Gibraltar Growth Corporation Announces the Proposed Acquisition of LXR Produits de Luxe International as its Qualifying Acquisition

Transaction Introduces LXR as a Publicly-Listed Company and Creates a Platform to Further Develop LXR's Position as a Leading International Omni-Channel Retailer of Branded Vintage Luxury Goods

  • LXR offers a curated assortment of pre-owned and authenticated luxury products, primarily handbags and accessories, from iconic brands such as Hermès, Louis Vuitton, Gucci and Chanel, among others
  • LXR is well-positioned in this large and fast-growing market
  • LXR has a history of rapid growth and strong financial performance—retail store count increased from 5 in 2014 to 46 at the end of 2016 while revenue has grown at 30% p.a.
  • With under 5% of its revenue coming from e-Commerce, LXR has a significantly underpenetrated digital opportunity
  • LXR has an expansion plan targeting a network of over 500 stores with projected Run-Rate revenue of over $400 million and EBITDA of over $50 million by 2021
  • LXR will continue to be led by its talented founders Fred Mannella and Kei Izawa, and will be supported by a strong board of directors and Gibraltar Growth's extensive experience in branding and retailing
  • Gibraltar Growth will acquire LXR for $82.5 million
  • Assuming redemption levels of 50% and 100%, the founders of LXR will own 23% and 35% of the resulting company, respectively
  • Gibraltar Growth has secured gross proceeds of $25 million pursuant to a private placement, resulting in a fully-funded acquisition that is not dependent on a minimum redemption level, and has secured the support of over 52% of its shareholders for the acquisition, excluding the Sponsor
  • Completion of the transaction is expected in June 2017
  • Investor conference call scheduled for Tuesday, April 18, 2017 at 12:45 p.m. EST

TORONTO, April 13, 2017 /CNW/ - Gibraltar Growth Corporation (TSX: GBG.A, GBG.WT) ("Gibraltar Growth") is pleased to announce its proposed qualifying acquisition (the "Acquisition") of 100% of Montreal-based LXR Produits de Luxe International Inc. ("LXR" or the "Company"). The Acquisition will introduce LXR as a publicly-listed company.

LXR is a rapidly growing, international omni-channel retailer of branded vintage luxury handbags and accessories. LXR sources and authenticates high quality pre-owned products and sells them through: a retail network of stores located in major department stores in Canada, the United States and Europe; wholesale operations primarily in the United States; and its own e-Commerce website, www.lxrco.com. LXR offers pre-owned, or vintage products from iconic luxury brands such as Hermès, Louis Vuitton, Gucci and Chanel, among others, at attractive prices and seeks to appeal to the aspirational lifestyle needs of women of all ages.  

LXR was founded in 2010 as a private label wholesaler of vintage luxury products to discount retailers across North America. In 2014, LXR launched its first retail stores based on its unique store-within-store model that partners with major department store retailers and emphasizes the LXR brand as part of a curated shopping experience. LXR's retail activities expanded rapidly from Canada in 2014 to the United States in the same year and, most recently, to Germany. At the end of 2016, LXR's retail network of 46 store locations extended across five retail partner department store banners. LXR launched its e-Commerce site in 2013, and at the end of 2016, had over 70,000 active subscribers and sold products to online customers in over 13 countries. LXR's vision is to become the leading global omni-channel retailer of branded pre-owned vintage luxury products.

LXR is well-positioned in the large and fast-growing pre-owned vintage luxury goods market. Gibraltar Growth and LXR believe that the size of the pre-owned vintage segment is anchored by the substantial size of the global primary market for luxury personal goods. Gibraltar Growth and LXR also believe that the growth prospects and attractiveness of the pre-owned vintage luxury market are favourable given the greater affordability and accessibility of pre-owned luxury goods, the increased social acceptance of 're-use' and affinity of consumers to extend product lifecycles.

LXR's unique store-within-store model has been successfully deployed in partnership with major department store retailers. Since 2014, LXR's net revenue has grown from $12.9 million to $21.9 million in 2016, representing a CAGR of 30%, and Adjusted EBITDA grew from $0.5 million to $1.1 million, representing a CAGR of 49%. LXR has been EBITDA positive since its inception in 2010. In 2016, approximately 74% of LXR's revenue was generated in the United States, 21% in Canada and 5% in Germany, and LXR's e-Commerce channel contributed under 5% of total net revenue.

