Sleep Country Files Management Proxy Circular for Special Meeting of Shareholders and Announces Receipt of Interim Order and Competition Act Approval

Board of Directors Recommends that Shareholders vote FOR the Arrangement

/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

TORONTO, Aug. 19, 2024 /CNW/ – Sleep Country Canada Holdings Inc. (“Sleep Country” or the “Company”) (TSX: ZZZ), is pleased to announce that it has filed and is in the process of mailing the management proxy circular (the “Circular”) and related materials for the special meeting (the “Meeting”) of the Company’s shareholders (the “Shareholders”) to be held on September 18, 2024, to approve the previously announced plan of arrangement under the Canada Business Corporations Act (the “Arrangement”), pursuant to which 16133258 Canada Inc. (the “Purchaser”), a newly-formed and wholly-owned subsidiary of Fairfax Financial Holdings Limited (“Fairfax”) (TSX: FFH) (TSX: FFH.U) will acquire all of the issued and outstanding common shares of Sleep Country for C$35.00 in cash per common share (the “Consideration”), all as more particularly described in the Circular.

Unanimous Recommendation of the Board of Directors and Benefits of the Arrangement to Shareholders

The Arrangement was reviewed and overseen by a Special Committee of the Board of Directors (the “Special Committee”). The Board of Directors, on the unanimous recommendation of the Special Committee, in consultation with its financial and legal advisors, and following consideration of a number of factors, unanimously determined that the Arrangement is fair to Shareholders and is in the best interests of Sleep Country, and recommended that Shareholders vote in favour of the Arrangement at the Meeting. The factors considered by the Board of Directors and the Special Committee are detailed in the Circular and include:

Significant Premium. The Consideration offered to Shareholders under the Arrangement represents a 34% premium to the 20-day volume-weighted average price of the common shares on the Toronto Stock Exchange for the period ending on July 19, 2024, and a 28% premium to the closing price on July 19, 2024, the last trading day prior to the announcement of the Arrangement.

Certainty of Value and Liquidity. The Consideration offered to Shareholders under the Arrangement is all cash, which allows Shareholders to immediately realize value for all of their investment. It also provides certainty of value and immediate liquidity in comparison to the risks and uncertainties to achieving equivalent value for the common shares by remaining a public company.

Compelling Value Relative to Strategic Alternatives. The Special Committee and the Board of Directors concluded, after consultation with the Company’s management and financial advisors, that the value offered to Shareholders under the Arrangement is more favourable to Shareholders than the value that could potentially result from other alternatives reasonably available to the Company, including a continuation of the status quo as a standalone entity, within a reasonably foreseeable timeframe.

Additional information related to the benefits and related risks of the Arrangement are contained in the Circular.

Interim Order

The Company is pleased to also announce that the Company has been granted an interim order (the “Interim Order”) from the Ontario Superior Court of Justice (Commercial List) (the “Court”) authorizing various matters, including the holding of the Meeting and the mailing of the Circular. The Meeting is to be held in accordance with the terms of the Interim Order.

Competition Act Approval

The Company is also pleased to announce that on August 5, 2024, the Commissioner of Competition under the Competition Act (Canada) issued an advance ruling certificate under Section 102 of the Competition Act (Canada), which allows the parties to complete the Arrangement as of the date of the advance ruling certificate and constitutes the Competition Act Approval for the purposes of the arrangement agreement dated July 21, 2024 among the Company, the Purchaser and Fairfax (the “Arrangement Agreement”).

Meeting and Circular

The Meeting will be held as a virtual-only meeting conducted by live webcast at https://web.lumiagm.com/218125307 (password: sleep2024) on September 18, 2024 at 10:00 a.m. (Toronto time). Proxies must be received by the Company’s transfer agent, Odyssey Trust Company, either online at https://login.odysseytrust.com/pxlogin, or in person, or by mail or courier, at Trader’s Bank Building, 702 – 67 Yonge Street, Toronto, ON, M5E 1J8, not later than 10:00 a.m. (Toronto time) on September 16, 2024 (or no later than 48 hours, excluding Saturdays, Sundays and statutory holidays in the city of Toronto, before any reconvened meeting if the Meeting is adjourned or postponed). If a Shareholder holds its common shares through an investment advisor, broker, bank, trust company, custodian, nominee, clearing agency or other intermediary, a completed voting instruction form should be deposited in accordance with the instructions printed on the form.

At the Meeting, Shareholders will be asked to consider and, if deemed advisable, pass a special resolution approving the Arrangement. In order to be effective, the Arrangement will be subject to the approval of (i) at least 66 2/3% of the votes cast by Shareholders present in person virtually or represented by proxy at the Meeting; and (ii) a simple majority of the votes cast by Shareholders present in person virtually or represented by proxy at the Meeting, excluding votes from certain Shareholders, as required under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions. In addition to Shareholder approval, the Arrangement is subject to approval by the Court as well as the satisfaction of certain other customary closing conditions.

The Circular provides important information regarding the Arrangement and related matters, including the background to the Arrangement, the reasons for recommendation of the Special Committee and the Board of Directors, voting procedures and how to virtually attend the Meeting. Shareholders are urged to read the Circular and its appendices carefully and in their entirety. The Circular is being mailed to Shareholders in compliance with applicable laws and the Interim Order. The Circular is available under the Company’s issuer profile on SEDAR+ at www.sedarplus.ca as well as on the Company’s website at https://www.sleepcountrypoa.com/.

Shareholder Questions and Assistance

If you have any questions or need assistance in your consideration of the Arrangement or with the completion and delivery of your proxy, please contact the Company’s strategic advisor, Kingsdale Advisors, at 1-888-518-1565 (toll-free in North America) or 1-416-623-2513 (text and call enabled outside of North America) or by email to [email protected]. 

