TORONTO, April 28, 2023 /CNW/ - EMERGE Commerce Ltd. (TSXV: ECOM) ("EMERGE", or the "Company"), a diversified acquirer and operator of niche e-commerce brands, announces that, further to its news release dated April 3, 2023, Emerge US Holdings LLC, a direct subsidiary of the Company, has completed the sale of Battlbox LLC ("BattlBox") to Battlbrands Holdings, Inc. (the "Buyer").
Pursuant to the sale of BattlBox (the "Transaction"), EMERGE received cash consideration of US$6,008,666 on closing of the Transaction, subject to certain distribution and debt adjustments, and the Buyer assumed an aggregate of US$1,161,537 in outstanding liabilities.
EMERGE no longer has any deferred payment obligations owed to former BattlBox Group shareholders in connection with its prior acquisition of Battlbox.
No finder's fees were paid in connection with the Transaction.
EMERGE plans to immediately utilize the majority of proceeds from the transaction proceeds to pay down its senior credit facility. Interest expense savings from debt repayment are expected to be approximately C$1M annually.
Ghassan Halazon, Founder and CEO of EMERGE commented, "With the sale of BattlBox complete, we plan to execute against our stated priorities of further debt paydown to strengthen the balance sheet, driving organic growth, extracting further operational efficiencies, and ultimately improving EBITDA to cash flow conversion."
EMERGE originally acquired BattlBox Group in October 2021, which included both the BattlBox and Carnivore Club brands. Carnivore Club is not included in the transaction, and will remain an EMERGE brand, working closely with truLOCAL, under the Meat / Grocery vertical.
Following the Transaction, EMERGE retains 7 brands across 4 main verticals (Pets, Meat/ Grocery, Golf and Experiences) in Canada and the U.S., namely WholesalePet, truLOCAL, Carnivore Club, UnderPar, JustGolfStuff, WagJag and BeRightBack. EMERGE's go-forward e-commerce portfolio is expected to approach C$100M in Gross Merchandise Sales(1) annually, and remain profitable on an Adjusted EBITDA(1) basis.
BattlBox (excluding Carnivore Club) had sales of US$18.8M and a net loss of US$1.9M for the year ended December 31, 2022. As at December 31, 2022, BattlBox had total assets of US$9.7M and liabilities of US$2.2M.
Certain officers of BattlBox held a controlling interest in the capital of the Buyer. Accordingly, the Transaction may be considered a "related party transaction" under the provisions of Multilateral Instrument 61- 101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). MI 61-101 requires the Company to obtain a formal valuation and seek "minority approval" of the Transaction by disinterested shareholders, unless exemptions are available. The Company relied on the exemption from the requirement to obtain a formal valuation under section 5.5(b) of MI 61-101 and the exemption from obtaining minority approval under section 5.7(e) of MI 61-101.
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Non-GAAP Financial Measure. Refer to section "Non-GAAP Financial Measures" below for additional information.
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About EMERGE
EMERGE is a diversified acquirer and operator of profitable niche e-commerce brands across North America. Our marketplace and subscription e-commerce properties provide our members with access to pet products, meat/ grocery, golf and discounted experiences, among other categories. EMERGE was named one of Canada's Top Growing Companies by Globe and Mail in 2022 (and 2020), and one of the fastest growing companies in Canada by the Startup 50 in 2020.
To learn more visit https://www.emerge-commerce.com
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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.
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. Gross Merchandise Sales ("GMS") and Adjusted EBITDA should not be construed as alternatives to revenue or net income/loss determined in accordance with IFRS. GMS and Adjusted EBITDA do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers.
GMS as defined by management is the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of discounts and refunds. Management believes GMS provides a useful measure for the dollar volume of e-commerce transactions made through our platforms and an indicator for our business performance.
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.
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 relating to the expected results from the Transaction including the paydown of outstanding debt, the results the Transaction may have on the operations of the Company and its remaining assets, financial figures that may be achieved by the Company and 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 risks related to the disposition of an operating business by the Company, risks that the benefits derived from the sale may not be as expected or that the Company may not see any benefit from the sale, 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 sale including allegations of misrepresentation or breach of conditions or covenants, as well as the risk factors discussed in the Company's MD&A, and most recent Annual Information Form which 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.
On Behalf of the Board
Ghassan Halazon
Director, President, and CEO
SOURCE EMERGE Commerce Ltd.
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