LXR plans to continue to rapidly grow its retail network across North America, particularly in the United States, and internationally. LXR believes it has the opportunity to expand its retail network to over 500 stores by the end of 2021 based on management's estimate of achieving reasonable penetration of the targeted network of prospective retail partners and including the anticipated roll-out of 20 to 25 free standing flagship stores under the LXR brand in certain geographies.

Following the closing of the Acquisition (the "Closing"), LXR will continue to be led by its founders Fred Mannella and Kei Izawa, along with its current management team. Collectively, assuming redemption levels of 50% and 100%, Fred Mannella and Kei Izawa will own 23% and 35% of the resulting company, respectively.

Gibraltar Growth will have ongoing involvement with LXR through its engagement on the board. Cam di Prata, current Co-Chief Executive Officer and director of Gibraltar Growth, will assume the role of Executive Chairman and will continue as a director of the resulting company. Joe Mimran, current Chairman, Co-Chief Executive Officer and director of Gibraltar Growth, will continue as a director of the resulting company and will lead the Company's International Expansion Committee, a board committee focused on executing LXR's five-year growth plan. In addition to Fred Mannella and Kei Izawa, the other board members will include Javier San Juan, current Vice-Chairman and Director of Gibraltar Growth, Steven Goldsmith, Chief Executive Officer and President, Brookstone Inc., and Luc Mannella, Managing Partner, Mannella, Gauthier, Tamaro and Associates. It is expected that up to an additional two independent directors will be added following the Closing. Jeremy Stepak, Gibraltar Growth's current Chief Financial Officer and Corporate Secretary, will act as Chief Financial Officer of the resulting company on an interim basis.

Summary of the Acquisition

Gibraltar Growth and the shareholders of LXR (the "Vendors") entered into a purchase agreement (the "Purchase Agreement") dated April 13, 2017 which provides for the acquisition by Gibraltar Growth of all the issued and outstanding shares of LXR for an aggregate purchase price of $82.5 million, subject to adjustments and payable in accordance with the terms of the Purchase Agreement. As a result of the Acquisition, LXR will become a wholly-owned subsidiary of Gibraltar Growth.

Pursuant to the Purchase Agreement, Gibraltar Growth will effectively assume indebtedness (net of cash on hand) of LXR (including the redemption and cancellation of certain outstanding preferred shares of LXR), which totals approximately $6.4 million as at December 31, 2016, and based on this amount of net indebtedness, will issue to the Vendors and reserve for optionholders an aggregate 7,607,347 Class B Shares of Gibraltar Growth at $10.00 per Class B Share at Closing. The actual number of Class B Shares to be issued and reserved for issuance is subject to adjustments, including for the actual amount of net indebtedness at Closing as well as customary working capital adjustments. In addition, based on the number of Class A Restricted Voting Shares redeemed, in lieu of up to 500,000 Class B Shares, Gibraltar Growth will instead pay up to a maximum of $5.0 million to Frederick Mannella and Kei Izawa in cash at Closing.

At closing, Gibraltar Growth will have access to the net cash (if any) remaining from the proceeds of its IPO less any amounts used to settle redemptions and to the proceeds of a $25.0 million private placement of 2,500,000 Class B Shares at $10.00 per Class B Share (the "Private Placement"), effected in connection with the Acquisition. Gibraltar Growth's Sponsor, and certain business associates of Gibraltar & Company, the parent company of the Sponsor, will subscribe for 300,800 Class B Shares at $10.00 per Class B Share as part of the Private Placement, for gross proceeds of over $3.0 million. The Acquisition constitutes Gibraltar Growth's qualifying acquisition under Part X of the TSX Company Manual.

The Vendors under the Purchase Agreement include Gibraltar & Company, the parent company of the Sponsor, which currently owns approximately 8.1% of LXR, and Gibraltar Ventures Fund One Limited Partnership, a venture capital fund under the management of Gibraltar & Company, which owns approximately 11.0% of LXR, and an officer of Gibraltar & Company, who owns 0.2% of LXR. As a result of the foregoing relationships, the Acquisition constitutes a related party transaction under Multilateral Instrument 61-101 ("MI 61-101"). Gibraltar Growth has applied for exemptive relief from the Ontario Securities Commission and the Autorité des marchés financiers to allow it to include the Class A Restricted Voting Shares in calculating its market capitalization for purposes of qualifying for an exemption from the requirements of MI 61-101. If exemptive relief is granted, Gibraltar Growth expects to be exempt from the requirements of MI 61-101. There can be no assurance that exemptive relief will be granted.  Pursuant to the rules of the Toronto Stock Exchange (the "TSX"), the Acquisition is required to be approved by a majority of the shareholders of Gibraltar Growth, excluding the Sponsor (the "Disinterested Shareholders"). The transaction is subject to the satisfaction of certain conditions including regulatory and TSX approvals, as well as certain third party consents.