Advisors and Counsel

CIBC Capital Markets is acting as financial advisor and Davies Ward Phillips & Vineberg LLP is acting as legal advisor to the Special Committee and the Company. Blair Franklin Capital Partners is acting as financial advisor to the Special Committee, including providing a fixed-fee fairness opinion regarding the Arrangement. Torys LLP is acting as legal advisor to Fairfax.

Forward-Looking Information

Certain information in this news release contains forward-looking information and forward-looking statements, which reflect our current view with respect to anticipated events as well as the Company’s objectives, plans, goals, strategies, outlook, results of operations, financial and operating performance, prospects and opportunities. Wherever used, the words “may”, “will”, “anticipate”, “expect”, and similar expressions, identify forward-looking information and forward-looking statements. Forward-looking information herein includes statements regarding: the reasons for, and the anticipated benefits of, the Arrangement; the timing for mailing of the Circular; the timing of various steps to be completed in connection with the Arrangement, including the anticipated dates for the holding of the Meeting; the timing and effects of the Arrangement; the solicitation of proxies by the Company and Kingsdale Advisors, the Company’s strategic advisor; the ability of the parties to satisfy the other conditions to the closing of the Arrangement; and other statements that are not historical facts. Forward-looking information and forward-looking statements should not be read as guarantees of future events, performance or results, and will not necessarily be accurate indications of whether, or the times at which, such events, performance or results will be achieved. All the information in this news release containing forward-looking information or forward-looking statements is qualified by these cautionary statements.

Forward-looking information and forward-looking statements are based on information available to Sleep Country at the time they are made, underlying estimates, opinions and assumptions made by Sleep Country and management’s current good faith belief with respect to future strategies, prospects, events, performance and results, and are subject to inherent risks and uncertainties surrounding future expectations generally. Such risks and uncertainties include, but are not limited to, those described in the Circular as well as the Company’s management’s discussion and analysis (“MD&A”) for Q2 2024 under the sections “Risk Factors” and those described in the Company’s 2023 annual information form (the “AIF”) filed on March 6, 2024, both of which can be accessed under the Company’s issuer profile on SEDAR+ at sedarplus.ca. In addition, forward-looking information in this news release is subject to a number of additional risks and uncertainties, including: the possibility that the Arrangement will not be completed on the terms and conditions, or on the timing, currently contemplated, and that it may not be completed at all, due to a failure to obtain or satisfy, in a timely manner or otherwise, required Shareholder, regulatory and Court approvals and other conditions of closing necessary to complete the Arrangement or for other reasons; failure to complete the Arrangement could negatively impact the price of the common shares or otherwise affect the business, financial condition or results of the Company; the Arrangement Agreement may be terminated by the parties in certain circumstances; the termination fee under the Arrangement Agreement may discourage other parties from attempting to acquire the Company or may have an adverse effect on the Company; the ability of the Board of Directors to consider and approve, subject to compliance with the terms and conditions of the Arrangement Agreement, a superior proposal for the Company; significant transaction costs or unknown liabilities; while the Arrangement is pending, the Company is restricted from taking certain actions; the possibility of adverse reactions or changes in business relationships resulting from the announcement or completion of the Arrangement; certain of the Company’s directors and officers may have interests in the Arrangement that are different from those of Shareholders; the exercise of dissent rights by Shareholders may result in the Arrangement not being completed; risks related to tax matters; the failure to realize the expected benefits of the Arrangement; risks relating to the Company’s ability to retain and attract key personnel during the interim period; credit, market, currency, operational, liquidity and funding risks generally and relating specifically to the Arrangement, including changes in economic conditions, interest rates or tax rates; the Company and the Purchaser may be subject to legal claims, securities class actions, derivative lawsuits and other claims; and other risks inherent to the business carried out by the Company and/or factors beyond its control which could have a material adverse effect on the Company or its ability to complete the Arrangement. Additional risks and uncertainties not presently known to the Company or that the Company currently believes to be less significant may also adversely affect the Company.

The Company cautions that the list of risk factors and uncertainties described above and in the Circular, the MD&A for Q2 2024 and the AIF are not exhaustive and that should certain risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual strategies, prospects, events, performance and results may vary significantly from those expected. There can be no assurance that the actual strategies, prospects, results, performance, events or activities anticipated by the Company will be realized or even if substantially realized, that they will have the expected consequences to, or effects on, the Company. Readers are urged to consider the risks, uncertainties, and assumptions carefully in evaluating the forward-looking information and forward-looking statements and are cautioned not to place undue reliance on such information and statements. The Company does not undertake to update any such forward-looking information or forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable laws.

About Sleep Country

Sleep Country is Canada’s leading specialty sleep retailer with a purpose to transform lives by awakening Canadians to the power of sleep. Sleep Country operates under the retailer banners; Sleep Country Canada, Dormez-vous, the rest, Endy, Silk & Snow, Hush and Casper Canada. The Company has omnichannel and eCommerce operations, including 307 corporate-owned stores and 18 warehouses across Canada. Recognized as one of Canada’s Most Admired Corporate Cultures in 2022 by Waterstone Human Capital, Sleep Country is committed to building a company culture of inclusion and diversity where differences are embraced and valued. The Company actively invests in its sleep ecosystem, innovative products, world-class customer experience, communities and its people. For more information about Sleep Country, please visit https://ir.sleepcountry.ca.

About Fairfax

Fairfax is a holding company which, through its subsidiaries, is primarily engaged in property and casualty insurance and reinsurance and the associated investment management.

SOURCE Sleep Country Canada Holdings Inc. Investor Relations