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TRANSACTION HIGHLIGHTS

Creates a Top 3 National U.K. Commercial Laundry Business

• Establishes a top 3 national laundry serving both healthcare and hospitality customers

• Combined ~10% U.K. market share in £1.6 billion total U.K. commercial laundry and textile rental market

• Enhances the combined growth opportunities through national scale, coast-to-coast geographic range, and full service coverage of both healthcare and hospitality markets
  

Establishes Coast-to-Coast Geographic Footprint in both Canada and the U.K.

• Strategically extends K-Bro’s existing U.K. footprint further south into England with 7 laundry facilities in key markets in the Northwest, Midlands, and South of England

• Results in leading coast-to-coast platforms in both Canada and U.K.

Adds a Leading U.K. Healthcare-Focused Platform

• Over two-thirds of Star Mayan’s revenue is healthcare-focused

• Second largest private healthcare laundry and linen processor

• Star Mayan has a highly diversified customer base of over 120 healthcare and hospitality customers

• K-Bro's pro forma U.K. healthcare revenue will increase to 43% pro forma from 6%, and K-Bro’s consolidated pro forma revenue from the U.K will increase to 51% pro forma from 30%, based on K-Bro's trailing-twelve-month ("TTM") period ended March 31, 2025

Highly Complementary to Existing U.K. Businesses

• Significant anticipated run-rate synergies of more than £2.0 million

• Cost synergies are expected to be achieved over 6-12 months, and operational efficiencies and platform optimizations are expected to be achieved within 24 months

• Phased approach to integration with a transition team led by K-Bro’s U.K. Managing Director

• Over time, K-Bro plans to invest a further £5.0 million in capital expenditures to expand capacity and enhance operational efficiencies

Attractive Financial Profile

• Purchase price represents 7.6x TTM (Mar. 2025) Adjusted EBITDA¹, including the impact of IFRS 16 and anticipated run-rate synergies of £2.0 million

• Expected to be mid-to-high single digit accretive to K-Bro's Adjusted EPS¹, including anticipated run-rate synergies of £2.0 million and after adding back amortization of Acquisition-related intangibles

• On closing of the Acquisition, pro forma net debt / TTM Adjusted EBITDA will be ~3.3x² and is expected to delever to K-Bro's long-term target of below 3x within 12 months following closing of the Acquisition

• K-Bro remains committed to its monthly dividend and is temporarily pausing its normal course issuer bid, which will expire on May 20, 2025. K-Bro will continue to assess its capital allocation priorities to balance deleveraging in the near-term while maintaining a flexible capital structure to support future acquisitions, organic growth and return of capital.

The Acquisition is expected to close in early June 2025, subject to the satisfaction of limited closing conditions.

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¹ Includes anticipated run-rate synergies of £2.0M.
² Calculated in accordance with the requirements under the Amended Credit Agreement.

ACQUISITION FINANCING

The Acquisition and related fees and expenses will be financed by:

• New C$140 million, four-year amortizing term loan led by The Toronto-Dominion Bank, and including National Bank of Canada, ATB Financial, Bank of Montreal and Canadian Imperial Bank of Commerce

  • K-Bro's existing committed revolving credit facility unchanged at C$175 million (of which C$121 million was drawn as at March 31, 2025) and additional uncommitted accordion of up to C$50 million

• C$70 million bought deal offering of subscription receipts led by TD Securities Inc.
  

OFFERING OF SUBSCRIPTION RECEIPTS

Concurrent with the execution of the share purchase agreement relating to the Acquisition (the “Acquisition Agreement”), the Corporation has entered into an agreement to sell 2,030,000 subscription receipts (“Subscription Receipts”) on a bought deal basis at a price of C$34.55 per Subscription Receipt to a syndicate of underwriters (the “Underwriters”) led by TD Securities Inc. for gross proceeds of C$70,136,500 (the “Offering”). In addition, K-Bro has granted the syndicate an over-allotment option (the “Over-Allotment Option”) to cover over-allotments, if any, and for market stabilization purposes. The Over-Allotment Option is exercisable, in whole or in part, for a period of 30 days following the closing of the Offering to purchase up to an additional 304,500 Subscription Receipts which, if exercised in full, would increase the aggregate gross proceeds of the Offering to C$80,656,975.

Each Subscription Receipt will entitle the holder thereof to receive, without payment of additional consideration or further action, upon closing of the Acquisition, one common share of K-Bro (a “Common Share”).