The transaction is subject to Gibraltar Growth shareholder approval. Gibraltar Growth has secured the support of over 52% of Disinterested Shareholders for the acquisition, resulting in increased transaction certainty. All of the directors and senior officers of Gibraltar Growth, along with the Sponsor, have agreed to support the Acquisition.

A copy of the Purchase Agreement, as well as an investor presentation, will be filed on SEDAR shortly. The Boards of Directors of each of Gibraltar Growth and LXR have approved the transaction and determined that it is fair and in the companies' respective best interests. Completion of the Acquisition is currently expected to occur in June 2017. Following the Closing, it is Gibraltar Growth's intention to rename itself as LXRandCo, Inc.  It is a condition of Closing that the Class B Shares and the Warrants be listed on the TSX. Gibraltar Growth has reserved the symbols "LXR" and "LXR.WT", respectively, for the Class B Shares and Warrants.

While Gibraltar Growth is the legal acquirer of LXR, LXR was identified as the acquirer for accounting purposes. Following Closing, a Voting Trust Agreement will give the Vendors control of a majority of the voting shares of the combined entity, and the composition of the combined entity's senior management team will largely resemble that of LXR's current management. As such, the LXR Acquisition will be accounted for as a share-based payment transaction.

Conference Call

Gibraltar Growth will host a conference call on Tuesday, April 18, 2017 at 12:45 p.m. EST to discuss the Acquisition, as well as its fourth quarter and 2016 financial results. The conference call will be chaired by Joseph Mimran, Gibraltar Growth's Chairman and Co‐Chief Executive Officer and Cam di Prata, Gibraltar Growth's Co‐Chief Executive Officer. The number to use for this call is toll free 1‐(888)‐231‐8191. The number for overseas callers is +1 (647)‐427‐7450.

Shareholder Approval

The Acquisition constitutes Gibraltar Growth's qualifying acquisition and must be approved by its shareholders. As an alternative to holding the holding of a shareholders meeting to approve the Acquisition, Gibraltar Growth may choose to seek approval of the Acquisition from its shareholders by way of written consent pursuant to section 604(d) of the TSX Company Manual. In accordance with the rules of the TSX, in order to forego a shareholders meeting, written consent must be obtained from Disinterested Shareholders. In the event that written consent is secured, Gibraltar Growth will issue a press release at least five business days in advance of Closing disclosing the material terms of the Acquisition and that it will not hold the shareholders meeting. In such circumstances, holders of Gibraltar Growth's class A restricted voting shares would continue to have redemption rights as described in Gibraltar Growth's final long form prospectus dated September 25, 2015.

Timing and Additional Information

Pursuant to applicable rules, Gibraltar Growth will file with the Canadian securities regulatory authorities in each of the provinces and territories of Canada a non-offering prospectus containing disclosure regarding the transaction and the Company assuming completion of the Acquisition. The preliminary long-form prospectus is expected to be filed with Canadian securities regulatory authorities in April 2017.

Goodmans LLP is acting as legal counsel to Gibraltar Growth, and Canaccord Genuity Corp. is acting as exclusive financial advisor to Gibraltar Growth and sole agent on the Private Placement. Mannella Gauthier Tamaro, Avocats Inc. is acting as legal counsel to LXR. Stikeman Elliott LLP is acting as legal counsel to Canaccord Genuity Corp.

About Gibraltar Growth Corporation

Gibraltar Growth is a special purpose acquisition corporation incorporated under the laws of the Province of Ontario for the purpose of effecting an acquisition of one or more businesses or assets, by way of a merger, amalgamation, arrangement, share exchange, asset acquisition, share purchase, reorganization, or any other similar business combination involving Gibraltar Growth. Gibraltar Growth received $100.0 million of proceeds from its initial public offering which was completed on October 2, 2015 and an additional $4.5 million from the partial exercise of the underwriters' over-allotment option. The total proceeds of $104.5 million were placed in an escrow account with TSX Trust Company immediately following the initial public offering and will be released upon consummation of Gibraltar Growth's qualifying acquisition in accordance with the terms and conditions of the escrow agreement.

