EMERGE Signs Definitive Agreement to Acquire U.S. and Canadian Subscription Brands, BattlBox and Carnivore Club

• BattlBox and Carnivore Club to become EMERGE's 6^th and 7^th brands in North America, and will be its largest and most profitable acquisition to date
• BattlBox and Carnivore Club generated combined revenues of approximately US$23 million and Adjusted EBITDA of approximately US$3.3 million in the trailing twelve months ended May 31, 2021  
• Transaction expected to be funded with existing cash on hand
• Upon closing, this acquisition will boost EMERGE's monthly subscription revenue and is expected to be immediately accretive to EBITDA
• Acquisition provides EMERGE with a strong US-based operating team with deep expertise in subscription-based e-commerce and cost-effective warehousing

TORONTO, Aug. 30, 2021 /CNW/ - EMERGE Commerce Ltd. ("EMERGE" or the "Company") (TSXV: ECOM), a leading acquirer and operator of direct-to-consumer ("D2C") e-commerce brands, has signed a definitive agreement (the "Agreement") to acquire all of the respective membership interest and shares of BattlBox, LLC ("BattlBox") and its affiliates, namely Carnivore Club, LLC and Carnivore Club Subscription Box Canada Inc. (together with BattlBox, the "BattlBox Group") (the "Transaction") for US$10.25 million in cash, US$1.5 million in deferred consideration payable over 3 years, and contingent earnout consideration of up to US$7.2 million over a 3 year period.

BattlBox (www.battlbox.com) is a market-leading survival, outdoor and camping goods subscription business-based in the U.S., and notably, featured in its own Netflix Original show, "Southern Survival", in 2020. Carnivore Club (www.carnivoreclub.co) is a premium artisanal meat subscription business in Canada, with a presence in the U.S.

BattlBox Group generated revenue of approximately US$23 million (unaudited) and Adjusted EBITDA of approximately US$3.3 million in the trailing twelve months ended May 31, 2021. The acquisition is expected to be immediately accretive to EMERGE's EBITDA.

"BattlBox Group will be our largest and most profitable acquisition to date, and provides us with a very capable and disciplined operating team in the U.S. with deep subscription-based e-commerce expertise," said EMERGE Founder and CEO, Ghassan Halazon. "The acquisition delivers two excellent brands with tremendous growth opportunities. Firstly, BattlBox, a highly profitable, market leader in the fast-growing survival, outdoor gear, and camping subscription space in the U.S., and second, Carnivore Club, a leading premium artisanal, cured meat subscription box, which we view as a complementary offering to truLOCAL, our premium meat subscription business. We see strong potential for cross-selling, and leveraging shared facilities over time." 

"Over the last several years at the BattlBox Group, we have assembled an incredibly talented team that has scaled the business profitably without any outside capital. With the tremendous success leading up to and following our recent Netflix Original show, 'Southern Survival', we were looking for a strategic partner that could help drive the business to the next level. With EMERGE, we found exactly what we were searching for. EMERGE will support us in our future growth endeavors, enabling us to leverage their M&A playbook, extensive member database, data insights, and shared services. This will allow us to accomplish our ambitious goals more cost-effectively and expeditiously." said John Roman, BattlBox Group Partner and CEO upon execution of the Agreement.

The Transaction is expected to be funded with cash on hand. The guaranteed (upfront and deferred cash) consideration represents a multiple of approximately 3.6 times Adjusted EBITDA, based on the BattlBox Group's unaudited financial statements for the trailing twelve-month period ended May 31, 2021.

The total purchase price for the Transaction is up to US$18.95 million, plus customary working capital and tax adjustments. The consideration payable by EMERGE in connection with the Transaction consists of the following:

i)	US$10.25 million paid in cash upon closing of the Transaction;
ii)	US$1.5 million in deferred cash consideration, which shall be payable in three equal installments of US$500,000 on the first, second and third year anniversaries of the closing of the Transaction;
iii)	An earn-out of up to US$7.2 million may be payable based on the overall operating performance of the BattlBox Group over three years, following the closing of the Transaction, with up to US$1.2 million in cash and US$1.2 million in common shares of EMERGE (the "Earn-Out Shares") in each year of the earn-out period. All Earn-Out Shares will be subject to a 180 day lock up and subject to such other terms, as may be required by the TSXV. The Earn-Out Shares may be satisfied, at EMERGE's sole discretion, in either cash or the issuance of common shares of EMERGE (the "Common Shares") at the 20-day volume weighted average trading price of the Common Shares calculated on the day immediately prior to the day of the issuance of such shares, or a combination thereof.

