ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

Toys “R” Us Central Europe Sale

Toys “R” Us, Inc. (the “Company”) and Smyths Toys Superstores (“Smyths Toys”) announced on April 21, 2018 that they have entered into a definitive agreement under which Smyths Toys will acquire Toys “R” Us’ operations in Germany, Austria and Switzerland, for a headline enterprise value of €80 million, on a cash-free and debt-free basis, and an estimated aggregate purchase price of €79 million, of which up to €37 million may be escrowed at closing with release subject to certain conditions. The Company’s Central European business, in fiscal year 2018, is forecasted to generate Adjusted EBITDA of €22 million, after Information Technology and Administrative Support Service Agreement (ITASSA) expense of €5 million and royalties of €13 million. Smyths Toys intends to rebrand the stores under their own banner. The Company’s sale of its Central European business is subject to the approval of the United States Bankruptcy Court for the Eastern District of Virginia (the “Bankruptcy Court”).

Toys “R” Us (Canada) Ltd. Sale

On April 19, 2018, Toys “R” Us-Delaware, Inc. (“Toys Delaware”), a subsidiary of the Company, entered into a stalking horse share purchase agreement (“Agreement”) with Fairfax Financial Holdings Limited (the “Buyer”) to sell the equity interests (the “Shares”) of Toys “R” Us (Canada) Ltd. (“Toys Canada”). Under the terms of the Agreement, the Shares would be sold for a base purchase price of CDN$300 million, subject to certain adjustments in accordance with the terms and conditions of the Agreement. In addition, an amount equal to five percent of the base purchase price will be escrowed in respect of a final working capital adjustment based on audited working capital.

The auction is currently scheduled to be held on April 23, 2018 at the offices of Kirkland & Ellis LLP in New York, and Toys Delaware expects to seek a final order (the “Canadian Equity Sale Order”) from the Bankruptcy Court at a hearing currently scheduled for April 24, 2018 at 10:00 am prevailing Eastern Time at the Bankruptcy Court.

The Agreement is subject to customary closing conditions of a transaction of this type, including, among other things, the following:

 

    The issuance of a Canadian Equity Sale Order by the Bankruptcy Court on or prior to April 30, 2018 and by the Ontario Superior Court of Justice (Commercial List) (the “CCAA Court”) prior to May 4, 2018;

 

    Designation of the Buyer as the successful bidder in accordance with the Bidding Procedures Order on or before April 25, 2018, or such later date as the auction pursuant to the Bidding Procedures Order concludes (but no later than April 27, 2018);

 

    Receipt of approval under the Competition Act (Canada); and

 

    All other required court approvals shall have been issued and become final on or before May 31, 2018, as may be extended subject to the terms and conditions of the Agreement, but no later than June 29, 2018.

In addition, all of Toys Canada’s outstanding indebtedness under the Superpriority Secured Debtor-in-Possession Credit Agreement dated as of September 22, 2017 would be repaid by the Buyer on or before closing.