of independent directors of the company's board of directors.

"The transaction committee is pleased to be able to provide minority shareholders with this offer," said Josh Blair and Dean McCann, co-chairs of the transaction committee (as defined herein). "After following a thorough process with our advisers, we believe that PCP's offer is in the best interest of the company."

"We are pleased that the transaction committee has unanimously agreed to support this enhanced offer, which provides a fair and attractive return to Neighbourly's public shareholders," said Stuart M. Elman, managing partner of PCP. "We are confident that this transaction will enable Neighbourly to accelerate its growth and achieve its strategic vision to advance the role that independent pharmacies can play across Canada, creating value for its customers, patients, employees and partners."

The transaction will be financed through a combination of debt and equity. PCP has received debt commitments for a fully underwritten credit facility in an amount of up to $600-million, including a $200-million undrawn revolver, with commitments from Scotiabank and RBC Capital Markets. In addition, Brookfield Asset Management Ltd., through its special investments program (BSI), has entered into an equity commitment letter with PCP, pursuant to which Brookfield has committed to a structured equity investment of up to $320-million in the privatized company. Each of the debt financing and the equity financing is subject to limited conditions, including the negotiation and execution of definitive agreements.

"We are pleased to partner with PCP and Neighbourly and look forward to supporting the company's next phase of growth as it continues to deliver critical health care services to Canadian communities," commented Michael Horowitz, managing director, Brookfield and BSI. "This investment demonstrates how BSI provides flexible capital and strategic support to help companies and their owners realize their long-term objectives," added Frank Yu, managing partner, Brookfield, and head of North America for BSI.

Skip Bourdo, chief executive officer of Neighbourly, added, "We are thrilled with the ongoing support of PCP and excited to welcome Brookfield's strategic partnership and resources as we continue executing our long-term plan, accelerating our growth and serving more communities across Canada."

Transaction details

Pursuant to the arrangement agreement, the purchaser would acquire all of the common shares in the capital of Neighbourly, other than those common shares already owned by PCP or its affiliates, for $18.50 per common share in cash (representing a consideration of approximately $415-million), plus one CVR per common share, which will entitle the holder thereof to an additional cash payment equal to 61 cents per CVR if the company's pro forma adjusted EBITDA for the fiscal year ending on March 28, 2026, is at or above $128-million (representing an additional potential payment of approximately $13.7-million). If the company's pro forma adjusted EBITDA for fiscal 2026 is below the EBITDA target, then no additional consideration will be payable to the holders of CVRs.

Each CVR is a direct obligation of the purchaser. The CVRs will not be listed on any market or exchange and may not be sold, assigned, transferred, pledged or encumbered in any manner, other than in the limited circumstances set out in the arrangement agreement. The CVRs will not represent any equity or ownership interest in the company, purchaser or any affiliate thereof (or any other person) and will not be represented by any certificates or other instruments. The CVRs will not have any voting or dividend rights, and no interest will accrue on any amounts payable on the CVRs to any holder thereof.

The arrangement agreement contains customary non-solicitation provisions prohibiting Neighbourly from soliciting competing acquisition proposals as well as right to match provisions in favour of the purchaser. The arrangement agreement provides for a $4-million expense fee payable to the purchaser if the arrangement agreement is terminated in certain circumstances, including in the context of a change of recommendation by the transaction committee or the board. The arrangement agreement also provides for payment by the purchaser of an expense fee of $2-million or $5-million if the arrangement agreement is terminated in certain specified circumstances, with the fee payable depending on the circumstances of the termination.

The arrangement agreement also prohibits Neighbourly to pay any dividends (including the historical quarterly dividend of 4.5 cents) to its shareholders until closing of the transaction.

The transaction will be completed pursuant to a court-approved plan of arrangement under Section 192 of the Canada Business Corporations Act and is subject to satisfaction of customary closing conditions, including (without limitation) court approval and the approval of the shareholders of Neighbourly as further set out herein. After completion of the transaction, the company expects to no longer be subject to the reporting requirements of applicable Canadian securities legislation, and its common shares will be delisted from the TSX.

Completion of the transaction will be subject to various closing conditions, including the approval of at least: (i) two-thirds (66-2/3rds per cent) of the votes cast by shareholders present in person or represented by proxy at the special meeting of the shareholders scheduled to be called to approve the transaction, voting as a single class (each holder of common shares being entitled to one vote per common share); and (ii) the approval of the majority of the holders of common shares present in person or represented by proxy at the special meeting, excluding the votes of PCP and its affiliates, and any other shareholders whose votes are required to be excluded for the purposes of minority approval under Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions, in the context of a business combination. Further details regarding the applicable voting requirements will be contained in a management information circular to be filed and mailed to Neighbourly shareholders in connection with the special meeting to approve the transaction.

