Neighbourly Announces Filing of Special Meeting Materials and Receipt of Interim Order in Respect of Go-Private Arrangement with Persistence Capital Partners

TORONTO, Feb. 12, 2024 /CNW/ - Neighbourly Pharmacy Inc. ("Neighbourly" or the "Company") (TSX: NBLY), Canada's largest and fastest growing network of independent pharmacies, announced today that it has filed and is in the process of mailing the management information circular (the "Circular") and related materials in connection with the special meeting (the "Meeting") of its shareholders (the "Shareholders") to be held virtually on March 8, 2024. The Meeting has been called for the Shareholders to consider and, if deemed advisable, to pass a special resolution (the "Arrangement Resolution") approving a previously announced statutory plan of arrangement involving the Company and T.I.D. Acquisition Corp. (the "Purchaser"), a newly-formed entity controlled by Persistence Capital Partners ("PCP"), pursuant to which the Purchaser will acquire all of the issued and outstanding common shares (the "Common Shares") in the capital of the Company, other than those Common Shares already owned by PCP or its affiliates, for $18.50 per Common Share in cash (the "Cash Consideration") plus one contingent value right ("CVR" and collectively with the Cash Consideration, the "Consideration") per Common Share, which will entitle the holder thereof to an additional cash payment of $0.61 per CVR if the Company's Pro-Forma Adjusted EBITDA for the 2026 fiscal year is at or above $128.0 million (the "CVR EBITDA Target"), the whole subject to the terms and conditions of the arrangement agreement dated January 15, 2024 (the "Arrangement Agreement") between the Company and the Purchaser (the "Arrangement").

Board Recommendation

The board of directors of the Company (the "Board") having taken into account such factors and matters as it considered relevant including, among other things, the recommendation of the independent special committee of the Board (the "Transaction Committee"), unanimously determined that the Arrangement is in the best interests of the Company and fair, from a financial point of view, to the holders of Common Shares (other than PCP and its affiliates). Accordingly, the Board unanimously recommends that the Shareholders vote in favour of the Arrangement Resolution at the Meeting.

Reasons for the Recommendation

In making its recommendation to the Board, the Transaction Committee considered and relied upon a number of substantive and procedural factors as set out in the Circular, including, among others, the following:

• Cash Consideration is an Attractive Premium to Shareholders. The Cash Consideration offered to Shareholders under the Arrangement represents a premium of approximately 53% to the closing price of the Common Shares of $12.12 on the Toronto Stock Exchange ("TSX") on October 2, 2023 (being the last trading day prior to the announcement of the letter of intent between the Company and PCP), and a premium of approximately 33% to the 20-day volume weighted average price per Common Share on the TSX of $13.96, respectively, as of the end of trading on October 2, 2023.
• Value Supported by the Formal Valuation and Fairness Opinion. The Transaction Committee's independent financial advisor, TD Securities Inc. ("TD Securities"), prepared a formal valuation of the Common Shares and the CVRs in accordance with Multilateral Instrument 61 101 – Protection of Minority Security Holders in Special Transactions, concluding that, as of January 14, 2024, and based upon and subject to the assumptions, limitations and qualifications set forth therein, the fair market value of the Common Shares was in the range of $18.50 to $23.50 per Common Share and the fair market value of the CVRs was in the range of $0.14 to $0.34 per CVR. In addition, TD Securities also orally delivered to the Transaction Committee a fairness opinion that, as of January 14, 2024, and subject to the assumptions, limitations and qualifications set forth therein, the Consideration to be received by the Shareholders pursuant to the Arrangement Agreement is fair, from a financial point of view, to the holders of the Common Shares (other than PCP and its affiliates).
• Potential Additional Consideration. The Consideration includes one CVR per Common Share, which provides the holders of Common Shares (other than PCP and its affiliates) with an opportunity to receive an additional $0.61 per CVR if the CVR EBITDA Target is met.
• Transaction Committee Oversight. The Transaction Committee, which is comprised entirely of independent directors and was advised by experienced and qualified independent financial and legal advisors, oversaw, reviewed and considered, and directly participated in the negotiation of, the Arrangement Agreement.

Interim Order

The Company has been granted an interim order (the "Interim Order") from the Ontario Superior Court of Justice (Commercial List) authorizing various matters, including the holding of the Meeting and the mailing of the Circular.

Meeting and Circular

The Meeting is scheduled to be held as a virtual-only meeting conducted via live audio webcast at meetnow.global/MS9WCLU on March 8, 2024 at 10:00 a.m. (Eastern time). It is recommended that Shareholders join at least fifteen minutes before the start of the Meeting. The Shareholders, regardless of geographic location, will have an equal opportunity to participate in the Meeting online, but will not be able to attend the Meeting in person. The Shareholders of record as on the close of business on January 29, 2024 are entitled to receive notice of and vote at the Meeting.

The Arrangement must be approved by at least (i) two-thirds (66 ^2/3%) of the votes cast by Shareholders virtually present or represented by proxy at the Meeting, voting as a single class (each holder of Common Shares being entitled to one vote per Common Shares) and (ii) the approval of the majority of the Shareholders virtually present or represented by proxy at 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".