BattlBox is headquartered outside Atlanta, Georgia, with the Carnivore Club team based in Toronto, Canada. This would be EMERGE's sixth acquisition in North America, and its second acquisition since listing on the TSXV in December 2020.

"BattlBox is a top-rated brand in its category, with over 3 million site visits in 2020. We plan to continue to execute against our robust acquisition pipeline and deliver other market-leading online brands to our diversified ecommerce portfolio," said Drew Green, EMERGE Chairman.

The Transaction is an arm's length transaction that is expected to constitute an "expedited acquisition" pursuant to Policy 5.3 of the TSX Venture Exchange ("TSXV") and is subject to customary closing conditions, including TSXV approval, receipt of certain third-party consents and the other conditions set out in the Agreement. Subject to the satisfaction of such conditions, the Transaction is expected to close within the next 45 days.

Conference Call

Management will host a conference call on Monday, August 30, 2021 at 8:30 am ET to discuss its second quarter results and the Transaction. To access the conference call, please dial [phone] or [phone] and provide conference ID 73826130. 

Alternatively, the conference call can be accessed online at: https://produceredition.webcasts.com/starthere.jsp?ei=1489051&tp_key=e3957598d4

About EMERGE:

EMERGE is a disciplined, diversified, rapidly growing acquirer and operator of D2C e-commerce brands. Our network of e-commerce sites provides our members with access to premium meat subscriptions, groceries, golf, family offers and nearby escapes. Our portfolio houses some of North America's most coveted online destinations including trulocal.ca, UnderPar.com, JustGolfStuff.ca, WagJag.com, and BeRightBack.ca. EMERGE was named one of the fastest growing companies in Canada by the Startup 50, and the Globe and Mail's 2020 Canada's Top Growing Companies.

To learn more visit https://www.emerge-commerce.com/

About BattlBox Group:

Founded in February 2015, BattlBox was 'first to market' offering outdoor and survival gear in a subscription box format. Every month, the BattlBox team delivers an expertly curated surprise box to their customers with the latest high-quality gear from both established and up-and-coming brands. Their leadership in the outdoor space led to their Netflix Original series "Southern Survival" which premiered in 2020. Carnivore Club was an established brand that the BattlBox team acquired in 2019.  Carnivore Club is the world's first subscription service featuring premium cured meats delivered to your door.  Getting a deal on Season 9 of Canada's "Dragons' Den" shortly after launch, Carnivore Club scours the globe sourcing celebrated artisans and featuring their products to its consumers.

To learn more, visit www.battlbox.com and www.carnivoreclub.co

Cautionary notice 

Investors are cautioned that any information released or received with respect to the transactions described herein may not be accurate or complete and should not be relied upon. Trading in the securities of the Company should be considered highly speculative.

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 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 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 the risk factors discussed in the Company's filing statement which are incorporated herein by reference and are available through SEDAR at www.sedar.com. 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.

Non-GAAP Measures

This press release makes reference to certain non-GAAP measures. These non-GAAP measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing a further understanding of results of operations from management's perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the financial information of the Company reported under IFRS. EBITDA and Adjusted EBITDA should not be construed as alternatives to net income/loss determined in accordance with IFRS. EBITDA and Adjusted EBITDA do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") and Adjusted EBITDA as defined by management means earnings before interest and financing costs, income taxes, depreciation and amortization, transaction costs, foreign exchange gains/losses, discontinued operations, unrealized gains/losses on contingent consideration and share-based compensation. Management believes that Adjusted EBITDA is a useful measure because it provides information about the operating and financial performance of EMERGE and its ability to generate ongoing operating cash flow to fund future working capital needs and fund future capital expenditures or acquisitions.

SOURCE EMERGE Commerce Ltd.

James Bowen, CFA, EMERGE Commerce Inc., 416-519-9442, [email protected]

Related Links

https://www.emerge-commerce.com/