PBH Premium Brands Holdings Corporation

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

Premium Brands Holdings Corporation (TSX:PBH), a leading producer, marketer and distributor of branded specialty food products, announced today that it has signed a definitive agreement to purchase substantially all of the assets and operating divisions of Seattle based Oberto Sausage Company. 

Oberto is one of North America’s leading manufacturers of beef jerky and other protein based snack foods, which it sells under its Oberto, Pacific Gold, Pacific Gold Reserve and Cattleman’s Cut brands.  The company was founded in 1918 by Mr. Constantino Oberto and later led by Constantino’s son Mr. Art Oberto who, along with other family members, still own it today.

The transaction is expected to close within the next four to six weeks and is subject to customary closing conditions including regulatory approvals such as expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. 

“We are very pleased to be welcoming the Oberto organization into our group.  Its values, culture, loyal employees and talented management team are an ideal fit for us.  Furthermore, we are very excited about being entrusted with the iconic Oberto brand, which we have followed and admired for many years,” said Mr. George Paleologou, President and CEO of Premium Brands.

“This transaction will create a leading North American platform in the rapidly growing meat snacks product category and will feature Canada’s top meat snack brands, including McSweeney’s, Grimm’s, Freybe, Piller’s and Harvest, as well as Oberto’s iconic family of brands and our fast emerging, U.S. based Hempler’s brand.  I have no doubt that both Oberto and our legacy businesses will benefit from each other’s respective strengths.

“Oberto will be our third major investment in Washington State.  Our two prior ones: sandwich maker SK Food Group and premium processed meats producer Hempler Foods Group, have both prospered under the Premium Brands umbrella with their combined sales growing from under US$130 million in 2011 to over US$560 million last year.  We fully expect Oberto to replicate this type of success by combining its current strengths with access to our various resources,” added Mr. Paleologou.

“We are very excited to be joining the Premium Brands group.  Its entrepreneurial culture and respect for the uniqueness of its individual businesses, combined with its focus on quality, innovation and long term decision making makes Premium Brands a perfect fit for our business,” said Mr. Tom Hernquist, CEO of Oberto.  “Furthermore, we are also very excited about accelerating the growth of our business by accessing the resources and abilities of Premium Brands, including its Canadian distribution channels, product development expertise and supply chain infrastructure,” added Mr. Hernquist.

“We are very proud of what we have achieved over the past 100 years as a family owned and operated business and it was an extremely difficult decision to make as to what would be the best next step in the evolution of Oberto.  We wanted to ensure that we found a partner that would not only honor the traditions, values and most importantly, the people, that are at the heart of Oberto’s success; but also one that shared our vision for its future,” said Mr. Art Oberto.  “My family and I have been very impressed with how Hempler’s and SK Food Group have thrived under the Premium Brands umbrella and do not doubt that they are the right partner to take us forward.”

“We are also pleased to announce that we increased our investment in Vancouver based McLean Meats Inc. to 66.2% percent from the previous 36.2%,” said Mr. Paleologou.  “McLean is a niche marketer and supplier of branded, high quality, preservative free and organic processed meats to foodservice and retail customers across Canada,” added Mr. Paleologou.

The combined purchase price for the Company’s investments in Oberto and McLean is approximately $237 million while the combined revenues of the two businesses are approximately $246 million.  These transactions are expected to be immediately accretive to both Premium Brands’ earnings per share and free cash flow per share for 2018.

Cody Peak Advisors acted as financial advisor to Oberto.

Equity Financing

Concurrent with the Oberto acquisition, Premium Brands entered into an agreement with a syndicate of underwriters co-led by CIBC Capital Markets, Scotiabank, BMO Capital Markets and Cormark Securities Inc. (collectively, the "Underwriters"), pursuant to which the Company will issue on a "bought-deal" basis, 1,280,000 subscription receipts (the “Subscription Receipts”) at a price of $117.35, (the “Offering”), for gross proceeds of approximately $150 million. The Company has also granted the Underwriters an over-allotment option to purchase up to an additional 192,000 Subscription Receipts (or, in certain circumstances, common shares), on the same terms, exercisable in whole or in part at any time for a period of up to 30 days following closing of the Offering, to cover over-allotments, if any. The net proceeds of the Offering will be used to partially finance the acquisition of Oberto.

Each Subscription Receipt represents the right of the holder to receive, upon closing of the Oberto acquisition, without payment of additional consideration, one common share of Premium Brands plus an amount per common share equal to the amount per common share of Premium Brands of any dividends for which record dates have occurred during the period from the closing date of the Offering to the date immediately preceding the closing date of the Oberto acquisition, less withholding taxes, if any. Closing of the Offering is expected to occur on or about May 2, 2018. The Offering is subject to normal regulatory approvals, including approval of the Toronto Stock Exchange.

