GSH 2023 Notice of Meeting

GOOD SPIRITS HOSPITALITY LIMITED
NOTICE OF COMBINED SPECIAL AND ANNUAL MEETING
10 OCTOBER 2023

Dear shareholders

As you will be aware from various announcements, Good Spirits Hospitality Limited (GSH) has been conducting a lengthy competitive sale process in respect of the business and assets of GSH and two of its wholly owned subsidiaries, Good Spirits Hospitality No.1 Limited (GSH No.1) and Good Spirits Hospitality No.3 Limited (GSH No.3).

Following a strategic review by Tonnant Partners as announced on 21 December 2022, Matt Adams and Geoff Tuttle expressed their interest to the Board regarding a purchase of the assets of GSH and its subsidiaries. A committee of independent directors, being myself (John Seton) and Carl Carrington, was formed to oversee a sales process managed by Tonnant Partners as transaction adviser.

On 2 August 2023, it was announced that GSH, GSH No.1 and GSH No.3 (together, the Vendors) had entered into a conditional agreement (Sale Agreement) to sell their business and assets to Brew On Quay Limited (BOQ) (Asset Sale). BOQ is or will be owned by Richard Sigley, Geoff Tuttle (current CEO of GSH) and Jaime Dutton, who are well known in the hospitality industry, together with Matt Adams (current director and chairman of GSH). The BOQ group owns and operates three well known venues in Auckland and Waiheke Island being Brew On Quay, Charlie Farleys and Siso. Under the Sale Agreement, BOQ has nominated nine wholly owned subsidiaries to each be a purchaser of the business and assets relating to a hospitality venue operated by GSH No.1 or GSH No.3 (as applicable) (BOQ Nominees).

The aggregate purchase price is $20,701,400 plus GST (if any) and subject to usual post completion adjustments. The committee of independent directors of the Board have worked hard to achieve this outcome and believe the aggregate sale amount is fully priced. It is at the higher end of the valuation range for the business and assets of the Vendors provided to the Board by its transaction adviser, Tonnant Partners and is also within the valuation range calculated by Campbell MacPherson, as set out in section 2.3 of its Independent Appraisal Report accompanying the Notice of Combined Special and Annual Meeting. Campbell MacPherson are of the opinion that the Asset Sale is fair to the shareholders not associated with BOQ.

Subject to the sale of the business and assets being approved by the shareholders and completion of the sale occurring, the Board intends to distribute an amount of $600,000 (before deducting the costs of obtaining a binding ruling from Inland Revenue and any applicable tax deductions) to shareholders, by way of a unimputed dividend payment of approximately $0.0104 per share (Dividend). The balance remaining from the proceeds of sale (after payment of GSH's transaction costs, payment of other creditors of the business and withholding costs for liquidation and/or deregistration of the GSH group companies) will be used to part repay GSH's financier, Pacific Dawn Limited (PDL), a wholly owned subsidiary of Nomura Asia Pacific Holdings Co. Ltd.
PDL is supportive of the Asset Sale, the terms of the Sale Agreement and the payment of the Dividend. It should be noted that PDL has agreed to payment of the Dividend when it is under no obligation to do so.

Following completion of the Asset Sale, GSH will no longer own any assets and therefore it intends to delist from the NZX Main Board (subject to usual NZX conditions) and to make payment of the Dividend (subject to the Board obtaining a binding ruling from Inland Revenue as to GSH's tax position and GSH satisfying the solvency test in the Companies Act 1993). Due to the potential delay in obtaining a binding ruling from Inland Revenue, it is expected that payment of the Dividend will occur after GSH has been delisted.

After delisting, payment of the Dividend and subject to no objections being received from either secured creditors or Inland Revenue, it is intended that GSH will eventually be liquidated or deregistered from the New Zealand Companies Register under Part 17 of the Companies Act 1993. Doing so will necessitate the deregistration or liquidation of all of GSH's wholly owned subsidiaries (including GSH No.1 and GSH No.3). PDL, in its capacity as lender, has consented to GSH delisting and GSH and GSH No. 1 deregistering following completion of the Asset Sale and has agreed not to file any objection in either of those processes.

If the resolutions are approved (and in the case of the Asset Sale all conditions are satisfied), the committee of independent directors have targeted the following milestones:
• Completion of the Asset Sale on 1 November 2023;
• GSH's delisting from the NZX Main Board on or around 13 November 2023;
• Payment of the Dividend to shareholders on or before 21 December 2023; and
• Providing completion of the Asset Sale occurs on 1 November 2023, deregistration or liquidation of GSH and its subsidiaries is anticipated to be no later than 1 November 2025.
The period until 1 November 2025 is to allow time for the BOQ Nominees to obtain their own on-licenses to sell alcohol at the Venues, during which period the Vendors are required to maintain their on-licenses (in order to ensure alcohol can continue to be sold at the Venues).

It is anticipated that the BOQ Nominees will obtain all on-licenses required to operate the Venues prior to 1 November 2025, in which case GSH and its subsidiaries will be liquidated and/or deregistered before that date. However, it is known that the application process with Councils in Auckland and Hamilton takes some time and the Board is unable to (at this stage) provide a more accurate date for deregistration or liquidation. Should the process take longer than 6 months after completion of the Asset Sale, BOQ is obliged to pay the Vendors' reasonable costs and expenses related to the management and corporate maintenance of the Vendors (including any directors' fees but excluding any costs and expenses incurred by a Vendor in relation to its liquidation or deregistration).

The committee of independent directors of the Board believe that the sale of the business and assets of GSH, GSH No.1 and GSH No.3 to BOQ is the best outcome for the shareholders and unanimously recommends shareholders vote to approve all resolutions set out in the notice of meeting.

If the resolutions are not approved, the Asset Sale will not proceed and PDL may bring enforcement action to recover its debt. Under the terms of the debt financing to PDL, PDL would have the right to call upon the guarantee given by GSH and appoint receivers over the assets of GSH and/or GSH No.1. Receivers may proceed with a sale of assets to BOQ under the Sale Agreement or an alternative agreement, neither of which would require shareholder approval. Shareholders are highly unlikely to receive any return in the event of a sale of the assets of GSH and/or GSH No. 1 by receivers (or any distribution in an eventual liquidation or deregistration).

Accompanying this letter are:
• A Notice of Combined Special and Annual Meeting of Shareholders of GSH, for a meeting to be held at the offices of Buddle Findlay, Level 18, 188 Quay Street, Auckland on Thursday, 26 October 2023, commencing at 2.30pm.
• An Independent Appraisal Report in respect of the sale of business and assets of Good Spirits Hospitality Limited, Good Spirits Hospitality No.1 Limited and Good Spirits Hospitality No.3 Limited to Brew on Quay Limited from Campbell MacPherson dated 9 October 2023 which serves as an Appraisal Report where required for the purposes of the Listing Rules.

Please read the Notice of Combined Special and Annual Meeting and the accompanying Independent Appraisal Report from Campbell MacPherson fully and carefully before the meeting.
As stated above, the committee of independent directors of the Board believe the sale of the business and assets of GSH, GSH No.1 and GSH No.3 to BOQ is the best outcome for the shareholders and welcomes your consideration and support.

Yours sincerely

John Seton
Chairman of the committee of independent directors
10 October 2023

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Announcement PDF