Rogers Sugar to Acquire Premier Growth Platform in Maple Syrup

VANCOUVER, BRITISH COLUMBIA--(Marketwired - July 10, 2017) -

THIS NEWS RELEASE IS INTENDED FOR DISTRIBUTION IN CANADA ONLY AND IS NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Key Transaction Highlights

• Unique opportunity to become a global market leader in growing maple syrup industry
• Investment brings an additional natural sweetener platform with attractive organic growth and acquisition opportunities in a fragmented market
• Maple syrup part of a growing worldwide trend towards alternative natural sweeteners
• Complements Rogers Sugar's retail and foodservice relationships
• Opportunity to expand Rogers Sugar's industrial customer relationships and increase applications of maple syrup as a natural sweetener
• Transaction to be financed with a mix of debt, subscription receipts and convertible debentures
• Deal structure and leverage ratios allow Rogers Sugar to pursue further acquisitions
• Transaction expected to provide approximately 10% accretion to Rogers Sugar's free cash flow per share for the year ending September 30, 2018, the first full year following completion of the Transaction

Rogers Sugar Inc. (the "Corporation" or "Rogers Sugar") (TSX:RSI) is pleased to announce the signing of a share purchase agreement with Champlain Financial Corporation Inc. ("Champlain") to acquire L.B. Maple Treat Corporation ("LBMT"), one of the world's largest branded and private label maple syrup bottling and distribution companies, for $160.3 million (the "Transaction"). To finance the Transaction, the Corporation has entered into an agreement with a syndicate of underwriters to raise approximately $110 million of subscription receipts and extendible convertible unsecured subordinated debentures on a bought deal basis as well as an agreement with selected banks in its existing banking syndicate to increase the Corporation's revolving facility by $75 million to $275 million.

"This transaction is significant for Rogers Sugar. It adds product reach in a natural sweetener category with attractive growth, it provides strong stand-alone economics, it will improve Rogers Sugar free cash flow, it should be quickly accretive and is expected to add shareholder value. The management teams of Rogers, LBMT and Champlain have worked very effectively and cooperatively to advance this transaction" said Dallas Ross, Chair of the Board of Rogers and Lantic Inc.

"This sizable and strategic transaction is a game changer for Rogers Sugar. The acquisition of LBMT will allow us to diversify into the large and growing market of maple syrup, a natural sweetener, with one of the leaders in the industry. This new platform will provide us with opportunities to grow organically, leverage sales and operational gains, and look at other acquisitions. The financing structure put in place permits us to maintain a solid balance sheet," said John Holliday, President and Chief Executive Officer of Rogers Sugar and Lantic Inc.

"Rogers Sugar is a perfect fit with L.B. Maple Treat because our organizations already share a number of business partners, and we intend to enhance and expand these essential relationships. As a result of our business combination, our customers and partners will now have access to an extraordinary portfolio of products, distribution and production capabilities across North America, Europe and Asia. Our group remains focused on its vision of offering an unparalleled level of reliability, flexibility, and leadership in the maple syrup industry", said Daniel Cousineau, President of LBMT.

Key Attributes of LBMT and Transaction

Headquartered in Granby, Québec, LBMT has two bottling plants in Québec, the heart of the world's maple syrup harvesting region, and one located in Vermont. The business is supported by distribution centers in Eastern and Western Canada, the U.S. and Australia. For the period ended March 31, 2017, LBMT's products were sold in the U.S. (~50%), Canada (~15%) and internationally (~35%). For the same period, private label and branded products accounted for approximately 85% and 15% of total sales, respectively.

LBMT represents an amalgamation of four independent companies, three of which were acquired over the past year. For the trailing twelve month period ended March 31, 2017, LBMT generated $154 million in revenue and $18.4¹ million in Adjusted Pro Forma EBITDA, which includes approximately $2.9 million of recent customer and operational gains. These gains, which management expects to be fully reflected by September 30, 2018, include newly awarded contracts, procurement efficiencies, redistribution of production lines and reduction of maple syrup losses.

Management of Rogers Sugar expects that the Transaction will bring further organizational capabilities, which it expects to materialize in additional integration gains of approximately $2.1 million, expected to be fully realized by September 30, 2019. The $160.3 million purchase price represents implied acquisition multiples of approximately 8.7x Adjusted Pro Forma EBITDA of $18.4 million and approximately 7.8x Adjusted Pro Forma EBITDA of $20.5 million, assuming the realization of all expected Rogers Sugar's integration gains.