The transaction is expected to close by March 29, 2024, subject to the satisfaction of customary closing conditions.

Copies of the definitive arrangement agreement and of the management information circular for the special meeting will be filed with Canadian securities regulators and will be available on the SEDAR+ profile of Neighbourly. Neighbourly's shareholders are urged to read those and other relevant materials when they become available.

Opinion and formal valuation

TD Securities Inc. was retained by the transaction committee to provide financial advice and prepare a formal valuation of the common shares, as required under MI 61-101. TD delivered an oral opinion to the transaction committee that, as of Jan. 14, 2024, and based on TD's analysis and subject to the assumptions, limitation and qualifications to be set forth in the formal valuation that will be included in the management information circular that will be sent to the shareholders of the company in connection with the special meeting, the fair market value of the common shares is in the range of $18.50 to $23.50 per common share and that the fair market value of the CVRs is in the range of 14 cents to 34 cents per CVR. TD has also delivered an oral opinion to the transaction committee that, as of Jan. 14, 2024, and subject to the assumptions, limitations and qualifications to be set forth in TD's written fairness opinion that will be included in the management information circular, the consideration to be received by the minority shareholders pursuant to the arrangement agreement is fair, from a financial point of view, to the minority shareholders. The management information circular will also include factors considered by the transaction committee and the board and other relevant information.

Unanimous approval of Neighbourly transaction committee and board of directors

The transaction committee has unanimously recommended that the board approve the arrangement agreement and unanimously recommends that the minority shareholders vote in favour of the special resolution to approve the transaction at the special meeting. The board, after receiving the unanimous recommendation of the transaction committee, has unanimously (with Stuart M. Elman, chair of the board and managing partner of PCP, having recused himself from the meeting) determined that the transaction is in the best interest of the company and unanimously recommends that minority shareholders vote in favour of the arrangement resolution at the special meeting. All of the directors and senior officers of the company have entered into support and voting agreements, pursuant to which they have agreed, subject to the terms thereof, to vote all of their common shares in favour of the arrangement resolution at the special meeting.

PCP early warning disclosure

PCP, together with its affiliates, currently beneficially owns or has control or direction over, directly or indirectly, 22,454,629 common shares, representing approximately 50.05 per cent of the currently issued and outstanding common shares. Following completion of the transaction, PCP will own or have control or direction over, directly or indirectly, 100 per cent of the common shares in the capital of Neighbourly.

PCP has its principal office located in Toronto at 60 Bloor St. W, Suite 404, Toronto, Ont., M4W 3B8. The company's head office is located in Toronto at 190 Attwell Dr., Unit 400, Toronto, Ont., M9W 6H8. For further information and/or a copy of the related early warning report to be filed on SEDAR+ under the company's profile, please contact the general counsel and secretary of PCP by e-mail at zzelman@persistencecapital.com.

Advisers

TD Securities is acting as financial adviser and independent valuator to the transaction committee, and McCarthy Tetrault LLP is acting as independent legal adviser to the transaction committee.

Scotiabank and RBC Capital Markets are acting as financial advisers to PCP, and Stikeman Elliott LLP is acting as legal adviser to PCP on the proposed transaction. Devon Park Advisors is providing strategic advisory and capital-raising services to PCP.

Pro forma adjusted EBITDA

This news release makes reference to pro forma adjusted EBITDA, which means the corporation's consolidated net income (determined in accordance with the international financial reporting standards), as adjusted in accordance with the adjustments provided in Schedule F of the arrangement agreement. In order to determine pro forma adjusted EBITDA, the EBITDA of any business that has been subject of an acquisition during a fiscal year shall be included in the EBITDA of the corporation for such fiscal year on a pro forma normalized basis for the previous 13 fiscal periods ended on the last day of such fiscal year, as if such acquisition occurred on the first day of the fiscal year for which the EBITDA of the corporation is calculated. Refer to the definition of EBITDA provided in the definitive arrangement agreement, which will be available on the SEDAR+ profile of Neighbourly.

About Neighbourly Pharmacy Inc.

Neighbourly is Canada's largest and fastest-growing network of community pharmacies. United by their patient-first focus and their role as essential and trusted health care hubs within their communities, Neighbourly's pharmacies strive to provide accessible health care with a personal touch. Since 2015, Neighbourly has expanded its diversified national footprint to include 293 locations, reinforcing the company's reputation as the industry's acquirer of choice.

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