NBLY Neighbourly Pharmacy Inc

TORONTO, Oct. 3, 2023 /CNW/ - Neighbourly Pharmacy Inc. ("Neighbourly" or the "Company") (TSX: NBLY), Canada's largest and fastest growing network of independent pharmacies, announced today that, based on the unanimous recommendation of a committee of independent directors (the "Transaction Committee") of its board of directors (the "Board"), it has entered into a letter of intent with an affiliate of Persistence Capital Partners (collectively, and together with their affiliated funds, "PCP"), in respect of a transaction (the "Proposed Transaction") whereby a newly-formed entity controlled by PCP (the "Purchaser") would acquire all of the common shares (the "Common Shares") in the capital of the Company, other than those Common Shares already owned by PCP or its affiliates, at a purchase price of $20.50 per Share (the "Offer Price"), payable in cash. The Company has granted the Purchaser exclusivity through November 13, 2023 to complete negotiations of definitive agreements between the Company and the Purchaser.

The Offer Price represents approximately a 69% premium to the closing price of $12.12 on the Toronto Stock Exchange (the "TSX") on October 2, 2023, and approximately a 47% premium to the 20-day volume weighted average price per share on the TSX of $13.96, respectively, as of the end of trading on October 2, 2023. The Offer Price also represents a premium of approximately 21% to the Company's May 2021 IPO price of $17.00 per Common Share.

The Board, having received the unanimous recommendation of the Transaction Committee, determined (with Stuart M. Elman, Chair of the Board and Managing Partner of PCP, recusing himself from the meeting) that pursuing the Proposed Transaction is in the best interests of the Company and subject to negotiating a definitive agreement, receiving an updated Fairness Opinion (as defined below) from TD (as defined below) at the time the definitive agreement is entered into and such other conditions described below being satisfied, the Board intends to recommend that the Company's shareholders vote in favour of the Proposed Transaction at a special meeting of shareholders to be held to approve the Proposed Transaction.

"PCP believes that taking Neighbourly private is the best way to unlock its full potential and create long-term value for all stakeholders," said Stuart M. Elman, Managing Partner of PCP. "As a private company, Neighbourly will have more flexibility and resources to pursue its strategic vision to advance the role that independent pharmacies can play in Canada. We are confident that this proposed transaction will benefit Neighbourly's customers, patients, employees, and partners, as well as provide a fair and attractive return to its public shareholders."

In connection with its review of the Proposed Transaction, the Transaction Committee retained TD Securities Inc. ("TD") to provide financial advice and prepare a formal valuation of the Common Shares (the "Formal Valuation") as required under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). TD delivered an oral opinion to the Transaction Committee that, as of October 2, 2023, and based on TD's analysis and subject to the assumptions, limitations and qualifications to be set forth in the Formal Valuation, the fair market value of the Common Shares of the Company is in the range of $20.50 to $25.50 per Common Share. TD has also delivered an oral opinion (the "Fairness Opinion") to the Transaction Committee that, as of October 2, 2023, and subject to the assumptions, limitations and qualifications to be set forth in TD's written fairness opinion, the consideration to be received by the holders of Common Shares (other than the Purchaser or its affiliates) pursuant to the Proposed Transaction is fair, from a financial point of view, to the holders of Common Shares (other than the Purchaser or its affiliates).

PCP, which owns as of the date hereof, directly or indirectly, an aggregate of approximately 22.4 million Common Shares of the Company, representing approximately 50.2% of the Company's issued and outstanding Common Shares, expressed to the Board and the Transaction Committee that it does not have any interest in selling the Common Shares that it owns to any third party and that it would not support any alternative transaction involving the Company and a third party. The Company has agreed to negotiate definitive agreements exclusively with PCP in connection with the Proposed Transaction.

Pursuant to the terms of the Proposed Transaction, the Purchaser will acquire all of the Common Shares, other than those Common Shares owned by PCP or its affiliates, for a purchase price of $20.50 per Common Share, payable in cash. The Proposed Transaction would be financed via equity and debt financing, both of which are in advanced stages of negotiations.