The Transaction is expected to provide approximately 10% accretion to Rogers Sugar's free cash flow per share for the year ending September 30, 2018, the first full year following completion of the Transaction.

Strategic Fit and Business Rationale

• Market leadership position with significant organic and acquisition growth opportunities
  Acquisition allows Rogers Sugar to enter the maple syrup market with a leading position and a premier platform that is well-positioned to benefit from favorable market trends and a fragmented industry.
  
  
• Favorable market growth trends in Canada and internationally
  Worldwide consumption of maple syrup has grown at a high-single digit rate since 2010 as consumer preferences shift towards adopting food & beverages based on natural ingredients and sweeteners.
  
  
• Leading supply chain and distribution network
  Long standing partnerships with 1,400+ producers provide LBMT with the lowest cost of acquisition, premium quality, and no reliance on strategic reserves. Long-lasting relationships with producers have allowed LBMT to develop a market leadership position for organic maple syrup.
  
  
• Strong relationship with the FPAQ who is committed to market development and growth
  Maple syrup bottlers will continue to benefit from the Fédération des producteurs acéricoles du Québec (the "FPAQ") monetary support in market development and growth. FPAQ has spent in excess of $35 million from 2004 to 2015 in promoting and marketing maple syrup.
  
  
• Complements Rogers Sugar's retail, foodservice & industrial relationships
  Opportunity to leverage Rogers Sugar's existing strong retail and foodservice presence, capitalize on Rogers Sugar's current marketing efforts and solidify the Corporation's value-added sweetener portfolio.
  
  
• Accretive to Rogers Sugar's free cash flow per share
  The Transaction is expected to provide approximately 10% accretion to Rogers Sugar's free cash flow per share for the year ending September 30, 2018, the first full year following completion of the Transaction.
  
  

Background on Maple Syrup and The Industry

Maple syrup is organic, and gluten-free. According to various sources, global demand for pure maple syrup has been growing at a compounded annual growth rate of 8% since 2010. Industry growth can be attributed to both new market penetration and increased per capita consumption. The size of the global wholesale market for maple syrup-based products is estimated to be $750 million.

"We are confident that L.B. Maple Treat will continue to have significant success under the existing industry environment which offers price stability through regulation and marketing support to Québec maple syrup producers with FPAQ's strong commitment to continue to support market development and growth," said John Holliday, President and Chief Executive Officer of Rogers Sugar and Lantic Inc.

The existing environment provides maple syrup bottlers like LBMT with a number of advantages including price stability, access to the maple syrup strategic reserve in case of unplanned demand, favorable payment terms which reduce bottlers' working capital requirements, ability to return excess inventory to the FPAQ and traceability of syrup.

Public Offering of Subscription Receipts and Extendible Convertible Debentures

To finance the Transaction, the Corporation has entered into an agreement with a syndicate of underwriters (the "Underwriters") co-led by TD Securities Inc. and BMO Capital Markets, pursuant to which Rogers Sugar will issue on a bought deal basis subscription receipts for gross proceeds of $60 million (the "Subscription Receipts") at a price of $5.90 per Subscription Receipt (the "Equity Offering") and $50 million aggregate principal amount of extendible convertible unsecured subordinated debentures (the "Debentures") at a price of $1,000 per debenture (the "Debenture Offering", and together with the Equity Offering, the "Offering").

Rogers Sugar has granted the Underwriters over-allotment options to purchase up to an additional approximate $9.0 million of Subscription Receipts and up to an additional $7.5 million aggregate principal amount of Debentures, on the same terms and conditions as the Equity and the Debenture Offering, respectively, to cover over-allotments.

The Subscription Receipts and the Debentures will be offered in all provinces of Canada pursuant to a short form prospectus to be filed by Rogers Sugar. In addition, the Subscription Receipts and the Debentures may be offered in the United States in transactions exempt from registration under the U.S. Securities Act of 1933 and applicable state securities laws. Closing of the Offering is expected to occur on or about July 28, 2017.

The Subscription Receipts are exchangeable on a one-for-one basis for common shares of Rogers Sugar ("Common Shares") upon closing of the Transaction for no additional consideration or further action. Should the Transaction closing (the "Transaction Closing") occur before the closing of the Equity Offering, Common Shares, in lieu of Subscription Receipts, will be issued upon closing of the Equity Offering. If the Transaction Closing does not occur on or before 5:00 pm (Montréal time) on October 31, 2017, or the Corporation advises the Underwriters or announces to the public that it does not intend to proceed with the Transaction in such circumstances that may be permitted pursuant to the share purchase agreement entered into in connection with the Transaction (each a "Termination Event" and the date such a Termination Event occurs a "Termination Date"), holders of Subscription Receipts will receive the full purchase price of the Subscription Receipts, together with their pro rata portion of interest earned thereon between the closing of the Equity Offering and the Termination Date.

