Patties Foods : PFL enters into Scheme Implementation Deed (Link)

f6c2d372-1229-4795-8709-629ed32aed0e.pdf

Patties Foods Ltd‌ ABN 62 007 157 182 Operations Corporate Office 161-169 Princes Highway Chifley Business Park Bairnsdale VIC 3875 Level 2, 1 Joseph Avenue PO Box 409 Mentone VIC 3194 Bairnsdale VIC 3875 PO Box 115‌ Phone: [phone] Dingley VIC 3172
Admin Fax: Sales Fax: info@patties www.patties.‌ 1 June 2016	03 5152 1135 Phone: [phone] 03 5152 1054 Fax : [phone] .com.au [e-mail] com.au www.patties.com.au

Announcements Officer‌

Company Announcements Platform ASX Limited‌‌

South Rialto Tower 525 Collins Street

MELBOURNE VIC 3000

Patties Foods Limited ("Patties" or the "Company") Enters into Scheme Implementation Deed‌

Key Points:

• Patties has entered into a Scheme Implementation Deed with Australasian Foods Bidco Pty Ltd ("BidCo"), an entity owned by funds managed or advised by Pacific Equity Partners, under which it is proposed that BidCo will acquire 100% of the share capital of Patties‌‌‌‌‌

• $1.65 per share cash offer, inclusive of a special dividend of up to $0.25 per share, with an equity alternative

• Opportunity for eligible shareholders, subject to their marginal tax rate, to receive up to

  $0.107 per share of additional benefit from franking credits attached to the special dividend, implying a total value of up to $1.757 per share

• Patties Directors unanimously recommend shareholders vote in favour of the Scheme, subject to no superior proposal emerging and an independent expert determining that the Scheme is in the best interest of Patties shareholders

• Patties Chairman, Mark Smith said "whilst the Board remains confident in management's plans for growth and innovation in the core brands and the business is experiencing strong momentum, the Scheme represents an attractive value for shareholders"‌‌‌

• Scheme meeting expected to be held in late August, with Scheme implementation in September 2016

• Members of Patties' founding Rijs family, which together hold 36.6% of total issued shares (including the interests of Mr Harry Rijs and Mr Richard Rijs, who are Directors of Patties), have each indicated they intend to vote in favour of the Scheme, in the absence of the Board recommending a superior proposal and subject to an independent expert determining that the Scheme is in the best interest of Patties shareholders

The Board of Patties Foods Limited today announced that it has entered into a Scheme Implementation Deed ("SID") with Australasian Foods Bidco Pty Ltd ("BidCo"), an entity owned by funds managed or advised by Pacific Equity Partners Pty Limited ("PEP"), or its affiliates, under which it is proposed that BidCo will acquire 100% of the share capital of Patties by way of a scheme of arrangement (the "Scheme").

If the Scheme is implemented, eligible Patties shareholders will receive total payments of

$1.65 per Patties share, comprising:

• A special dividend of up to and including $0.25 per Share paid by Patties on or before the Scheme Implementation Date, which is expected to be fully franked ("Special Dividend"); plus

• $1.65 in cash per share less the amount per Share of the Special Dividend, with an equity alternative ("Scheme Consideration").

  The total payment of $1.65 per share values Patties' fully diluted equity1at approximately

  $231.8m and represents a:

• 31.3% premium to the undisturbed volume weighted average price (VWAP2) of Patties shares during the 1 month leading up to and including 27 May of $1.26 (27 May being the trading day prior to Patties' announcement that it had received a non-binding, conditional and incomplete proposal from PEP);

• 38.6% premium to the undisturbed 3-month VWAP to 27 May of $1.19;

• 42.4% premium to the undisturbed 6-month VWAP to 27 May of $1.16; and

• 9.5x EV / FY15 Underlying EBITDA.3

If the Special Dividend is $0.25 per Share, those shareholders who are entitled to a refundable tax offset for franking credits attached to the Special Dividend of this amount are expected to receive, subject to their marginal tax rate, an additional benefit valued at $0.107 per share, which in addition to the $1.65 in payments per share, provides to those shareholders a total implied value of $1.757 per share. Any additional benefit will be less if the Special Dividend amount is less. Whether a shareholder will be in a position to derive the full benefit of the franking credits will depend on their particular circumstances.

All Patties shareholders on the register at 7.00pm (Melbourne time) on the Special Dividend record date will be entitled to receive the Special Dividend. The amount and record date for the Special Dividend will be announced if Patties shareholders approve the Scheme at a meeting to be convened by order of the Supreme Court of Victoria.

