​Empire Company Limited
to Acquire Farm Boy
​September 24, 2018
Disclaimers
FORWARD-LOOKING INFORMATION
This document contains forward-looking statements which are presented for the purpose of assisting the reader to understand management’s expectations
regarding the Company’s strategic priorities, objectives and plans. These forward-looking statements may not be appropriate for other purposes. Forward-looking
statements are identified by words or phrases such as “expects”, “intends”, “may”, “plans”, “will”, and other similar expressions or the negative of these terms.
These statements include those relating to: (i) timing of the acquisition which may be impacted by regulatory approval and closing conditions; (ii) timing and
magnitude of growth (including same-store-sales, rollout and additional penetration in GTA, our expectations for additional stores by the end of fiscal 2020 and
doubling the size of the business in five years) which may be impacted by customer demand, increased competition, the real estate opportunities available, the
pace of new store openings, and the amount of time it will take new stores to ramp up; (iii) returns, accretion, free cash flow generation and projected fiscal 2020
EBITDA expected from the acquisition which may be impacted by the points noted in (ii) above and whether new stores are able to attain historical profitability
levels, the ability of the Company to predict and adapt to changing consumer tastes, preferences and spending patterns, future general economic and market
conditions, legislative and regulatory environment in which the Company operates, and the effectiveness of integration efforts; and (iv) the timing of e-commerce
roll-out which may be impacted by the overall customer response to the service and the performance of its business partner, Ocado.
Additional risks are described in detail from time to time in documents filed by the Company with securities regulatory authorities in Canada. By its nature,
forward-looking information requires the Company to make assumptions and is subject to inherent risks, uncertainties and other factors which may cause actual
results to differ materially from forward-looking statements made.
For more information on risks, uncertainties and assumptions that may impact the Company’s forward-looking statements, please refer to the Company’s
materials filed with the Canadian securities regulatory authorities, including the “Risk Management” section of the fiscal 2018 annual Management’s Discussion
and Analysis.
NON-IFRS MEASURES
There are measures included in this news release that do not have a standardized meaning under generally accepted accounting principles (“GAAP”) and
therefore may not be comparable to similarly titled measures presented by other publicly traded companies. The Company includes these measures because it
believes certain investors use these measures as a means of assessing financial performance.
• Free cash flow is calculated as cash flows from operating activities, plus proceeds on disposal of property, equipment and investment property, less
property, equipment and investment property purchases.
• Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as net earnings before finance costs, income tax expense, and
depreciation and amortization.
• EBITDA margin is EBITDA divided by sales.
• Adjusted EPS (fully diluted) is calculated as adjusted net earnings divided by diluted weighted average number of shares outstanding.
• Same-store sales are sales from stores in the same location in both reporting periods.
All references herein are to Canadian dollars.
1
Participants at Today’s Presentation
Michael Medline
Michael Vels
Jean-Louis Bellemare
Jeff York
President & Chief
Executive Officer of
Empire and Sobeys
Chief Financial Officer of
Empire and Sobeys
Founder & Co-CEO of
Farm Boy
Co-CEO of Farm Boy
2
Overview of Farm Boy

Founded in 1981, Farm Boy Inc., (“Farm Boy”) is an Ontariobased retail grocer that has a focus on high quality and locallysourced meat and produce and offers a wide range of
exceptional private label and prepared foods and renowned
customer service

In 2012, Berkshire Partners, a leading global private equity firm
specializing in consumer products and retail investments,
partnered with the Bellemare family and invested in Farm Boy

Farm Boy is led by Jean-Louis Bellemare (founder and co-CEO)
and Jeff York (co-CEO), both of whom will continue their
leadership roles with Farm Boy post-transaction

Farm Boy operates a unique and compelling brand that
resonates with Canadians and has a passionate and loyal
customer base

Scalable platform with infrastructure in place to support future
long-term growth

Over the last 5 years, Farm Boy has approximately doubled
store count and delivered strong revenue, EBITDA and free
cash flow growth

