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
• 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.

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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.

Kyle Burt-Gerrans, EMERGE Commerce Ltd., 416-479-9590, [email protected]