Liquor Barn Trustees unanimously recommend rejection of unsolicited take-over bid by Liquor Stores



    EDMONTON, April 25 /CNW/ - The Board of Trustees of Liquor Barn Income
Fund (TSX: LBN.UN) ("Liquor Barn" or the "Fund"), a leading operator of
private liquor stores in Western Canada, today formally responded to the
unsolicited take-over bid by Liquor Stores Income Fund (TSX: LIQ.UN) ("Liquor
Stores") to purchase all of the outstanding Units of Liquor Barn (the "Liquor
Stores Offer"). In the Trustees' Circular that is being filed and mailed today
to Liquor Barn Unitholders, the Board of Trustees unanimously recommends that
Unitholders reject the Liquor Stores Offer and not tender their Units.
    "After careful consideration and analysis, the Board of Trustees has
unanimously determined that the Liquor Stores Offer is not in the best
interests of our Unitholders," said Bob King, Chairman of the Board of
Trustees. "We believe the Liquor Stores Offer is inadequate and opportunistic,
as it does not reflect the underlying value and future growth potential of
Liquor Barn. We commenced a strategic review process to identify and consider
strategic alternatives to enhance Unitholder value, and we intend to see that
process through to completion."
    In the Trustees' Circular, the Board of Trustees recommends the rejection
of the Liquor Stores Offer based on a number of factors, including the
following:

    The Liquor Stores Offer is inadequate.

    On April 24, 2007, TD Securities Inc. delivered a written opinion to the
Board of Trustees concluding that the consideration offered under the Liquor
Stores Offer is inadequate, from a financial point of view, to Liquor Barn
Unitholders.

    The Liquor Stores Offer does not reflect the underlying value of Liquor
    Barn's business, including its growth strategy in British Columbia.

    The Fund is well-positioned to deliver substantial value to Liquor Barn
Unitholders in 2007, and anticipates that Liquor Barn will have completed 15
acquisitions by July 31, 2007. Liquor Barn anticipates that 13 of these
acquisitions will be made in British Columbia, the market that presents the
most profitable growth opportunity for Liquor Barn. In the 14-month period
from May 17, 2006 to July 31, 2007, Liquor Barn will have grown the number of
its stores by 40% from 58 to 81. By July 31, 2007, 25% of the stores owned by
Liquor Barn will be located in British Columbia. This is a significantly
higher percentage than Liquor Stores, which had only 8% of its stores in
British Columbia at December 31, 2006. Liquor Stores has not been as effective
in growing its business in British Columbia, where it has opened or acquired
only seven stores since going public in September 2004.

    Superior proposals delivering greater value to Liquor Barn Unitholders
    may emerge.

    Liquor Barn has established a data room for the purpose of providing
financial, operating and acquisition data, as well as other confidential
information, to interested parties. Numerous parties have signed
confidentiality and standstill agreements. Liquor Barn's aggressive pursuit of
strategic alternatives may lead to a better proposal than the Liquor Stores
Offer. The Board of Trustees is considering all potential alternatives,
including having the Fund continue its current growth strategy on a
stand-alone basis. The process is ongoing, and the Board of Trustees will
communicate further with Liquor Barn Unitholders on a timely basis, prior to
the expiry of the Liquor Stores Offer.

    The value of the consideration under the Liquor Stores Offer is uncertain
    compared to a cash bid.

    Because the consideration under the Liquor Stores Offer consists entirely
of Liquor Stores Units, its value is less certain than would be the case in a
cash bid, and will depend on the future performance of Liquor Stores. There is
also a significant risk that Liquor Stores will be unable to realize
anticipated synergies from the integration of Liquor Barn and Liquor Stores,
and may in fact suffer revenue and margin losses, which will undermine the pro
forma trading value of Liquor Stores' units, reducing the value of
consideration received by Liquor Barn Unitholders under the Liquor Stores
Offer.

    Liquor Barn Unitholders who tender their Units to the Offer may suffer
    adverse tax consequences.

    The exchange of Liquor Barn Units for Liquor Stores units under the
Liquor Stores Offer will not be a tax-deferred or "rollover" transaction, but
instead may be a taxable transaction for Liquor Barn Unitholders. Liquor Barn
Unitholders may be required to pay cash taxes on any capital gain realized on
completion of the Liquor Stores Offer and may be forced to sell Liquor Stores
units received to pay the cash taxes. Although the Liquor Stores Offer
contemplates a Merger Transaction that could potentially permit certain Liquor
Barn Unitholders to receive Liquor Stores units on a tax-deferred basis,
Liquor Barn Unitholders that are not resident in Canada may be subject to
adverse foreign tax implications in connection with the Merger Transaction. In
addition, such Liquor Barn Unitholders will lose control over their Liquor
Barn Units and the affairs of the Fund before their Liquor Barn Units are paid
for.

    The Timing of the Liquor Stores Offer is Opportunistic.

    The timing of the Liquor Stores Offer is opportunistic because Liquor
Stores is attempting to acquire Liquor Barn without reflecting the incremental
EBITDA that will occur as a result of the anticipated 25% increase in the
number of stores owned by Liquor Barn. The Board of Trustees believes that the
Liquor Stores Offer does not reflect the intrinsic value to Liquor Barn
Unitholders of the Fund's increased EBITDA.

    The Liquor Stores Offer has been rejected by Liquor Barn's principal
    founder and largest Unitholder, as well as other significant Unitholders.

