Champlain, other investors to acquire Sportscene in C$51m deal

Sportscene Group, a Boucherville, Quebec-based restaurant business, has agreed to privatization deal with a consortium that includes president and CEO Jean Bédard.

Sportscene Group, a Boucherville, Quebec-based restaurant business, has agreed to privatization deal with a consortium that includes president and CEO Jean Bédard. Quebec investors in the consortium are being led by Canadian private equity firm Champlain Financial Corp. The deal, valued at about C$51.25 million, will see Sportscene acquired by a newly created company. It is subject to a shareholders’ vote in January 2022.

PRESS RELEASE

Sportscene Group announces a privatization agreement carried out by its President and CEO, Jean Bédard, and a consortium of Québec investors led by Champlain for a cash consideration of $7.25 per share

MONTREAL, Nov. 18, 2021 /CNW/ – Sportscene Group Inc. (“Sportscene” or the “Corporation”) (TSX Venture Exchange: SPS.A ) announced today that it had entered into a final combination agreement (the “Combination Agreement”) pursuant to which Jean Bédard, the President and Chief Executive Officer of Sportscene, and a consortium of Québec investors led by Champlain Financial Corporation (“Champlain” and collectively with Jean Bédard, the “Offerors”) will acquire, through a newly incorporated corporation (the “Purchaser”), all of the issued and outstanding Class A shares of Sportscene (the “Shares”), except for 1,715,288 Shares held, directly or indirectly, by Jean Bédard, for a cash consideration of $7.25 per Share (the “Transaction”). Under the terms of the Transaction, Sportscene will therefore become a private corporation for a total consideration of approximately 51.25 million dollars, excluding the value of certain Shares and the options of the Corporation held by Jean Bédard and his affiliated entity, and the Shares will cease to be listed on the TSX Venture Exchange (the “TSX-V”).

The cash consideration of $7.25 per Share represents a premium of approximately 84% to the closing price of the Shares on the TSX-V on November 18, 2021, the last trading day before this press release, and a premium of 79% to the volume-weighted average trading price of the Shares on the TSX-V for the 20-day period ending at the close of market on November 18, 2021.

“Eighteen months after the start of the worst crisis ever to affect the restaurant industry, we believe that privatizing the business will simplify the Corporation’s operations and enable us to better pursue the implementation, with the management team and our new partners, of our strategic plan initiated before the pandemic. I would like to stress the invaluable support of the shareholders, key among them being Charles St-Germain and his family, who for 25 years have given the Corporation the support and resources needed to make Sportscene a leader in the Québec restaurant industry and to contribute to its exemplary growth,” said Jean Bédard, President and Chief Executive Officer of Sportscene.

“We are proud to join Jean Bédard and all the employees, franchisees and partners of Sportscene Group, who have shown great creativity and the ability to innovate and adapt both before and during the pandemic,” said Pierre Simard, President of Champlain. “We firmly believe that the vision of Sportscene’s team is a perfect fit with our desire to create strong Québec brands and our value creation approach.”

Independent Valuation Process
In accordance with applicable securities legislation, the board of directors of the Corporation formed a special committee composed of independent directors to examine and review the proposed Transaction and to make recommendations to the board of directors of the Corporation as to whether the Transaction being considered is in the best interests of the Corporation and whether the board of directors of the Corporation should approve the Combination Agreement and recommend that Disinterested Shareholders (as defined below) vote their Shares in favour of the Transaction. The members of the special committee, Nelson Gentiletti (chair of the special committee), Annick Mongeau and Katia Marquier, retained Stikeman Elliott LLP as independent legal advisers, and PricewaterhouseCoopers LLP (“PwC”) was retained as independent financial advisers to advise the special committee and prepare an opinion as to the fairness of the Transaction from a financial point of view.

PwC has provided an opinion (the “Fairness Opinion”) to the special committee to the effect that, on the date hereof, subject to the assumptions, limitations and qualifications contained therein, the consideration to be received by the shareholders of the Corporation, other than Jean Bédard and the corporations under his control (the “Disinterested Shareholders”), pursuant to the Transaction is fair, from a financial point of view, to the Disinterested Shareholders.

