Prime Restaurants Inc.
TSX : EAT

Prime Restaurants Inc.

November 21, 2011 08:20 ET

Prime Restaurants Inc. Announces Receipt of Superior Proposal and Commencement of Cara's Matching Period

MISSISSAUGA, ONTARIO--(Marketwire - Nov. 21, 2011) - Prime Restaurants Inc. ("PRI" or the "Company") (TSX:EAT) announced today that it has received an offer from Fairfax Financial Holdings Limited ("Fairfax") to acquire of all of the issued and outstanding class A limited voting shares (the "Shares") and restricted share units ("RSUs") of the Company by way of a plan of arrangement under Section 182 of the Business Corporations Act (Ontario) (the "Fairfax Offer"). The Fairfax Offer was solicited by the Company during the "go-shop" period permitted under its agreement with Cara Operations Limited ("Cara") described below. The total consideration payable by Fairfax under the Fairfax Offer is approximately $71 million, equivalent to $7.75 per Share or RSU. Under the Fairfax Offer, holders of Shares (the "Shareholders") would receive $7.50 per Share in cash directly from Fairfax on the effective date. In addition, Fairfax would pay approximately $2.2 million to the Company to be used for paying certain expenses associated with the Fairfax Offer (including the Cara Termination Payment described below), with any remainder available to be distributed to Shareholders as a special dividend. The amount of the special dividend to be paid, if any, could not exceed $0.25 per Share and will depend on, among other things, the amount of the Cara Termination Payment and the Company's cash position on the effective date, as determined by the Board. It is possible that no special dividend will be paid. The special dividend, if any, would be an eligible dividend for purposes of the Income Tax Act (Canada) and any applicable provincial taxing statutes.

The Company's board of directors (the "Board") has unanimously determined that the Fairfax Offer is a superior proposal within the meaning of the Cara Acquisition Agreement (defined below) and that Fairfax has the financial ability to execute the transaction.

"After carefully weighing the alternatives, in consultation with our legal and financial advisors, the board of directors has concluded that the Fairfax Offer provides greater shareholder value than Cara's existing offer," said the Company's Chairman Steven Sharpe.

On October 17, 2011, PRI entered into an acquisition agreement (the "Cara Acquisition Agreement") with Cara, whereby Cara agreed to acquire all of the issued and outstanding Shares of the Company by way of plan of arrangement (the "Cara Offer"). Under the Cara Offer, Shareholders would receive a total of $7.00 per Share on the effective date, comprised of $6.75 per Share payable by Cara in cash and $0.25 per Share as a special dividend from PRI. In accordance with the Cara Acquisition Agreement, PRI has notified Cara of the Board's determination that the Fairfax Offer is a superior proposal and that it is prepared to accept the Fairfax Offer. Cara now has five business days during which it may choose to make a proposal which it believes would cause the Fairfax Offer to no longer constitute a superior proposal (a "Matching Proposal"). Alternatively, Cara can terminate the Cara Acquisition Agreement and receive a termination payment (the "Cara Termination Payment").

If Cara makes a Matching Proposal and the Board determines in good faith, after consultation with its financial advisors and outside counsel, that the Fairfax Offer no longer constitutes a superior proposal, the Board will support a revised transaction with Cara. Otherwise, PRI may immediately terminate the Cara Acquisition Agreement, pay the Cara Termination Payment and execute an acquisition agreement with Fairfax in respect of the Fairfax Offer.

The Fairfax Offer provides for, among other things, a non-solicitation covenant on the part of the Company, subject to a customary "fiduciary out" provision, which entitles the Company to consider and accept a superior proposal, subject to the right of Fairfax to match the superior proposal and the payment to Fairfax of a termination payment of $3,500,000.

As a condition of the Fairfax Offer, John Rothschild (the Company's CEO), Nicholas Perpick (the Company's President) and Grant Cobb (the Company's Senior Vice President – Brand Management) have agreed to invest a portion of the proceeds of the Fairfax Offer each would receive into shares of the Company following closing.

If accepted, the Fairfax Offer will be subject to a number of conditions, including (a) approval of Ontario's Superior Court of Justice, (b) approval by the holders of at least 66 2/3% of the votes cast by Shareholders present in person or by proxy at a special meeting of Shareholders, (c) approval by a "majority of the minority" Shareholders, excluding the votes of John Rothschild, Nicholas Perpick and Grant Cobb, together with any parties related to, and any person acting jointly or in concert with, John Rothschild, Nicholas Perpick and Grant Cobb, including Prime Restaurant Holdings Inc., and (d) certain other customary conditions. The Fairfax Offer is not conditional on financing.

About Prime Restaurants Inc.

PRI franchises, owns and operates one of Canada's leading networks of casual dining restaurants and pubs. With such well-respected brands as East Side Mario's, Casey's, Fionn MacCool's, D'Arcy McGee's, Paddy Flaherty's, Tir nan Óg, and Bier Markt, Prime has been delivering quality, value and a superior guest experience for more than thirty years. Prime's class A limited voting shares are listed on the Toronto Stock Exchange under the symbol "EAT".

Forward-Looking Statements

The public communications of PRI often include written or oral forward-looking statements. Statements of this type are included in this news release, and may be included in filings with Canadian securities regulators, or in other communications. Forward-looking statements may involve, but are not limited to, the completion of either of the Cara Offer or Fairfax Offer in accordance with their proposed terms, comments with respect to our objectives for 2011 and beyond, our strategies or planned future actions, and our targets or expectations for our financial performance and condition. All statements, other than statements of historical fact, contained in this news release are forward-looking statements, including, without limitation, statements regarding the future financial position and operations, business strategy, plans and objectives of or involving PRI. Readers can identify many of these statements by looking for words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" and similar words or the negative thereof. Although management believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this news release are made as of the date of this news release. Except as required by applicable securities laws, PRI does not undertake to update any forward-looking statement, whether written or oral, that may make or that may be made, from time to time.

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