In addition, while the Subscription Receipts remain outstanding, holders will be entitled to receive cash payments (“Dividend Equivalent Payments”) per Subscription Receipt equal to dividends declared by K-Bro on each Common Share to holders of record on such date(s) during the period the Subscription Receipts are outstanding. Such Dividend Equivalent Payments will have the same record date as the corresponding Common Share dividend and will be paid, net of any applicable withholding taxes, to holders of Subscription Receipts concurrently with the payment date of each such dividend. The Dividend Equivalent Payments will be made regardless of whether or not the Acquisition is completed. If the Acquisition is not completed prior to June 30, 2025, the Acquisition Agreement is terminated or if the Corporation otherwise advises the Underwriters or the public that it does not intend to proceed with the Acquisition, then the subscription price for the Subscription Receipts will be returned to holders of Subscription Receipts, together with, net of any applicable taxes, any unpaid Dividend Equivalent Payments as well as any pro-rata interest on such funds and such holder’s pro-rata share of the interest that would have been earned on the initial Underwriters’ fee payment as if such payment had been held in escrow as part of the escrowed funds and not paid to the Underwriters, if any interest remains after payment of the Dividend Equivalent Payments.

The gross proceeds of the Offering, less the portion of the Underwriters' fee that is payable on closing of the Offering, will be held in escrow pending the closing of the Acquisition and, after payment of applicable fees and expenses upon the closing of the Acquisition, are intended to be used by K-Bro to fund a portion of the purchase price for the Acquisition.

The Offering is being made in all provinces and territories of Canada and a preliminary short form prospectus will be filed no later than May 16, 2025 with the securities regulatory authorities in all provinces and territories of Canada. The Offering is expected to close on or about May 30, 2025. No securities regulatory authority has either approved or disapproved of the contents of this press release.

This press release is not an offer of securities for sale in the United States. The Shares being offered have not been and will not be registered under the United States Securities Act of 1933 (the “Act”) and accordingly are not being offered for sale and may not be offered, sold or delivered, directly or indirectly within the United States, its possessions and other areas subject to its jurisdiction or to, or for the account or for the benefit of a U.S. person, except pursuant to an exemption from the registration requirements of that Act.

Q1 2025 FINANCIAL RESULTS HIGHLIGHTS

For full details on K-Bro’s Q1 2025 results, please refer to the quarterly results press released filed on May 13, 2025. A summary of select highlights is included below.

• Revenue

  • Revenue increased by 13.4% in Q1 2025 to $91.0 million compared to $80.2 million in 2024

• Adjusted EBITDA³ and EBITDA

  • Adjusted EBITDA increased to $15.0 million in Q1 2025 compared to $13.4 million in 2024

  • EBITDA increased to $12.4 million for Q1 2025 compared to $11.6 million in 2024

• Net Earnings and Adjusted Net Earnings³

  • Adjusted net earnings decreased to $3.4 million in Q1 2025 from $3.6 million in 2024

  • Net earnings for the quarter decreased to $0.8 million in 2025 from $1.8 million in 2024

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³ Adjusted EBITDA and Adjusted Net Earnings are non-GAAP measures. See “Terminology” in K-Bro’s quarterly results press release for further information on the definition and composition of these measures.

ADVISORS

TD Securities Inc. is acting as exclusive financial advisor to K-Bro. Stikeman Elliott LLP and Burness Paull LLP are acting as legal advisors to K-Bro and Goodmans LLP is acting as legal advisor to the Underwriters.

INVESTOR EVENT AND CONFERENCE CALL DETAILS

The Corporation will hold a conference call and webcast at 4:45pm Eastern Time (2:45pm Mountain Time).

The conference call will include prepared remarks from Linda McCurdy, President and CEO, and Kristie Plaquin, Chief Financial Officer. There will be no question-and-answer session.

To join the conference call without operator assistance, you may register and enter your phone number at https://app.webinar.net/daN9YMyY8DE to receive an instant automated call back.

A replay of the call will be available until May 20, 2025 at 1-888 660 6345 (entry code: 28647#).

The first quarter analyst call originally scheduled for Thursday, May 15, 2025 has been cancelled.

DESCRIPTION OF K-BRO

K-Bro is the largest owner and operator of laundry and linen processing facilities in Canada. K-Bro provides a comprehensive range of general linen and operating room linen processing, management and distribution services to healthcare institutions, hotels and other commercial accounts. K-Bro currently operates eleven processing facilities in eight Canadian cities: Québec City, Montréal, Toronto, Regina, Edmonton, Calgary, Vancouver and Victoria.