Based on PwC’s conclusions, among the other factors taken into consideration, and after consulting with its financial and legal advisers, the special committee has unanimously determined that the Transaction was in the best interests of the Corporation and was fair to the Disinterested Shareholders and recommended that the board of directors of the Corporation determine that the Transaction is in the best interests of the Corporation and is fair to the Disinterested Shareholders and recommend that the Disinterested Shareholders vote in favour of the Transaction. Consequently, the board of directors of the Corporation unanimously approved the Transaction (the interested directors, Jean Bédard and Marc Poulin (Mr. Poulin being a director of corporations related to Champlain) having recused themselves) and recommended that the Disinterested Shareholders vote their Shares in favour of the Transaction.

Charles St-Germain and his family’s affiliated entities holding Shares representing 53.2% of all voting rights attached to the 8,647,786 issued and outstanding Shares, have signed irrevocable support and voting agreements pursuant to which they have agreed to vote all of their Shares at the Meeting in favour of the Transaction, and they will vote as Disinterested Shareholders at the Meeting. Jean Bédard and his affiliated entities holding Shares representing 20.3% of all voting rights attached to all Shares, have also signed irrevocable support and voting agreements pursuant to which they have agreed to vote all of their Shares at the Meeting in favour of the Transaction. In addition, the directors and certain executive officers of the Corporation who hold Shares also signed support and voting agreements under which, subject to certain terms and conditions, they have agreed to vote all of their Shares at the Meeting in favour of the Transaction.

Transaction Details
The Transaction will be carried out by amalgamation of the Corporation and two subsidiaries of the Purchaser under the Canada Business Corporations Act. At the time of the amalgamation, the shareholders of the Corporation, with the exception of the Offerors who hold Shares, will receive, in consideration of each of their Shares, one redeemable preferred share of the amalgamated entity, which will be redeemed immediately after the amalgamation for a cash consideration of $7.25.

Under the Combination Agreement, on the date on which the amalgamation takes effect, each option that has not yet been exercised will be terminated and cancelled, at the time the amalgamation takes effect, in exchange for a cash payment made by the Corporation corresponding to the difference between $7.25 per option and the option exercise price (less applicable withholdings and deductions provided by law) in accordance with the terms of the Corporation’s stock option plan, which will be amended prior to the closing date of the Transaction to provide for this cash payment. Options that have an exercise price equal to or greater than $7.25 will be terminated and cancelled without payment of any consideration.

The Transaction is not subject to a financing condition. To guarantee its obligations under the Combination Agreement, including the payment of the total consideration and the required payments to option holders under the Combination Agreement, the Purchaser has arranged for an amount of 50 million dollars to be deposited in trust with the TSX Trust Company, as escrow agent, in order to guarantee its obligation under the Combination Agreement. Such amount will be held in trust and released once the conditions to which the Transaction is subject under the Combination Agreement have been met.

The shareholders of the Corporation will be asked to approve the Transaction at a special meeting (the “Meeting”) that the Corporation intends to hold in January 2022. Completion of the Transaction is subject to certain closing conditions, including the approval of the TSX Venture Exchange, approval by at least two-thirds of the votes attached to the Shares held by the shareholders of the Corporation voting at the Meeting as well as the approval by a simple majority of the votes attached to the Shares held by the Disinterested Shareholders voting at the Meeting and the absence of any material adverse change affecting the Corporation. Mr. St–Germain and his affiliates will vote as Disinterested Shareholders at the Meeting. The Combination Agreement governing the Transaction contains customary representations, warranties and undertakings for a transaction of this nature. If all conditions are met, the closing of the Transaction is expected to take place in the week following the Meeting. Termination fees of $2 million may be payable to the Purchaser by the Corporation in certain circumstances, including in the event that the Corporation supports a superior proposal.

Further information about the Transaction, including a copy of the Fairness Opinion and the specific reasons why the board of directors of the Corporation and the special committee made a favourable recommendation to the shareholders of the Corporation, will be included in the information circular (the “Circular”) to be mailed to the shareholders of the Corporation in December 2021 in connection with the Meeting.

The Combination Agreement, the Circular (including the Fairness Opinion) and certain related documents will be filed in a timely manner on SEDAR, under the Corporation’s profile, at www.sedar.com.

The Corporation plans to release its results for the fiscal year ended August 29, 2021, on November 26, 2021, prior to the opening of the markets.