About LXR

LXR is a rapidly growing, international omni-channel retailer of branded vintage luxury handbags and accessories. LXR sources and authenticates high quality pre-owned products and sells them through: a retail network of stores located in major department stores in Canada, the United States and Europe; wholesale operations primarily in the United States; and its own e-Commerce website, www.lxrco.com. LXR offers pre-owned products from iconic luxury brands such as Hermès, Louis Vuitton, Gucci and Chanel, among others, at attractive prices and seeks to appeal to the aspirational lifestyle needs of women of all ages.  LXR's headquarters are located in Montréal, Québec, and LXR operates an office in Tokyo, Japan. As at December 31, 2016, the Company had 175 employees. Please visit www.lxrco.com.

Non‐IFRS Measures

EBITDA, Adjusted EBITDA and Run-rate Revenue are not measures recognized under international financial reporting standards ("IFRS") and do not have a standardized meaning prescribed by IFRS. They are therefore unlikely to be comparable to similar measures presented by other companies. These measures should also not be considered in isolation nor used as a substitute for measures of performance prepared in accordance with IFRS. Gibraltar Growth believes that these non-IFRS financial measures provide meaningful supplemental information regarding LXR's underlying performance and may be useful to investors because they allow for greater transparency with respect to key metrics used by LXR in its financial and operational decision making, normalized for non-recurring events. Gibraltar Growth also believes that providing such information to securities analysts, investors and other interested parties who frequently use non-IFRS measures in the evaluation of issuers will allow them to better compare LXR's performance against others in the retailing industry. Please see Gibraltar Growth's preliminary long form prospectus to be filed at www.sedar.com for a detailed description of these measures and a reconciliation of the measures to the nearest IFRS measure.

Caution Regarding Forward-Looking Statements

Certain statements in this news release are prospective in nature that constitute forward-looking information and/or forward-looking statements within the meaning of applicable securities laws (collectively, "forward-looking statements"). Forward-looking statements include, but are not limited to, statements concerning the completion and proposed terms of, and matters relating to, the Acquisition, the expected operations, financial results and condition of Gibraltar Growth following the Acquisition, expectations regarding overall market growth rates and LXR's growth rates, and Gibraltar Growth's future objectives and strategies to achieve those objectives, as well as other statements with respect to management's beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, outlook, circumstances, performance or expectations that are not historical facts.

Forward-looking statements generally, but not always, can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "could", "would", "will", "expect", "intend", "estimate", "forecasts", "project", "seek", "anticipate", "believes", "should", "plans" or "continue", or similar expressions suggesting future outcomes or events and the negative of any of these terms.

Forward-looking statements reflect management's current beliefs, expectations and assumptions and are based on information currently available to management. With respect to the forward-looking statements included in this news release, Gibraltar Growth has made certain assumptions with respect to, among other things, the anticipated approval of the Acquisition by the shareholders of Gibraltar Growth, the number of Class A Restricted Voting Shares that will be subject to redemption in connection therewith, the anticipated receipt of any required regulatory approvals and consents (including the approval of the TSX and applicable securities regulatory authorities), the expectation that no event, change or other circumstance will occur that could give rise to the termination of the Purchase Agreement, the expenses and timing of Closing, the granting of exemptive relief from MI 61-101, that LXR is capable of meeting and will meet its future objectives and strategies, that LXR's future projects and plans are achievable and will proceed as anticipated, and the expected number and timing of store openings in North America and internationally, as well as assumptions concerning general economic and market growth rates, currency exchange and interest rates and competitive intensity.

Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the future circumstances, outcomes or results anticipated or implied by such forward-looking statements will occur or that plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve known and unknown risks and uncertainties and other factors that could cause actual results to differ materially from those contemplated by such statements. Factors  that could cause such differences include, but are not limited to: conditions precedent or approvals required for the Acquisition not being obtained; the potential benefits of the Acquisition not being realized; risks related to the achievement of LXR's business objectives; LXR not maintaining growth in the future; unfavourable economic conditions adversely affecting LXR's operations; the interests of the Company's directors and officers being different from or in addition to the interests of shareholders; and the Acquisition being terminated in certain circumstances. This list is not exhaustive of the factors that may impact the forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on the forward-looking statements in this news release. As a result of the foregoing and other factors, there can be no assurance that actual results will be consistent with these forward-looking statements.

All forward-looking statements included in and incorporated into this news release are qualified by these cautionary statements. Unless otherwise indicated, the forward-looking statements contained herein are made as of the date of this news release, and except as required by applicable law, Gibraltar Growth does not undertakes any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

SOURCE Gibraltar Growth Corporation

For further information: please contact: Cam di Prata, Co-Chief Executive Officer, Gibraltar Growth Corporation, (416) 843-5347

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