Empire Company announces the sale of 61 properties held by wholly-owned Sobey Leased Properties to Crombie REIT for $428.5 million

    STELLARTON, NS, Feb. 25 /CNW/ - Empire Company Limited (TSX: EMP.A) today
announced that it and certain of its wholly-owned subsidiaries, including
Sobey Leased Properties Limited ("SLP"), have entered into agreements to sell
a portfolio of 61 retail properties representing approximately 3.3 million
square feet of gross leaseable area to Crombie Real Estate Investment Trust
("Crombie"). The selling price in respect of the 61 properties is
approximately $428.5 million representing an effective capitalization rate of
8.12 percent before transaction costs.
    Empire indirectly maintains, and will continue to own immediately
following this transaction, approximately a 48.1 percent ownership interest in
    On closing of this purchase transaction by Crombie ("the Acquisition"),
expected on April 21, 2008, Empire will receive net cash proceeds of
approximately $280 million. The difference between the $428.5 million sale
price and the net cash proceeds received on closing of approximately
$280 million is largely related to funds used for the retirement of debt and
for additional equity investment in Crombie, in addition to closing and
transaction costs.
    Empire will realize a pre-tax gain of approximately $165 million on the
closing of the transaction. Under Canadian Generally Accepted Accounting
Principles, the gain will not be included in net earnings; rather the gain
(net of related taxes) will represent a reduction in the carrying value of
Empire's equity investment in Crombie.
    The net cash proceeds from the transaction will be utilized by both
Empire and its wholly-owned subsidiary, Sobeys Inc. to repay bank
indebtedness. As a result of this planned debt reduction, Empire's pro forma
consolidated funded debt to capital ratio would have declined to 41.1 percent
as compared to 45.0 percent at the end of Empire's second quarter. Sobeys
Inc's pro forma funded debt to capital ratio would have declined to
35.5 percent as compared to 38.4 percent at the end of its second quarter.
    Paul D. Sobey, President and Chief Executive Officer of Empire, stated:
"We are very pleased to announce this property sale to Crombie. This
transaction aligns well with Empire's real estate strategy as it facilitates
significant growth for Crombie while also strengthening the solid relationship
between our core businesses of food and related real estate. Going forward we
remain supportive of Crombie and look forward to the generation of further
property sale opportunities as a result of Empire's property development

    Empire was advised on this transaction by the Bank of Montreal.

    Financing of the Acquisition

    In order to partially finance the Acquisition, Crombie has entered into a
bought deal for $60 million of subscription receipts at a price of
$11.00 per unit, each of which is convertible into a Crombie unit. In
addition, Empire has committed to the purchase of $55 million of Class B LP
Units of Crombie Limited Partnership at a price of $11.00 per unit in order to
maintain its 48.1 percent economic and voting interest in Crombie. Please
refer to the Crombie news release dated February 25, 2008 for further details
on its financing arrangements.
    As Empire currently owns a 48.1 percent economic and voting interest in
Crombie, Empire is considered a related party of Crombie under the securities
laws of certain provinces of Canada and therefore the Acquisition must be
approved by the affirmative vote of a majority of unit holders not related to
Empire at a Unit holders Meeting of Crombie scheduled for April 14, 2008.
    The particulars of the agreements governing the transaction have been
reviewed and approved by the Board of Directors of Empire Company and by an
Independent Committee of the Board of Trustees of Crombie. The Independent
Committee of Crombie has advised the Crombie Board of Trustees that, in its
view, the Acquisition is fair to Crombie's public unit holders and in the best
interests of Crombie. Further, it has unanimously recommended that its Board
of Trustees enter into the acquisition agreements and that the Board of
Trustees recommend to Crombie unit holders that they vote in favour of the

    Description of the Properties to be Acquired

    The properties to be sold by SLP and acquired by Crombie comprise
approximately 3.3 million square feet of GLA, consisting of 40 freestanding
grocery stores carrying various Sobeys banners, which are 100 percent
occupied, and 21 strip plazas, all of which are also anchored by Sobeys
bannered grocery stores, and are 96 percent occupied. In connection with the
Acquisition, Sobeys will enter into new lease agreements with Crombie for 61
properties. These new, fully-net lease agreements have terms of between 17 and
23 years depending on the property.
    On or before February 29, 2008, Crombie will file with the securities
commissions or other similar regulatory authorities in each of the provinces
of Canada a preliminary short form prospectus relating to the issuance of the
Subscription Receipts and the Debentures. Closing of the offering is expected
to occur on March 20, 2008. The Subscription Receipts and Debentures will not
be registered under the United States Securities Act of 1933, as amended, and
may not be offered or sold in the United States absent registration or an
applicable exemption from registration requirements.

    About Empire Company

    Empire Company Limited (TSX: EMP.A) is a Canadian company headquartered
in Stellarton, Nova Scotia. Empire's key businesses include food retailing and
related real estate. With approximately $13.6 billion in annual revenue and
$5.8 billion in assets, Empire employs approximately 40,000 people directly
and through its subsidiaries. More information about Empire Company can be
found at www.empireco.ca.

    About Crombie REIT

    Crombie REIT (TSX: CRR.UN) is an open-ended real estate investment trust
established under, and governed by, the laws of the Province of Ontario. The
trust invests in income-producing retail, office and mixed-use properties in
Canada, with a growth strategy focused primarily on the acquisition of retail
properties. Crombie REIT currently owns a portfolio of 52 commercial
properties in six provinces, comprising approximately 8.0 million square feet
of rentable space. More information about Crombie can be found at

    Forward-Looking Statements

    This news release contains forward-looking statements regarding the
Acquisition, the financing of the Acquisition, the expected sale proceeds and
the impact thereof on the financial condition of the Company. Wherever
possible, words such as "may", "will", "estimate", "anticipate", "believe",
"expect", "intention" and similar expressions have been used to identify these
forward looking statements. These forward looking statements reflect the
current expectations of the management of Empire regarding the Acquisition and
its impact on the Company and are based on information currently available to
management of Empire. These forward looking statements involve significant
risks and uncertainties. While agreements of purchase and sale with respect to
the Acquisition have been executed, the Acquisition remains subject to
significant conditions including the approval of a majority of minority unit
holders of Crombie and a number of regulatory and other consents and
approvals. There can be no assurance that the Acquisition will be completed by
Crombie or that, if completed, the Acquisition will have the impact on Empire
as expected by management. In particular, the expected decline in the funded
debt to capital ratio as outlined in this news release is conditional on the
successful completion of the Acquisition. The risks associated with these
forward looking statements should be considered carefully and readers should
not place undue reliance on the forward looking statements. There can be no
assurance that the expectations of management of Empire will prove to be
correct. These forward-looking statements are made as of the date of this news
release and Empire assumes no obligation to update or revise them to reflect
new events or circumstances.

    Legal Notice

    This news release does not constitute an offer to purchase or a
solicitation of an offer to sell any securities.

For further information:

For further information: Paul V. Beesley, Executive Vice President and
Chief Financial Officer, Empire Company Limited, (902) 755-4440

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