Holders of Subscription Receipts will receive on the date of the Transaction Closing, in the form of a dividend equivalent payment, an amount equal to any dividends declared by Rogers Sugar and payable to holders of Common Shares of record as of dates from and including the closing date of the Equity Offering to but excluding the date of the Transaction Closing. The first dividend equivalent payment holders of Subscription Receipts will be eligible to receive is in respect of the dividend payable on or about October 20, 2017 to holders of Common Shares of record on September 30, 2017, to the extent that such dividend is declared by the Corporation.

The Debentures will bear interest at a rate of 5.0% per annum, payable semi-annually in arrears on the last day of June and December in each year, commencing December 31, 2017, and will be convertible at the option of the holder into Common Shares at a conversion rate of 121.0654 Common Shares per $1,000 principal amount of Debentures, which is equal to a conversion price of $8.26 per Common Share. The initial maturity date of the Debentures will be the earliest date on which the Termination Event occurs or October 31, 2017, which initial maturity date will automatically be extended to December 31, 2024 upon closing of the Transaction.

Expected Closing

The Transaction is subject to customary closing conditions including regulatory approval and the Transaction Closing is expected to occur in August 2017.

Conference Call

Rogers Sugar will hold a conference call and webcast today at 4:30 pm Eastern Time to discuss the proposed acquisition of LBMT. The Speakers will be John Holliday, President and Chief Executive Officer of Rogers Sugar and Lantic Inc. and Manon Lacroix, Vice President of Finance and Secretary of Lantic Inc. The public is invited to participate by dialing toll-free at 1-877-223-4471 or by accessing the webcast at www.gowebcasting.com/8540. The accompanying slide presentation will also be available at www.lanticinc.com/en/investor-relations. A recording of the conference call will be available for replay 1 hour after the call's completion and until July 17, 2017. To access the recording, dial 1-800-585-8367, conference ID: 44719271.

Availability of Documents

Copies of related documents, such as the preliminary short form prospectus, underwriting agreement and the share purchase agreement will be available under Rogers Sugar's profile on SEDAR (www.sedar.com) as part of its public filings.

Forward-Looking Information

This press release contains forward-looking information within the meaning of applicable securities laws. All information and statements other than statements of historical facts contained in this press release are forward-looking information. These statements are "forward-looking" because they are based on current expectations, estimates, assumptions, risks and uncertainties. These forward-looking statements are typically identified by future or conditional verbs or words such as "may", "could", "will", "outlook", "believe", "anticipate", "estimate", "project", "expect", "intend", "plan" and terms and expressions of similar import. Such forward-looking information may include, without limitation, statements with respect to: the use of proceeds of the Offering and the closing date of the Offering, the expected financial condition and results of Rogers Sugar resulting from the Transaction, the expected date of closing of the Transaction, the expected purchase price of the Transaction, the anticipated benefits of the Transaction, the ability for Rogers Sugar to maintain its current dividend level following the Transaction, the indebtedness to be incurred under the amended credit agreement of Lantic Inc.

The forward-looking information is based on certain key expectations and assumptions made by the Corporation, including, but not limited to, that the conditions of the Transaction will be satisfied, that the Underwriters will fulfil their obligations under the underwriting agreement, that no event entitling the Underwriters to terminate their obligations under the underwriting agreement will occur and that the Offering will be completed successfully, that all of the components of the financing of the Transaction will be available in terms satisfactory to the Corporation, that general market and economic conditions remain consistent with historical experience and management's expectations, that the market prices for the Corporation's and LBMT's products remain at current levels or increase, that the Corporation will timely and successfully integrate LBMT's business in its operations and that the Transaction will achieve the anticipated benefits and operational gains within the expected timeframe, including its impacts on the various financial metrics contained in this press release, that the combined entity resulting from the Transaction will be able to maintain its status as an authorized buyer with the FPAQ, that the combined entity resulting from the Transaction will be able to purchase sufficient quantities of maple syrup from maple syrup producers in North America, including impact due to climate change, that the Corporation will be able to maintain its current dividend level following the Transaction. Although the Corporation believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information since no assurance can be given that they will prove to be correct.