Shareholders may vote prior to the Meeting by completing a form of proxy or voting information form in accordance with the instructions provided therein, and delivering the executed form of proxy to the Company's transfer agent before 10:00 a.m. (Eastern time) on March 6, 2024 (or if the Meeting is adjourned or postponed, not later than forty eight (48) hours (excluding Saturdays, Sundays and statutory holidays) prior to the commencement of the Meeting) (the "Proxy Deadline"). Shareholders are urged to vote well before the Proxy Deadline.

Shareholders may also vote at the Meeting. Registered Shareholders may vote by completing a ballot online. Details on how Shareholders who hold Common Shares through a broker, investment dealer, bank, trust company or other intermediary can attend, participate or vote at the Meeting are included in the Circular.

The Circular provides important information on the Arrangement and related matters, including the background to the Arrangement, the rationale for the recommendation made by the Transaction Committee and the Board, voting procedures and how to virtually attend the Meeting. Shareholders are urged to read the Circular carefully and in its entirety, and, if assistance is required, to consult their financial, legal, tax or other professional advisors. The Circular is being mailed to the Shareholders in compliance with applicable laws and the Interim Order. The Circular is available on the SEDAR+ profile of Neighbourly at www.sedarplus.com and Neighbourly's investor relations website at https://investors.neighbourlypharmacy.ca/events-and-presentations/default.aspx.

The Arrangement is expected to close on or about March 15, 2024, subject to obtaining the required Shareholder approval at the Meeting and all other conditions of the Arrangement being satisfied.

Shareholder Questions and Assistance

Shareholders who have questions about the information contained in the Circular, or require assistance with the procedure for voting, including to complete the form of proxy or letter of transmittal mailed together with the Circular, may contact Computershare Investor Services Inc., at 1-800-564-6253 (toll free in Canada and the United States) or 1-514-982-7555 (from outside of Canada and the United States), or by email at [email protected].

Forward Looking Information

This news release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking information") within the meaning of applicable securities laws. This information includes, but is not limited to, statements concerning our objectives, our strategies to achieve those objectives, as well as statements made with respect to management's beliefs, plans, estimates, projections and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "expects", "estimates", "outlook", "forecasts", "projection", "prospects", "intends", "anticipates", "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", "will", "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances. Forward-looking information in this news release include, among other things, statements relating to Neighbourly's business in general; and statements relating to the Meeting, the transaction, the ability to complete the transactions contemplated by the Arrangement Agreement and the timing thereof, including the parties' ability to satisfy the conditions to the consummation of the transaction, the receipt of the required shareholder approvals and Court approval and other customary closing conditions, the achievement of the CVR EBITDA Target and the payout of additional amounts to holders of CVRs under the Arrangement Agreement, and the expected benefits to the Company and its shareholders of the proposed transaction.

Risks and uncertainties related to the transactions contemplated by the Arrangement Agreement include, but are not limited to: the possibility that the transaction will not be completed on the terms and conditions, or on the timing, currently contemplated, and that it may not be completed at all, due to a failure to obtain or satisfy, in a timely manner or otherwise, required regulatory, shareholder and Court approvals and other conditions to the closing of the transaction or for other reasons; the risk that competing offers or acquisition proposals will be made; the negative impact that the failure to complete the transaction for any reason could have on the price of the Common Shares or on the business of the Company; the failure of PCP to enter into definitive agreements with respect to the debt commitment or the equity commitment, or PCP's failure to satisfy the closing conditions thereunder in a timely manner or at all; the Purchaser's failure to pay the cash consideration at closing of the transaction; the ability of the Purchaser to pay any expense fee under the Arrangement Agreement, should such fee become payable, as its obligations are not guaranteed; the absence of a reverse break fee in favour of the Company; the business of Neighbourly may experience significant disruptions, including loss of clients or employees due to transaction related uncertainty, industry conditions or other factors; risks relating to employee retention; the risk of regulatory changes that may materially impact the business or the operations of Neighbourly; the risk that legal proceedings may be instituted against Neighbourly; and risks related to the diversion of management's attention from Neighbourly's ongoing business operations while the transaction is pending; and other risks and uncertainties affecting Neighbourly, including those described in in the Company's annual information form for the 52-week period ended March 25, 2023, as well as other filings and reports Neighbourly may make from time to time with the Canadian securities authorities.

Although we have attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. No forward-looking statement is a guarantee of future results. Accordingly, you should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this news release represents the Company's expectations as of the date of this news release (or as the date they are otherwise stated to be made) and are subject to change after such date. However, the Company disclaims any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws in Canada. All of the forward-looking information contained in this news release is expressly qualified by the foregoing cautionary statements.

This announcement is for informational purposes only and does not constitute an offer to purchase or a solicitation of an offer to sell, or an offer to sell or a solicitation of an offer to buy, Neighbourly Common Shares.

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 healthcare hubs within their communities, Neighbourly's pharmacies strive to provide accessible healthcare with a personal touch. Since 2015, Neighbourly has expanded its diversified national footprint to include 294 locations, reinforcing the Company's reputation as the industry's acquirer of choice.

SOURCE Neighbourly Pharmacy Inc.

For more information, please contact Marina Davies, VP, Investor Relations at [email protected] or visit www.neighbourlypharmacy.ca.