Dollarama to Acquire Australian Discount Retailer The Reject Shop

Dollarama to acquire Australian discount retailer The Reject Shop - March 26, 2025 Press Release - PR Newswire / Press Release - PDF

Strategic international expansion into Australia with a solid initial foothold, building on Dollarama’s proven
track record in Canada and Latin America

MONTREAL, March 26, 2025 /PRNewswire/ - Dollarama Inc. (TSX: DOL) ("Dollarama" or the "Corporation") announced today that it has entered into a definitive agreement to acquire all the issued and outstanding ordinary shares of The Reject Shop Limited (ASX: TRS) ("The Reject Shop"), the largest discount retailer in Australia, for an all cash consideration of A$6.68 per ordinary share (the "Transaction"), which values The Reject Shop's ordinary share capital at approximately A$259 million (C$233 million[1]). The Transaction will be implemented by way of an Australian scheme of arrangement (the "Arrangement"). The Reject Shop Board of Directors unanimously recommends that The Reject Shop's shareholders vote in favour of the Arrangement[2].

"Identifying the right opportunity to expand into new geographies and build on our track record as a leading value retailer in Canada and Latin America has been a key objective for the Dollarama team. With this acquisition, we have a unique and compelling opportunity to bring our differentiated value proposition to a new market which presents a clear path for growth through an established platform," said Neil Rossy, President and Chief Executive Officer of Dollarama.

"We look forward to embarking on this new chapter of Dollarama's international growth journey with the local management team and its more than 5,000 employees across Australia. Together, we will leverage our core strengths as value retailers with best-in-class merchandising, sourcing and operational expertise. With compatible cultures and values, we are confident that the business will have an exciting future as Dollarama's new and complementary growth platform," Neil Rossy concluded.

Headquartered in Melbourne, The Reject Shop is Australia's largest discount retailer with a store network of more than 390 locations across the country. Its offering includes private-label and national brand products. The Reject Shop generated consolidated sales of A$866 million (C$779 million[1]) for the last twelve-month period ended December 29, 2024, and employs over 5,000 people.

Transaction Details

The cash consideration of A$6.68 per ordinary share represents a 108% premium to The Reject Shop's 20-day volume-weighted average price of A$3.21. The per share consideration implies an equity value of approximately A$259 million (C$233 million[1]) and an enterprise value of approximately A$189 million (C$170 million[1]) on a pre-AASB 16 basis or approximately A$421 million (C$379 million[1]) on a post-AASB 16 basis. The enterprise value implies a 8.9x multiple on The Reject Shop's EBITDA (pre-AASB 16) (and a 3.3x multiple on post-AASB 16 EBITDA) for the last twelve-month period ended December 29, 2024.

Under the Arrangement, The Reject Shop may, subject to the terms of the definitive agreement, pay a fully franked special dividend of up to A$0.77 per share, with the amount of that dividend to be deducted from the cash consideration to be paid by Dollarama under the Arrangement. The cash consideration to be paid by Dollarama under the Arrangement will not be reduced by the fully franked interim dividend of A$0.12 per share which was determined on February 20, 2025 and is due to be paid by The Reject Shop on May 1, 2025.

The purchase price will be funded through a mix of cash on hand and available liquidities under Dollarama's revolving credit facility. The Transaction is expected to have a minimal immediate impact to Dollarama's net earnings per share and to have a limited impact on its pro forma adjusted net debt-to-EBITDA ratio upon closing of the Transaction.

Plan for the Business

Dollarama intends to work with The Reject Shop local management team to execute its strategic vision for the business, leveraging Dollarama's retail, merchandising and sourcing expertise, and store and logistics operational know-how.

Already Australia's largest discount retailer, with a well-located store network spanning every Australian state, The Reject Shop provides Dollarama with a strong foundation for future expansion. Dollarama believes there is an opportunity to grow The Reject Shop's store network in Australia from more than 390 locations as of today to approximately 700 stores by 2034.

Transaction Approvals and Closing

The Transaction will be implemented by way of an Australian scheme of arrangement and is subject to customary closing conditions, including, among other things, an independent expert concluding that the scheme of arrangement is in the best interests of The Reject Shop shareholders, The Reject Shop shareholders' approval, and the receipt of necessary regulatory and court approvals, with closing expected to occur in the second half of 2025.

The definitive agreement of the Arrangement contains customary exclusivity covenants on the part of The Reject Shop, subject to customary "fiduciary out" qualifications as well as "right to match" provisions in favour of Dollarama in the context of any superior proposal. A break fee would be payable by The Reject Shop to Dollarama in certain circumstances, including if Dollarama does not exercise its right to match.

The Reject Shop Board of Directors unanimously recommends that The Reject Shop shareholders vote in favour of the Arrangement[2]. In addition, The Reject Shop has announced that their largest shareholder Kin Group, who controls approximately 20.8% of the ordinary shares outstanding at the date of the announcement, has informed The Reject Shop Board of its intention to vote in favour of the Arrangement[2].

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About Dollarama

Founded in 1992 and headquartered in Montréal, Quebec, Canada, Dollarama (TSX:DOL) is a recognized Canadian value retailer offering a broad assortment of consumable products, general merchandise and seasonal items both in-store and online. With stores in all Canadian provinces and two territories, our 1,601 locations across Canada provide customers with compelling value in convenient locations, including metropolitan areas, mid-sized cities and small towns. Select products are also available, by the full case only, through our online store at www.dollarama.com. Our quality merchandise is sold at select fixed price points up to C$5.00.

Dollarama also owns a 60.1% interest in Dollarcity, a growing Latin American value retailer. Dollarcity offers a broad assortment of consumable products, general merchandise and seasonal items at select, fixed price points up to US$4.00 (or the equivalent in local currency) in 588 conveniently located stores in Colombia, Guatemala, El Salvador and Peru.

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[1] All amounts in Canadian dollars are calculated using an exchange rate of A$1.00 = C$0.90.

[2] In the absence of a superior proposal and subject to an Independent Expert concluding (and continuing to conclude) that the Arrangement is in the best interests of The Reject Shop shareholders.