Since forward-looking information addresses future events and conditions, by its very nature it involves inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks related to: the risks related to LBMT's historical financial information and the unaudited pro forma financial information contained in the short form prospectus, the risk that following completion of the Transaction, Rogers Sugar and Lantic Inc. may not be able to successfully integrate LBMT's business with their current business and achieve the anticipated benefits of the Transaction, including operational gains, the risks related to the Transaction not being completed in the anticipated timeframe or at all due to the failure by one or both parties to satisfy the conditions to the closing of the Transaction, including the receipt of all necessary regulatory approvals, the risks related to the information provided by LBMT not being accurate or complete, the unexpected costs or liabilities related to the Transaction, including that the representations and warranties insurance policy in place for the Transaction may not be sufficient to cover such costs or liabilities or that the Corporation may not be able to recover such costs or liabilities from the shareholders of LBMT, the risks related to the regulatory regime governing the purchase and sale of maple syrup in Québec, including the risk that the combined entity resulting from the Transaction may not be able to maintain its authorized buyer status with the FPAQ and the risk that it may not be able to purchase maple syrup in sufficient quantities, the risk related to the production of maple syrup being seasonal and subject to climate change, the risk related to LBMT's reliance on private label customers, the risk related to consumer habits, the risk related to LBMT's business growth being substantially relying on exports and the risks related to international trade in general.

To the extent any forward-looking information in this press release constitutes future-oriented financial information or financial outlooks within the meaning of securities laws, such information is being provided to demonstrate the potential benefits of the Offering and the Transaction and readers are cautioned that this information may not be appropriate for any other purpose. Future-oriented financial information and financial outlooks, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to the risks set out above.

The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. The forward-looking information contained herein is made as of the date of this press release, and the Corporation undertakes no obligation to publicly update such forward-looking information to reflect new information, subsequent or otherwise, unless required by applicable securities laws.

THIS NEWS RELEASE IS NOT AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES AND IS NOT AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OF ROGERS SUGAR, NOR SHALL IT FORM THE BASIS OF, OR BE RELIED UPON IN CONNECTION WITH ANY CONTRACT FOR PURCHASE OR SUBSCRIPTION. THE SUBSCRIPTION RECEIPTS OR DEBENTURES OF ROGERS SUGAR WILL ONLY BE OFFERED IN THE PROVINCES OF CANADA BY MEANS OF THE PROSPECTUS REFERRED TO ABOVE. SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE US SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THESE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION THEREFROM.

Non-IFRS Measures

This press release refers to financial measures that are not recognized under International Financial Reporting Standards (IFRS). While the Corporation, LBMT and certain other issuers measures and evaluate the performance of their respective consolidated operations and business segments with reference to non-IFRS measures, non-IFRS measures do not have any standardized meaning under IFRS and therefore are unlikely to be comparable to similar measures presented by other issuers. The Corporation believes these measures are useful supplemental information that may assist investors in assessing their investment in the Subscription Receipts and Debentures. The following non-IFRS measures are used in this press release: Adjusted Pro Forma EBITDA, Adjusted Pro Forma EBITDA, assuming the realization of all expected Rogers Sugar's integration gains and free cash flow per share. Please refer to the short form prospectus to be filed in all provinces of Canada by Rogers Sugar for reconciliation of the non-IFRS measures used in this press release.

About Rogers Sugar Inc.

Rogers Sugar is a corporation established under the laws of Canada. The Corporation holds all of the common shares of Lantic Inc. Lantic Inc. operates cane sugar refineries in Montreal, Québec and Vancouver, British Columbia, as well as the only Canadian sugar beet processing facility in Taber, Alberta. Lantic Inc.'s sugar products are marketed under the "Lantic" trademark in Eastern Canada, and the "Rogers" trademark in Western Canada and include granulated, icing, cube, yellow and brown sugars, liquid sugars and specialty syrups.

About L.B. Maple Treat Corporation

Recognized as a pioneer in the maple syrup industry, LBMT began serving customers in 1975 with a vision of offering an unparalleled level of reliability, flexibility, and customer service. Our customers and partners have access to an extraordinary portfolio of products, distribution and production capabilities across North America, Europe and Asia, with the help of our 160 employees. LBMT's crops are carefully managed by more than 1,400 maple syrup producers that are dedicated to harvesting the highest quality of pure maple syrup. The company owns the L.B. Maple Treat, Highland Sugarworks and Great Northern brands.

¹ Calculated as pro-forma EBITDA of $15.5 million for the last twelve months ended March 31, 2017 plus recent customer and operational gains of $2.9 million for a total of $18.4 million, excluding projected one-time costs