Today, Farm Boy has 26 stores with defined plans for continued
expansion into the GTA
3
Transaction Overview
Purchase
Price
Financial
Profile
Financial
Flexibility
Timing &
Approvals
(1)
(2)

Empire, through a subsidiary, will acquire Farm Boy based on a total enterprise value of $800 million

Farm Boy will be set up as a separate company within Empire’s structure

Farm Boy’s Co-CEOs will reinvest in 12% of the continuing Farm Boy business

Represents a 14.1x multiple of Farm Boy’s estimated EBITDA in Empire’s fiscal 2020 (1)

Accretive to adjusted earnings per share and operating cash flow per share in the first full fiscal year after closing

EBITDA CAGR of 21% with compelling EBITDA margin profile(2)

Plan to double store count in the next 5 years

Free cash flow generation more than sufficient to self-fund growth

All stores are profitable and growing

Cash consideration funded with cash on hand and a new $400 million bank facility

Rapid deleveraging profile

Significant liquidity available from unutilized facilities

Expected to close at the beginning of 2019

Subject to standard closing conditions – including Competition Bureau approval
Based on a total enterprise value of $800 million and performance under Empire’s ownership, including growth related to same-store sales and new store openings
For the period from FY2014 through the 52 weeks ended July 14, 2018
4
Key Investment Highlights
1
Aligned with Empire’s Strategic Priorities
2
Leading Specialty Food Retailer with Strong Brand
Loyalty
3
Attractive, Scalable Platform Primed for Growth
4
Enhances Presence in Urban Markets with
Established, Well-Known Brand in Ontario
5
Exceptional Private Label Offering
6
Retention of Strong and Driven Management Team
5
Aligned with Empire’s Strategic Priorities
Strategic Priorities
Reset our
Foundation
Successful
completion of
Sunrise by end of
fiscal 2020
Bolster our Brand
Win in Our Stores
Enhance Discount
Win E-Commerce
Strengthen the
emotional
connection to our
banner brands
Improve service and
offering in our
conventional stores
Expand discount to
Western Canada
and refine our
FreshCo model
Launch home
delivery through
Ocado partnership
Farm Boy Strategic Fit
 Shifting from defence to
offence
 New platform to
accelerate growth in
urban markets
 Managed separately
 Existing Farm Boy
management team will
continue to oversee
growth
 Unique and compelling
brand that resonates
with urban demographic
 Passionate customer
base
 Focus on fresh
 Distinct store format
 Bolsters core food
business
 Exceptional private
label offering
 Growing chef-inspired
 New distribution
channel for exceptional
private label products
 Drives Ocado Ecommerce platform
prepared food offering
 Renowned customer
experience
6
Leading Specialty Food Retailer with Strong Brand Loyalty
Differentiated value proposition with exceptional private label and
chef-inspired prepared food offering
Unique Grocery Retail Concept
Wide Selection of Highest Quality, Fresh Foods
Majority of the Store is Fresh

Premium-Quality Private Brand

Broad Prepared Food Offering

Unique Assortment Featuring Local, Organic,
On-Trend Products

Healthy, On-Trend Food

Authentic Brands that Offer an In-Store “Experience”

