Announcement • Jun 01
Trilogy Retail Holdings Inc. and Trilogy Investments L.P. completed the acquisition of remaining 39.4% stake in Indigo Books & Music Inc. (TSX: IDG). Trilogy Retail Holdings Inc. and Trilogy Investments L.P. entered into a non-binding proposal to acquire remaining 39.4% stake in Indigo Books & Music Inc. (TSX: IDG) for CAD 24.5 million on February 1, 2024. Trilogy Retail Holdings Inc. and Trilogy Investments L.P. entered into a definitive arrangement agreement to acquire remaining 39.4% stake in Indigo Books & Music Inc. on April 2, 2024. As reported, Trilogy will acquire remaining stake in IDG for CAD 2.25 per share in cash. The Board will review the Proposal to determine the course of action that it believes is in the best interest of the Company. Under the arrangement agreement, Trilogy will acquire remaining stake in IDG for CAD 2.50 per share in cash for a total consideration of CAD 29.8 million. Trilogy, together with its affiliates and joint actors, beneficially owns, or exercises control or direction over, an aggregate of 16,774,665 common shares of IDG.
The consummation of the transaction is subject to (i) the approval of at least two-thirds of votes cast by IDG’S shareholders (including Trilogy, its affiliates and joint actors) at a special meeting of shareholders; (ii) the approval of a simple majority of the votes cast by Minority Shareholders at such meeting; and (iii) court approval. The IDG Board has established a special committee of independent directors to evaluate the proposal and any viable alternatives that may be available to IDG and make recommendations to the Board. The Special Committee unanimously recommended that IDG Board approve the transaction. The IDG Board having received the unanimous recommendation of the Special Committee, unanimously determined that the transaction is in the best interests of IDG and fair to the minority shareholders and recommends that minority shareholders vote in favour of the transaction. On April 30, 2024, Ontario Superior Court of Justice (Commercial List) has granted an interim order in connection with arrangement. The special meeting of IDG shareholders will be held on May 27, 2024. The transaction is expected to close in June 2024. As of May 27, 2024, Indigo Shareholders approved the arrangement with Trilogy. Assuming that the remaining conditions are satisfied, it is expected that the Arrangement will be effected on or about May 31, 2024.
Alex Moore of Blake, Cassels & Graydon LLP is acting as legal counsel to the IDG Special Committee. BMO Capital has been retained by the Special Committee as independent valuator and financial advisor. BMO also delivered an oral opinion to the Special Committee. John Emanoilidis of Torys LLP is acting as legal counsel to IDG. Emmanuel Pressman and Alex Gorka of Osler, Hoskin & Harcourt LLP are acting as legal counsel to Trilogy. TSX Trust Company acted as the depositary and transfer agent and registrar to IDG. Morrow Sodali (Canada) Ltd. acted as proxy solicitation agent to IDG for a fees of up to CAD 50,000 for such services, in addition to reimbursing certain out-of-pocket expenses. The terms of the Engagement Letter provide for payment to BMO of a fixed fee of CAD 250,000 upon delivery of BMO’s preliminary valuation analysis; and a fixed fee of CAD 450,000 upon delivery of the Formal Valuation and Fairness Opinion.
Trilogy Retail Holdings Inc. and Trilogy Investments L.P. completed the acquisition of remaining 39.4% stake in Indigo Books & Music Inc. (TSX: IDG) on May 31, 2024. Major Estimate Revision • Feb 15
Consensus EPS estimates fall by 33% The consensus outlook for earnings per share (EPS) in fiscal year 2024 has deteriorated. 2024 revenue forecast decreased from CA$949.4m to CA$934.8m. Losses expected to increase from CA$1.55 per share to CA$2.06. Specialty Retail industry in Canada expected to see average net income growth of 49% next year. Consensus price target down from CA$3.40 to CA$3.20. Share price fell 2.4% to CA$2.06 over the past week. Reported Earnings • Feb 10
Third quarter 2024 earnings released: EPS: CA$0.36 (vs CA$1.23 in 3Q 2023) Third quarter 2024 results: EPS: CA$0.36 (down from CA$1.23 in 3Q 2023). Revenue: CA$370.6m (down 12% from 3Q 2023). Net income: CA$9.98m (down 71% from 3Q 2023). Profit margin: 2.7% (down from 8.1% in 3Q 2023). The decrease in margin was driven by lower revenue. Revenue is forecast to stay flat during the next 2 years compared to a 7.6% growth forecast for the Specialty Retail industry in Canada. Over the last 3 years on average, earnings per share has increased by 23% per year but the company’s share price has fallen by 24% per year, which means it is significantly lagging earnings. 