The entering into of a definitive agreement concerning the Proposed Transaction will be subject to, among other things, as at the time the definitive agreement is entered into, (i) PCP having secured fully committed debt and equity financing; (ii) the negotiation and execution of a definitive agreement for the Proposed Transaction on terms satisfactory to PCP and Neighbourly; (iii) receipt from TD of an updated Formal Valuation; and (iv) receipt from TD of an updated Fairness Opinion, containing a fairness conclusion consistent with the Fairness Opinion. The consummation of the Proposed Transaction will be subject to various conditions customary for transactions of this nature, including, among others, (i) receipt by the Company and PCP of any required regulatory, court and/or stock exchange approvals; and (ii) the approval of the Proposed Transaction at a special meeting of the shareholders of the Company entitled to vote on the Proposed Transaction (including a "majority of the minority" vote of the shareholders excluding for this purpose the votes of Shares held or controlled by PCP and any other persons described in items (a) through (d) of Section 8.1(2) of MI 61-101).

Neighbourly expects to hold a special meeting (the "Special Meeting") of the Company's shareholders to approve the Proposed Transaction following execution of definitive agreements with respect to the Proposed Transaction. The Proposed Transaction is expected to close in the last calendar quarter of 2023 or early in the first calendar quarter of 2024, subject to the above listed conditions and other customary closing conditions. The terms and conditions of the Proposed Transaction will be disclosed in greater detail in a management information circular for the Special Meeting that is expected to be mailed to the Company's shareholders following the execution of the definitive agreement for the Proposed Transaction. Copies of the definitive agreements 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 at www.sedarplus.com. Neighbourly's shareholders are urged to read those and other relevant materials when they become available.

While the Board, after having received the unanimous recommendation of the Transaction Committee, has determined to pursue the Proposed Transaction, neither the Transaction Committee nor the Board has approved the Proposed Transaction. There can be no assurance that Neighbourly and PCP will enter into a definitive agreement for the Proposed Transaction or that the Proposed Transaction will occur as proposed or at all. Neither the Company nor the Transaction Committee expect to make further public comment regarding the matters contemplated herein until a definitive agreement for the Proposed Transaction is reached or the Proposed Transaction is abandoned.

PCP currently beneficially owns or has control or direction over, directly or indirectly, 22,420,922 Common Shares, representing approximately 50.2% of the currently issued and outstanding Common Shares.

PCP is expected to take actions in furtherance of the Proposed Transaction. Accordingly, the Proposed Transaction could result in one or more of the actions set forth in clauses (a) through (k) of item 5 of PCP's updated early warning report to be filed on SEDAR+, including a plan of arrangement or other corporate transaction involving the Company, the delisting of the Common Shares from the Toronto Stock Exchange and the Company ceasing to be a reporting issuer in Canada. Other than as described above, PCP does not have any future intentions of the type referred to in clauses (a) through (k) of Item 5 of PCP's updated early warning report to be filed on SEDAR+, although it reserves the right to do so in the future.

PCP has its principal office located in Toronto at 60 Bloor Street West, Suite 404, Toronto, ON M4W 3B8. The Company's head office is located in Toronto at 190 Attwell Drive, Unit 400, Toronto, ON 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 at www.sedarplus.ca, please contact the general counsel and secretary of PCP by email at: zzelman@persistencecapital.com.

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, which includes, among other things, statements relating to the Proposed Transaction and timing thereof, is necessarily based on a number of opinions, estimates and assumptions that the Company considered appropriate and reasonable as of the date such statements are made in light of its experience, current conditions and expected future developments.

Risks and uncertainties related to the Proposed Transaction include, but are not limited to: failure of Neighbourly and PCP to enter into a definitive agreement for the Proposed Transaction on terms satisfactory to Neighbourly, or at all; failure of PCP to secure equity or debt financing on acceptable terms, or at all; failure to complete satisfactory due diligence; failure of Neighbourly and PCP to obtain the required shareholders and regulatory approvals for, or satisfy other conditions to effect, the Proposed Transaction; failure by TD to deliver an updated Formal Valuation at the time the definitive agreement is entered into; failure by TD to deliver an updated Fairness Opinion at the time the definitive agreement is entered into; the risk that the Proposed Transaction may involve unexpected costs, liabilities or delays; the risk that, prior to or as a result of the completion of the Proposed Transaction, 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.

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.

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 291 locations, reinforcing the Company's reputation as the industry's acquirer of choice.

TD Securities is acting as financial advisor and independent valuator to the Transaction Committee, and McCarthy Tétrault LLP is acting as independent legal advisor to the Transaction Committee.  

Scotiabank and RBC Capital Markets are acting as financial advisors to PCP, and Stikeman Elliott LLP is acting as legal advisor to PCP on the Proposed Transaction.  Devon Park Advisors¹ is providing strategic advisory and capital raising services to PCP.

SOURCE Neighbourly Pharmacy Inc.