Fishers was established in 1900 and is an operator of laundry and linen processing facilities in Scotland, providing linen rental, workwear hire and cleanroom garment services to the hospitality, healthcare, manufacturing and pharmaceutical sectors. Fishers' client base includes major hotel chains and prestigious venues across Scotland and the North East of England. The company operates five sites in Scotland and the North East of England with facilities in Cupar, Perth, Newcastle, Livingston and Coatbridge.

Shortridge has operated as a family run business since the 1990s and is based in Cumbria, with plants in Workington, Dumfries and a distribution depot in Darlington. It specializes in providing high quality laundry services to local independent hospitality businesses, including hotels, B&Bs, self-catering units and restaurants.

Additional information regarding the Corporation including required securities filings are available on our website at www.k-brolinen.com and through SEDAR+ at www.sedarplus.ca.

DESCRIPTION OF STAR MAYAN

Star Mayan is an investment and holding company which owns 100% interests in three operating businesses: Synergy, Grosvenor and AeroServe. Star Mayan is a leading commercial laundry business in England, serving the healthcare and hospitality markets. Typical services offered include processing, management and distribution of healthcare and hospitality linens, including sheets, blankets, towels, surgical gowns and other linen. Star Mayan has seven operating facilities strategically located across England: Bermondsey, Derby, Dunstable, Sheffield, Slough (2), and St. Helens, in addition to a distribution depot in Manchester.

NON-IFRS MEASURES

This press release makes reference to certain non-IFRS financial measures that are not recognized measures under International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) and do not have a standardized meaning prescribed by IFRS and are therefore considered non-GAAP measures. These measures are provided as additional information to complement IFRS financial measures by providing further understanding of the Corporation’s results of operations from management’s perspective. Accordingly, these non-IFRS financial measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. Non-IFRS financial measures disclosed in this press release include “Adjusted EBITDA”, “EBITDA” and “Adjusted Net Earnings” which are defined as follows:

EBITDA (Earnings before interest, taxes, depreciation and amortization) comprises revenues less operating costs before financing costs, capital asset and intangible asset amortization, and income taxes. EBITDA is a sub-total presented within the statement of earnings in accordance with the amendments made to IAS 1 which became effective January 1, 2016. EBITDA is not considered an alternative to net earnings in measuring K-Bro’s performance. EBITDA should not be used as an exclusive measure of cash flow since it does not account for the impact of working capital changes, capital expenditures, debt changes and other sources and uses of cash, which are disclosed in the consolidated statements of cash flows.

Adjusted EBITDA is a measure which has been reported in order to assist in the comparison of historical EBITDA to current results. “Adjusted EBITDA” is defined as EBITDA (defined above) with the exclusion of certain material items that are unusual in nature, infrequently occurring or not considered part of our core operations. This includes transaction costs, structural finance costs, transition and integration costs, restructuring costs, gains/losses on settlement of contingent consideration and any other non-recurring transactions. The Corporation believes this non-GAAP definition provides more meaningful reflections of normalized financial performance from operations and will enhance period-over-period comparability.

Adjusted Net Earnings is a non-GAAP measure defined to exclude certain amounts which management does not consider indicative of ongoing operating performance. This includes transaction costs, structural finance costs, transition and integration costs, restructuring costs, gains/losses on settlement of contingent consideration and any other non-recurring transactions. The Corporation believes this non-GAAP definition provides more meaningful reflections of normalized financial performance from operations and will enhance period-over-period comparability.

FORWARD LOOKING STATEMENTS

This news release contains forward-looking information that represents internal expectations, estimates or beliefs concerning, among other things, future activities or future operating results and various components thereof. In particular, this news release contains forward-looking statements pertaining to the Corporation’s business strategy, plans and other expectations, beliefs, goals and objectives, including relating to: the Acquisition; the expected closing date of the Acquisition; anticipated benefits arising from the Acquisition, including anticipated synergies and accretive value to the Corporation and its shareholders, increased expansion opportunities and enhanced revenue diversification; the financing of the Acquisition, including statements regarding the Offering, as well as the Corporation’s expectations with respect thereto, including the size of the Offering and the completion and timing thereof; the timing of the distribution of the Subscription Receipts pursuant to the Offering and the distribution of Common Shares upon closing of the Acquisition; the effects of the Acquisition on the Corporation’s financial and operational outlook and performance following the closing of the Acquisition and the completion of the Offering; the listing on the TSX of the Subscription Receipts and Common Shares issuable pursuant to the terms of the Subscription Receipts, including the Subscription Receipts issuable pursuant to the Over-Allotment Option; and the Corporation’s corporate strategy and its financial guidance and outlook. The use of any of the words “anticipate”, “continue”, “expect”, “may”, “will”, “project”, “intend”, “should”, “believe”, and similar expressions suggesting future outcomes or events are intended to identify forward-looking information. Statements regarding such forward-looking information reflect management's current beliefs and are based on information currently available to management.