    As of the date of this Trustees' Circular, Liquor Barn's principal
founder and largest Unitholder, the Liquor Barn Group, as well as three other
founding Liquor Barn Unitholders, who collectively hold approximately 19.6% of
the currently outstanding Liquor Barn Units and special voting units, have
indicated that they do not intend to accept the Liquor Stores Offer.

    The Liquor Stores Offer has been rejected by all of the trustees,
    directors and officers of Liquor Barn.

    None of the trustees, directors or senior officers of Liquor Barn has
accepted or intends to accept the Liquor Stores Offer.

    The Liquor Stores Offer significantly understates Liquor Barn's growth
    potential under the Federal Government's "Tax Fairness Plan."

    The Liquor Stores Offer states that Liquor Barn's growth potential under
the Federal Government's Tax Fairness Plan is limited to $65 million through
2010, when in fact Liquor Barn would be entitled under current guidelines to a
minimum of $50 million remaining equity growth in each of 2008, 2009 and 2010,
for a remaining total of $150 million. By significantly understating Liquor
Barn's growth potential, the Liquor Stores Offer is materially misleading and
may cause Liquor Barn Unitholders to mistakenly believe that Liquor Barn
cannot execute its growth strategy. Moreover, because the Liquor Stores Offer
is predicated on this flawed assumption regarding Liquor Barn's growth
prospects, it does not reflect the true value of the Fund.

    The Liquor Stores Offer is coercive and requires certain Liquor Barn
    Unitholders to give up rights they currently have, prior to being paid
    for their Units.

    Under the terms of the Liquor Stores Offer, tendering Liquor Barn
Unitholders who elect to participate in the Merger Transaction or who make no
election will grant a broad, irrevocable power of attorney in favour of Liquor
Stores, which will be effective prior to the time when Liquor Stores would pay
for the Liquor Barn Units. As a consequence, these Liquor Barn Unitholders
will lose control over their Liquor Barn Units and the affairs of the Fund
before their Liquor Barn Units are paid for, and it is possible that they may
receive no cash distributions from either Liquor Barn or Liquor Stores between
the Expiry Time and the completion, if it occurs, of the Merger Transaction.

    The Liquor Stores Offer is highly conditional and not a firm offer.

    The undefined and subjective nature of many of the conditions effectively
gives Liquor Stores the option not to proceed with the Liquor Stores Offer.

    A complete list of the reasons for the Board of Trustees' recommendation,
as well as a full discussion of each, is provided in the Trustees' Circular.
The Board of Trustees urge Unitholders to read the Trustees' Circular in its
entirety. The document will be available on SEDAR at www.sedar.com and is
available on the Fund's website at www.liquorbarn.ca.

    Liquor Barn's relationship with Devco

    Liquor Barn has benefited from its relationship with Liquor Barn Devco
Ltd., a development entity managed and controlled by our President and Chief
Executive Officer, Dr. John Mather. Under the terms of its development
agreement with Devco, Liquor Barn has the option to acquire stores acquired or
developed by Devco and to match any third party offers for such stores. To
date, Devco has acquired eight liquor stores, including six in Alberta and two
in British Columbia. The Fund has not exercised its option to acquire any of
these stores. Liquor Barn's relationship with Devco has reinforced the Fund's
aggressive growth strategy by permitting the Fund to continue obtaining
interests in new liquor stores even when the Fund's own capital resources are
constrained. This was the case following the October 31, 2006 announcement of
proposed changes to the taxation of income trusts, which had a negative impact
on the income trust market and delayed the Fund's ability to raise money in
the public capital markets. More recently, the Fund's strengthened capital
resources, and the experience it has gained in directly acquiring and
operating liquor stores in the British Columbia market, have reduced the need
for Devco to supplement its growth strategy.

    How to withdraw your Units from the Liquor Stores offer

    Unitholders who have already tendered units to the Liquor Stores Offer
and wish to withdraw them, are urged to contact their broker or Kingsdale
Shareholder Services Inc. toll-free at 1-800-749-9890.

    About Liquor Barn Income Fund

    Liquor Barn Income Fund is a publicly traded Canadian income fund that
owns a 72.4% interest in Liquor Barn Limited Partnership ("Liquor Barn LP").
Liquor Barn LP, which currently operates 61 liquor stores in Alberta and 14 in
British Columbia, is a leading operator of private liquor stores in Western
Canada. Liquor Barn's units trade on the Toronto Stock Exchange under the
symbol LBN.UN. Additional information about Liquor Barn Income Fund is
available at www.liquorbarn.ca or www.sedar.com.

    Forward-Looking Statements

    This news release contains forward-looking statements. These statements
relate to future events or future performance and reflect the expectation of
the Fund regarding its growth, results of operations, performance and business
prospects, and opportunities and trends affecting the retail liquor industry.
Such forward-looking statements reflect current beliefs of management and are
based on information currently available. Many of these statements can be
identified by looking for words such as "believe", "expects", "will",
"intends", "projects", "anticipates", "estimates", "continues" or similar
words or the negative of these or other comparable terminology. A number of
factors could cause actual events or results to differ materially from the
events or results discussed in such forward-looking statements. Although
management believes that the expectations represented in such forward-looking
statements are reasonable, there can be no assurance that such expectations
will prove to be correct. Any forward-looking statements included in this news
release are made as of the date of this news release and the Fund assumes no
obligation to update or revise them to reflect new events or circumstances.

    %SEDAR: 00023526E




For further information:

For further information: Dr. John Mather, Chief Executive Officer,
Liquor Barn GP Inc., (780) 462-0190 ext 315; Richard N. Hughes, Chief
Financial Officer, Liquor Barn GP Inc., (780) 462-0190 ext 310

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LIQUOR BARN INCOME FUND

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