Carlsberg to Acquire Waterloo Brewing In An All-Cash C$144 Million Transaction

December 21, 2022 Canadian News

Waterloo Brewing Ltd. (TSX: WBR) – (“Waterloo Brewing” or the “Company”) announced today that it has entered into a definitive arrangement agreement (the “Arrangement Agreement”) with Carlsberg Group (“Carlsberg”) pursuant to which Carlsberg has agreed to acquire all of the issued and outstanding shares of Waterloo Brewing (“Waterloo Brewing Shares”), by way of a statutory plan of arrangement (“Plan of Arrangement”) under the Business Corporations Act (Ontario) (“Transaction”). Under the terms of the Arrangement Agreement, holders of Waterloo Brewing Shares (“Waterloo Brewing Shareholders”) will receive C$4.00 in cash for each Waterloo Brewing Share held (“Consideration”), which implies an aggregate equity value for Waterloo Brewing, of approximately C$144 million, on a fully diluted, in-the-money, treasury method basis and an enterprise value of C$217 million. The total offer Consideration also represents an implied TEV/LTM EBITDA multiple of 12.4x, based on Waterloo’s third quarter results ending October 30, 2022.*

“We’ve enjoyed a close relationship with Carlsberg and are excited about becoming part of one of the largest brewing companies in the world,” said George Croft, Waterloo Brewing’s President and CEO. “Waterloo Brewing will be a great fit with Carlsberg’s strong, purpose-driven culture, and our Board of Directors is confident that joining Carlsberg is the best long-term solution for our employees, partners, customers, consumers and community.”

Carlsberg Group CEO Cees ‘t Hart commented: “One of our priorities in our SAIL’27 strategy is to grow our business in attractive markets, where we are small today, like Canada. The acquisition of Waterloo Brewing significantly improves our growth prospects in the Canadian market.”

Managing Director, Carlsberg Canada, Anders Rud Jørgensen says, “This exciting opportunity will scale our business in Canada. The brand portfolios are complementary. Local sourcing will secure long-term robustness of supply, increase commercial flexibility and speed to market for innovations, step-changing the way we operate. Waterloo Brewing’s excellent portfolio of long-standing co-packing relationships will benefit from these combined operations.”

TRANSACTION HIGHLIGHTS:

      • The Consideration represents a 19.4% premium to the closing price of the Waterloo Brewing Shares on the Toronto Stock Exchange (“TSX”) as at December 14, 2022 and a 26.0% premium over the 10-day volume-weighted average price.
      • The Consideration represents a premium valuation equating to an implied TEV/LTM EBITDA multiple of 12.4x based on Waterloo Brewing’s third quarter results ending October 30, 2022.*
      • The all-cash offer crystalizes value for Waterloo Brewing Shareholders and provides full liquidity and certainty of value.
      • Waterloo Brewing’s board of directors (“Board”), having received a unanimous recommendation of a special committee of independent directors consisting of John Bowey, Peter Schwartz, Stanley Dunford, David Shaw and Ed Kernaghan (the “Special Committee”), has unanimously approved the Transaction and recommends that Waterloo Brewing Shareholders vote in favour of the Transaction.
      • Directors and executive officers of Waterloo Brewing, representing ~39% of Waterloo Brewing Shares, and ~45% of Company options, have entered into irrevocable support and voting agreements with Carlsberg pursuant to which they have agreed to vote their Waterloo Brewing Shares and options in favour of the Transaction.
      • The Transaction is not subject to a financing condition and the Consideration will be funded from Carlsberg’s existing cash on its balance sheet.

TRANSACTION DETAILS

Under the terms of the Transaction, holders of Waterloo Brewing Shares will receive C$4.00 in cash for each Waterloo Brewing Share held. Each in-the-money option of the Company outstanding will be deemed to be vested and disposed of to the Company for an in-the-money cash payment, and all Company options issued and outstanding shall thereafter be immediately cancelled.

The Transaction will be effected by way of a statutory plan of arrangement under the Business Corporations Act (Ontario) and is subject to customary closing conditions including approval of the Ontario Superior Court of Justice and the approval of (a) at least two-thirds of the votes cast by holders of Waterloo Brewing Shares and options, voting together as a single class, (b) two thirds of the votes cast by holders of Waterloo Brewing Shares, voting as a separate class and (c) a simple majority of the votes cast by the holders of Waterloo Brewing Shares (excluding the votes cast by two executive officers holding approximately 5.7% of the Waterloo Brewing Shares) as required pursuant to Multilateral Instrument 61-101 – Protection of Minority Securityholders in Special Transactions.

Waterloo and Carlsberg have each provided representations and warranties customary for a transaction of this nature in this Arrangement Agreement. In addition, the Arrangement Agreement includes customary deal protection provisions, including that Waterloo Brewing has agreed not to solicit or initiate any discussion regarding any other business combination, subject to customary “fiduciary out” rights. Waterloo Brewing has also granted Carlsberg a right-to-match any superior proposal and will pay a termination fee of C$6.0 million to Carlsberg if the Arrangement Agreement is terminated in certain circumstances, including if the Waterloo Brewing Board recommends or approves an acquisition proposal or enters into an agreement with respect to a superior proposal.

The Board, acting on the unanimous recommendation of the Special Committee, has approved the Transaction and unanimously recommends that Waterloo Brewing Shareholders vote in favour of the Transaction.

Canaccord Genuity Corp. and Paradigm Capital Inc. have each provided a fairness opinion to the Board of Directors and the Special Committee, to the effect that, subject to the assumptions, limitations and qualifications set out in such opinions, as such other matters considered relevant, the Consideration to be received pursuant to the Transaction is fair, from a financial point of view, to the Waterloo Brewing Shareholders. Copies of the fairness opinions of Canaccord Genuity Corp. and Paradigm Capital Inc. and a description of the various factors considered by the Special Committee and the Board in their determination to approve the Transaction, as well as other relevant background information, will be included in the information circular to be sent to Waterloo Brewing Shareholders in the coming weeks in advance of the special meeting of Company shareholders and option holders (the “Special Meeting”) to vote on the Plan of Arrangement. The Special Meeting is expected to occur in late February 2023 and it is currently anticipated that, subject to the satisfaction of closing conditions, the Transaction will be completed in the first quarter of 2023. Copies of the information circular, the Arrangement Agreement, the Plan of Arrangement, the voting and support agreements will be filed with the applicable securities regulators and will be available on SEDAR at www.sedar.com.

Following closing, Waterloo Brewing Shares will be de-listed from the TSX and it is anticipated that Waterloo will apply to cease to be a reporting issuer.