These statements are not guarantees of future performance and are based on management's estimates and assumptions that are subject to risks and uncertainties, which could cause the Corporation’s actual performance and financial results in future periods to differ materially from the forward-looking information contained in this news release. Such information is based on numerous assumptions regarding present and future business strategies and the environment in which the Corporation will operate in the future, including expected volumes and revenues from certain contracts, expected impact of labour cost initiatives, expected levels of capital expenditure and ability to achieve goals. In particular, the assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information described above include the expectations that: Star Mayan will be successfully integrated into the Corporation’s existing business on the timeline currently established by management; the Acquisition will enhance the Corporation’s ability to retain and attract new business in the U.K.; the Corporation will be able to achieve the expected cost savings associated with the integration of Star Mayan; the Corporation will be able to retain key employees of Star Mayan in connection with its integration into the Corporation’s business; future economic and business conditions and other factors in the U.K. will remain stable and will not materially deteriorate; Star Mayan’s business will continue to perform in a manner that is consistent with historical results; the diversity of Star Mayan’s revenue sources will remain consistent with historical results; the information (including financial information) provided by Star Mayan to the Corporation during its due diligence for the Acquisition was accurate and complete; and there are no significant undisclosed costs or liabilities associated with the Acquisition.

In evaluating these forward-looking statements, investors should also consider various risk factors, which, if realized, could cause the Corporation’s actual results to differ materially from those expressed or implied in forward-looking statements, Such risk factors include, but are not limited to risks relating to: the Acquisition, including the ability of the Corporation and the shareholders of Star Mayan to close the Acquisition on a timely basis or at all; the possibility of undisclosed material liabilities, disputes or contingencies relating to the Acquisition and the Corporation more generally; the failure to realize the anticipated benefits or synergies of the Acquisition following completion thereof due to integration or other issues; challenges or delays in achieving synergies and integration targets; the inability to complete the Offering or other necessary financing arrangements in respect of the Acquisition in accordance with management’s current expectations or at all; risks associated with historical and pro forma financial information; adverse general economic and market conditions in Canada and the U.K., including in connection with actual and threatened tariff policies and other trade barriers; the diversion of management's time and focus from other business concerns; the use of resources that may be needed in other parts of our business; the Corporation's competitive environment; utility costs, minimum wage legislation and labour costs; the Corporation's dependence on long-term contracts with the associated renewal risk and the risks associated with (i) maintaining short term contracts; (ii) increased capital expenditure requirements; and (iii) reliance on key personnel; changing trends in government outsourcing; changes or proposed changes to minimum wage laws in Ontario, British Columbia, Alberta, Quebec, Saskatchewan and the U.K.; textile demand; availability and access to labour; rising wage rates in all jurisdictions the Corporation operates; foreign currency risk; and certain other risks and uncertainties detailed in the Annual Information Form for the year ended December 31, 2024, Management’s Discussion and Analysis for the years ended December 31, 2024 and 2023 and Management’s Discussion and Analysis for the three months ended March 31, 2025 and from time to time in the Corporation’s public disclosure documents available at www.sedarplus.ca and the Corporation’s website at www.k-brolinen.com.

Although the forward-looking information contained in this news release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Certain statements regarding forward-looking information included in this news release may be considered “financial outlook” for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this news release. Forward-looking information included in this news release includes the expected annual healthcare revenues to be generated from the Corporation's contracts with new customers, calculation of costs, including one-time costs impacting the quarterly financial results, anticipated future capital spending and statements with respect to future expectations on margins and volume growth.

All forward-looking information in this news release is qualified by these cautionary statements. Forward-looking information in this news release is presented only as of the date made. Except as required by law, the Corporation does not undertake any obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

This news release also makes reference to certain measures in this document that do not have any standardized meaning as prescribed by IFRS and, therefore, are considered non-GAAP measures. These measures may not be comparable to similar measures presented by other issuers. Please see “Non-IFRS Measures” for further discussion.

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