The Reject Shop (TRS) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition of Australia's largest pure-play discount retailer provides entry into an under-penetrated market with no direct national competitor, leveraging a proven value retail model for long-term growth.

• Dollarama Inc. will acquire all shares of The Reject Shop Limited via a scheme of arrangement, aiming to expand its international footprint and leverage synergies in discount retailing.

• TRS's established network of 390+ stores and 5,000 employees offers a scalable platform with compatible corporate cultures and business models.

• The deal aligns with a strategy to expand internationally, building on success in Canada and Latin America, and aims to grow the Australian store network to 700 by 2034.

• The transaction is positioned as being in the best interests of The Reject Shop shareholders, with unanimous board support, subject to no superior proposal and a positive independent expert opinion.

Financial terms and conditions

• All-cash offer of AUD 6.68 per share, a 108% premium to TRS's 20-day VWAP, valuing equity at CAD 233 million and enterprise value at CAD 170 million (pre-AASB 16) or CAD 379 million (post-AASB 16).

• Scheme consideration is $6.68 per share in cash, less any special dividend (up to $0.77 per share) paid by The Reject Shop before completion.

• The aggregate consideration will be paid into a trust account before implementation, with payment to shareholders on the implementation date.

• Both parties have agreed to reciprocal break fees of $2,592,195 under certain circumstances.

• The acquisition will be funded through cash on hand and available liquidity, with minimal immediate impact on earnings per share and leverage ratio.

Synergies and expected cost savings

• Plans to unlock margin and growth potential by optimizing merchandise mix, price points, store layout, and tech infrastructure.

• Integration of best practices in sourcing, IT, logistics, and merchandising, with a gradual transition to the Dollarama model over four years.

• The integration committee will plan for operational transition, employee retention, stakeholder engagement, and process consolidation, aiming for efficiency gains post-acquisition.