The Reject Shop Limited has announced that it has entered into a binding Scheme Implementation Agreement with Dollarama Inc. under which Dollarama will acquire all of the issued and outstanding shares in The Reject Shop by way of a scheme of arrangement (Scheme) at a price of A$6.68 cash per share (Scheme Consideration).
If the Scheme becomes effective, The Reject Shop Board intends to determine a fully franked special dividend of up to A$0.77 per share payable prior to implementation of the Scheme. The amount of the special dividend will be deducted from the Scheme Consideration. It is expected that eligible shareholders will benefit from franking credits of up to A$0.33 per share attached to any such special dividend.
Founded in 1992 and headquartered in Montréal, Quebec, Canada, Dollarama is a recognised Canadian value retailer offering a broad assortment of consumable products, general merchandise and seasonal items both in-store and online. Dollarama is listed on the Toronto Stock Exchange and currently has 1601 locations located throughout Canada and also owns a 60.1% interest in Dollarcity, a growing Latin American value retailer that has 588 stores located in Colombia, Guatemala, El Salvador and Peru.
Details of the Scheme Consideration
The Scheme Consideration of A$6.68 cash per share values The Reject Shop’s equity at approximately A$259 million and represents a premium of:
- 112% to the closing share price on 26 March 2025 of A$3.15 per share;
- 108% to the 20-day volume-weighted average price (VWAP) to 26 March 2025 of
- A$3.21 per share; and
- 117% to the 6-month VWAP to 26 March 2025 of A$3.08 per share.
The Scheme Consideration also represents an implied pre-AASB 16 EV / EBITDA multiple of 8.9x and pre-AASB 16 EV / EBIT multiple of 22.2x to The Reject Shop’s LTM pre-AASB 16 EBITDA and pre-AASB 16 EBIT respectively (as at December 2024).
The Scheme Consideration will not be reduced by the fully franked interim dividend of A$0.12 per share determined at the 1H25 results which is due to be paid on 1 May 2025.
Unanimous Board recommendation and intention
The Reject Shop Board unanimously recommends that shareholders vote in favour of the Scheme at the meeting, in the absence of a superior proposal and subject to an Independent Expert concluding that the Scheme is in the best interests of The Reject Shop shareholders and not subsequently changing that conclusion to be that the Scheme is not in the best interests of The Reject Shop shareholders. Subject to these qualifications, all Directors of The Reject Shop have also confirmed that they will vote all of The Reject Shop shares held or controlled by them in favour of the Scheme.
The Reject Shop Chairman Steven Fisher said: “Today marks a milestone in the journey of The Reject Shop. Attracting an offer from Dollarama, a recognised leader in the value retail market, is testament to both the meaningful improvement that our incredible team has made to our business over the past few years as well as the significant growth potential that exists for The Reject Shop.
“The all-cash Scheme Consideration provides attractive value and certainty for all shareholders. The Board believes the proposed transaction will benefit both shareholders and stakeholders of The Reject Shop and is in line with the Board’s priority to deliver shareholder value.”
The Reject Shop Chief Executive Officer Clinton Cahn said: “We are excited about the opportunities that this transaction presents. There is strong cultural alignment between our teams and we look forward to working alongside the Dollarama team to leverage the expertise of a leading value retailer, accelerate our store network expansion plan and continue helping all Australians save money every day.”
Dollarama Chief Executive Officer Neil Rossy said: “Identifying the right opportunity to expand into new geographies and build on our track record as a leading value retailer in Canada and Latin America has been a key objective for the Dollarama team. With this acquisition, we have a unique and compelling opportunity to bring our differentiated value proposition to a new market which presents a clear path for growth through an established platform.
“We look forward to embarking on this new chapter of Dollarama’s international growth journey with the local management team and its more than 5000 employees across Australia. Together, we will leverage our core strengths as value retailers with best-in-class merchandising, sourcing and operational expertise. With compatible cultures and values, we are confident that the business will have an exciting future as Dollarama’s new and complementary growth platform.”
Major shareholder support
The Reject Shop’s largest shareholder, Kin Group Pty Ltd (Kin Group), who controls approximately 20.8% of ordinary shares outstanding as at the date of this announcement, has informed The Reject Shop Board that it intends to vote all shares held in favour of the Scheme in the absence of a superior proposal and subject to an Independent Expert concluding that the Scheme is in the best interests of The Reject Shop shareholders and not subsequently changing that conclusion to be that the Scheme is not in the best interests of The Reject Shop shareholders.
Indicative timetable and next steps
The Reject Shop shareholders do not need to take any action at this stage.
A Scheme Booklet containing information relating to the Scheme, an Independent Expert’s Report and details of the Scheme Meeting is expected to be sent to shareholders in due course in advance of the Scheme Meeting. Shareholders will be given the opportunity to vote on the Scheme at the Scheme Meeting which is currently expected to be held in June 2025.
Subject to approval of the requisite majorities of shareholders and other conditions of the Scheme being satisfied, implementation of the Scheme is expected to occur in the second half of 2025. These dates are indicative and are subject to change.