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Liquor Stores Exiting the Lower 48 U.S. States

November 20, 2017

Sales of U.S. assets will place focus directly on core Alberta, B.C. and Alaska markets

EDMONTON, ALBERTA, November 20, 2017 – Liquor Stores N.A. Ltd. (the “Company” or “Liquor Stores”) (TSX: LIQ) today announced that it has acted on the strategy endorsed by shareholders in June of refocussing on its core markets of Alberta, B.C. and Alaska by selling its 15 Liquor Barn retail stores in the state of Kentucky and entering into negotiations for the sale of its 51% interest in Birchfield Ventures LLC (“Birchfield”) which owns two stores in New Jersey.

The completion of both of these transactions will result in the reduction of the Company’s long‐ term debt levels by up to $47 million (US$ 37 million), along with extinguishing its obligation to purchase the remaining 49% interest in Birchfield as early as January 1, 2019, currently valued at $12.4 million. As a result of these transactions, the Company will also not need to fund the significant renovation costs that these stores would have required.

The Company is also currently in discussions with a third party about the sale of its store in Norwalk, Connecticut (the “Connecticut transaction”).

Liquor Stores will also close its U.S. head office and will no longer have any U.S.‐based executives or senior management. The operating and administrative expenses saved from these initiatives are expected to nearly offset the net cash flow contributions of the above‐mentioned U.S. assets based on the Company’s projections for these businesses.

“These transactions are strong indicators of the Board and management’s determination to implement the strategic plan which our shareholders endorsed in June by electing six new directors” said Board Chair Derek H. Burney. “Director James Burns has spearheaded the negotiating and closing of these transactions as well as the other initiatives to create shareholder value as Chair of the Special Committee on Business Transformation. The speed at which our objectives have been accomplished is a testament to Mr. Burns’ full‐time efforts on behalf of the Company since the Board changes. I would also like to commend Director Peter Lynch for his efforts working with Mr. Burns.”

Details of the transactions

The Company sold the 15 stores in Kentucky to Blue Rose Spirits LLC, a subsidiary of holding company Blue Equity, LLC (the “Kentucky Transaction”). Blue Equity is a Louisville, Kentucky
based private equity firm. The Kentucky Transaction generated gross proceeds of approximately $33.4 million (US$26.15 million) on closing, subject to (i) final working capital adjustments to be determined subsequent to closing, and (ii) up to an additional $4.2 million (US$3.3 million) payable in March 2021 pursuant to an earn‐out arrangement, subject to the level of sales generated over the calendar years 2018 to 2020, inclusive.

The Company is also finalising the sale of its indirect 51% interest in Birchfield, which operates two stores in New Jersey, for anticipated gross proceeds of approximately $3.8 million (US$3.0 million) (the “Birchfield Transaction”). The Birchfield Transaction is expected to include (i) the settlement of a loan provided by the Company to Birchfield of approximately $5.5 million (US$4.3 million), which will result in CAD$9.3 million cash proceeds to the Company upon completion and (ii) the cancellation of the put liability described above.

Readers are cautioned that the terms of the Birchfield Transaction are being finalised and are not conclusive. Accordingly, there is no assurance that a definitive agreement in connection with the Birchfield Transaction will be agreed to or that a sale of the of the Company’s 51% interest in Birchfield will be completed. Further, if the Birchfield or Connecticut Transactions are not completed, the Company may elect to pursue a sale with another party or not to sell its interest at this time. Completion of the Birchfield or Connecticut Transactions will require, amongst other things, the approval of the transfer and/or amendments to liquor licenses by the applicable regulatory authorities.

“The Board is very excited about our prospects going forward with our focus solely on our core markets to maximize our shareholder value going forward,” stated Mr. Burney.

ABOUT LIQUOR STORES N.A. LTD.

Liquor Stores N.A. Ltd. operates 233 retail liquor stores. The Company’s common shares and convertible subordinated debentures trade on the Toronto Stock Exchange under the symbols “LIQ” and “LIQ.DB.B”, respectively.

To read the full press release, click HERE

 

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