The Subscription Receipts will be offered in each of the provinces and territories of Canada by way of a short form prospectus, and by way of private placement in the United States to "qualified institutional buyers" pursuant to Rule 144A or in such a manner as to not require registration under the United States Securities Act of 1933, as amended.

About Premium Brands

Premium Brands owns a broad range of leading specialty food manufacturing and differentiated food distribution businesses with operations in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia, California, Nevada, Ohio, Arizona, Minnesota, Mississippi and Washington State.  The Company services a diverse base of customers located across North America and its family of brands and businesses include Grimm’s, Harvest, McSweeney’s, Piller’s, Freybe, SJ Fine Foods, McLean Meats, Expresco, Belmont Meats, Leadbetter, Skilcor, The Meat Factory, Hempler’s, Isernio’s, Fletcher’s U.S., Direct Plus, Country Prime Meats, Audrey’s, SK Food Group, OvenPride, Bread Garden Go, Hygaard, Quality Fast Foods, Deli Chef, Buddy’s Kitchen, Raybern’s, Creekside Bakehouse, Stuyver’s Bakestudio, Island City Baking, Shaw Bakers, Partners Crackers, Conte Foods, Larosa Foods, Gourmet Chef, Duso’s, Centennial Foodservice, B&C Food Distributors, Shahir, Wescadia, Harlan Fairbanks, Maximum Seafood, Ocean Miracle, Hub City Fisheries, Diana’s Seafood, C&C Packing, Premier Meats, Interprovincial Meat Sales and Frandon Seafoods.

For further information, please contact George Paleologou, President and CEO or Will Kalutycz, CFO at (604) 656-3100.

www.premiumbrandsholdings.com

The securities to be offered have not been and will not be registered under the United States Securities Act of 1933, as amended, or under any state securities laws, and may not be offered, sold, directly or indirectly, or delivered within the United States of America and its territories and possessions or to, or for the account or benefit of, United States persons except in certain transactions exempt from the registration requirements of such Act. This release does not constitute an offer to sell or a solicitation to buy such securities in the United States, Canada or in any other jurisdiction where such offer is unlawful.

Forward Looking Statements

This press release contains forward looking statements with respect to the Company, including its business operations, strategy and financial performance and condition. These statements generally can be identified by the use of forward looking words such as "may", "could", "should", "would", "will", "expect", "intend", "plan", "estimate", "project", "anticipate", "believe" or "continue", or the negative thereof or similar variations.

Although management believes that the expectations reflected in such forward looking statements are reasonable and represent the Company's internal expectations and belief as of April 12, 2018, such statements involve unknown risks and uncertainties beyond the Company's control which may cause its actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward looking statements.

Some of the factors that could affect future results and could cause results to differ materially from those expressed in the forward-looking statements contained herein include: (i) changes in the cost of raw materials used in the production of the Company’s products; (ii) seasonal and/or weather related fluctuations in the Company’s sales; (iii) changes in consumer discretionary spending resulting from changes in economic conditions and/or general consumer confidence levels; (iv) changes in the cost of finished products sourced from third party manufacturers; (v) changes in the Company’s relationships with its larger customers; (vi) access to commodity raw materials; (vii) potential liabilities and expenses resulting from defects in the Company’s products; (viii) changes in consumer food product preferences; (ix) competition from other food manufacturers and distributors; (x) execution risk associated with the Company’s growth and business restructuring initiatives; (xi) risks associated with the Company’s business acquisition strategies; (xii) changes in the value of the Canadian dollar relative to the U.S. dollar; (xiii) new government regulations affecting the Company’s business and operations; (xiv) the Company’s ability to raise the capital needed to fund its growth initiatives; (xv) labor related issues including potential disputes with employees represented by labor unions and labor shortages; (xvi) the loss and/or inability to attract key senior personnel; (xvii) fluctuations in the interest rates associated with the Company’s funded debt; (xviii) failure or breach of the Company’s information systems; (xix) financial exposure resulting from credit extended to the Company’s customers; (xx) the malfunction of critical equipment used in the Company’s operations; (xxi) livestock health issues; (xxii) international trade issues; and (xxiii) changes in environmental, health and safety standards. Details on these risk factors as well as other factors can be found in the Company's 2017 MD&A, which is filed electronically through SEDAR and is available online at www.sedar.com.

Unless otherwise indicated, the forward looking statements in this document are made as of April 12, 2018 and, except as required by applicable law, will not be publicly updated or revised. This cautionary statement expressly qualifies the forward looking statements in this press release.