Local Food and Carefully Sourced Supplier Network

Exceptional Private Label Offering
Prepared Food Strategy
Differentiated in-store experience focused on fresh and
freshly prepared food and renowned customer service
7
Attractive, Scalable Platform Primed for Growth
3-Year Average SSSG
Sales
EBITDA
(2015A – 2017A)
CAGR:
21%
CAGR:
18%
5.3%
1.7%
1.3%
Average of
Canadian
Grocery
Peers(1)
Average of
U.S. Grocery
Peers(2)
2014A
2015A
2016A
2017A
52-weeks
ending
14-Jul-18
2014A
2015A
2016A
2017A
52-weeks
ending
14-Jul-18
Double digit sales and EBITDA growth, high margin format, self-funding business model
(1)
(2)
Includes Sobeys, Loblaw and Metro
Includes Albertsons, Ingles Markets, Kroger, Sprouts Farmers Market and Whole Foods Market
8
Attractive, Scalable Platform Primed for Growth
Expect to double the business through a combination of new store openings and
conversion of existing Sobeys locations in the next 5 years
Continue Best-in-Class SSSG
Existing Markets are Underpenetrated
 Enhance assortment of Farm Boy private label products
Current
Stores
 Continual innovation in chef-inspired prepared food
14
Ottawa
offering
 Deliver delicious products at a great value
Stores
3
GTA
Stores
 Continue to drive brand loyalty
 Continue excellent store-level execution and in-store
Southwestern
Ontario
7
Stores
Population
Population /
Store
~1.0M
71,000
~6.3M
2,000,000
~2.6M
370,000
marketing
Strong Early Success in the GTA
Enter New Markets

Year -1 sales of Whitby and Toronto locations
approximately 35% higher than the average store

Multiple large, attractive markets where Farm Boy can
continue to grow

GTA continues to represent significant whitespace to
increase number of stores

Ability to leverage Sobeys’ relationships and know-how
to accelerate growth into new markets
Established Approach to Success
Applied to Existing and New Markets
9
Enhances Presence in Urban Markets with Established, WellKnown Brand in Ontario
Flexible Formats
Advances Ontario Strategy, Accelerating Ontario Presence and GTA Growth
Ottawa
Traditional
~28,000 sq. ft.
Kingston
Toronto
Store Count by Region
Mixed Use
Waterloo
~20,000 sq. ft.
Hamilton
8%
11%
London
54%
27%
Existing Farm Boy Stores
Announced Farm Boy Store Opening
Small Format
Existing Farm Boy Distribution Centre
~8,000 – 10,000 sq. ft.
Announced Farm Boy Distribution Centre Opening
Ottawa
SW Ontario
GTA
Other
10
Exceptional Private Label Offering
1
2
3
Comprehensive Product
Offering
High Quality, Premium
Products
Exclusive Offering to be
Available Through ECommerce Partnership
Farm Boy Private Label
products supply multiple
categories (bakery, deli,
dairy, grocery, kitchen,
meat & fish)
Premium private label
offering, meticulously
procured and prepared
fresh, daily
Private Label products are
available exclusively
through Farm Boy stores
+500
8 out of 10
Drives E-Commerce
SKUs Introduced
Since 2012
Top Grocery SKUs are Farm Boy
brand
Enables differentiated Ocado
product offering
11
Retention of Strong and Driven Management Team

Farm Boy will be managed separately from existing Sobeys business and will continue to be run by Jean-Louis Bellemare and Jeff
York, who will report to Empire President and CEO, Michael Medline

Jean-Louis, Jeff and other senior management to reinvest in 12% interest of the continuing Farm Boy business

Deep senior management team with highly relevant industry experience

Separate Farm Boy management allows Sobeys existing management team to continue to focus on the existing business and
executing Project Sunrise
Jean-Louis Bellemare
Founder & Co-CEO

Jean-Louis founded Farm Boy in 1981

Played a pivotal role in the growth of Farm Boy
Jeff York
Co-CEO

Joined Farm Boy in 2009

Previously served as President and CEO of Giant Tiger for 10 years
35+ years
with Farm Boy
9+ years
with Farm Boy
20 years
experience
with Giant
Tiger
Empire and Farm Boy management teams are strongly aligned to
drive long-term growth of the Farm Boy platform
12
Key Investment Highlights
1
Aligned with Empire’s Strategic Priorities
2
Leading Specialty Food Retailer with Strong Brand
Loyalty
3
Attractive, Scalable Platform Primed for Growth
4
Enhances Presence in Urban Markets with
Established, Well-Known Brand in Ontario
5
Exceptional Private Label Offering
6
Retention of Strong and Driven Management Team
13
​Thank You