The payment and amount of the Special Dividend is at the discretion of the Patties Board. To the extent Patties does not pay a Special Dividend, or declares a Special Dividend of less than

$0.25, the reduction in the Scheme Consideration will be commensurately less, such that the total payments received by Patties shareholders will remain $1.65 per Patties share.

Equity Alternatives

Under the Scheme, equity alternatives are proposed which would enable Patties shareholders to retain an indirect interest in the business.

Subject to certain conditions, Patties shareholders will have the option to elect to receive the

$1.404Scheme Consideration in the following ways:

1 Fully diluted shares on issue expected to be approximately 140.5 million upon implementation of the Scheme

2 Volume weighted average price based on cumulative trading volume

3 EV calculated using fully diluted shares on issue and net debt of $74.6m as at 31 December 2015. FY15 Underlying EBITDA of $32.3m

4 Assuming a Special Dividend amount of $0.25 per Share. The payment and amount of the Special Dividend is at the

discretion of the Patties Board. To the extent Patties does not pay a Special Dividend, or declares a Special Dividend of

Page 2 of 6

1. All Cash Consideration: $1.40 in cash; or

2. Maximum Equity Consideration: 1 Class B share in Australasian Foods Holdco Pty Limited ("HoldCo"), a newly incorporated acquisition entity, subject to any scale back to ensure the total number of Class B shares do not exceed 45% of the total shares on issue in HoldCo ("Scrip Scale Back"); or

3. Mix-and-Match: Shareholders can elect to receive Class B shares in HoldCo in exchange for between 50% and 100% of their Patties shares (subject to the Scrip Scale Back) and $1.40 in cash for the remainder of their Patties Shares.

The Maximum Scrip Consideration and Mix-and-Match alternatives (the "Equity Alternatives") will only operate if elections made would result in Patties shareholders holding, in aggregate, at least 5% of the issued share capital of HoldCo following the implementation of the Scheme. In the event this criterion is not satisfied, all Patties shareholders will receive the All Cash Consideration.

Patties shareholders that receive Class B shares in HoldCo will become parties to the HoldCo Shareholders Agreement, which is included as a schedule to the Scheme which is itself a schedule to the SID. Under the terms of the HoldCo Shareholders Agreement, Class B shareholders will have different voting and other rights to those currently applicable to Patties ordinary shares.

Patties' Board Unanimously Recommends the Scheme

The Directors of Patties unanimously recommend shareholders vote in favour of the Scheme at the Scheme meeting and they also recommend that shareholders should, subject to their views on the Equity Alternatives, elect to receive the All Cash Consideration. The Directors make no recommendation in relation to the Equity Alternatives.

Each Director of Patties intends to vote all the Patties shares held or controlled by them in favour of the Scheme.

The Directors' recommendation and voting intentions as set out above are subject to no superior proposal emerging and an independent expert determining that the Scheme is in the best interest of Patties shareholders.

The Board advises that Patties shareholders should read the Explanatory Booklet to be provided in July, and seek appropriate advice before accepting the Equity Alternatives.

Patties Chairman, Mark Smith, said that the Board had reached its unanimous recommendation after extensive discussions and negotiations with PEP in relation to its proposal.

"Whilst the Board remains confident in management's plans for growth and innovation in the core brands and the business is experiencing strong momentum, the Scheme represents an attractive value for shareholders," said Mr Smith.

Rijs Family Voting Intentions

Members of Patties' founding Rijs family, which together hold 36.6%5of total issued shares (including the interests of Mr Harry Rijs and Mr Richard Rijs, who are Directors of Patties), have each indicated they intend to vote in favour of the Scheme, in the absence of the Board recommending a superior proposal and subject to an independent expert determining that the Scheme is in the best interest of Patties shareholders.

Details of the Scheme Implementation Deed

less than $0.25 per Share, the reduction in the Scheme Consideration will be commensurately less, such that the total payments received by Patties shareholders will remain $1.65 per Patties share.

5 Based on last substantial shareholder notices disclosed to ASX, as set out in the Patties 2015 Annual Report.

Page 3 of 6

The implementation of the Scheme is subject to a number of customary conditions including the approval of Patties' shareholders and the Supreme Court of Victoria, no material adverse change or prescribed occurrence, as well as the approval of Australia's Foreign Investment Review Board ("FIRB"). An application for such approval will be submitted by PEP to FIRB for its consideration.

PEP has advised Patties that the Scheme proposal is fully funded on customary terms.

The SID contains customary exclusivity provisions including no shop and no talk restrictions, a notification obligation and a matching right, subject to Patties Directors' fiduciary obligations. The SID also details circumstances under which a break fee may be payable to PEP, or a reverse break fee payable to Patties.

A copy of the executed SID with its attachments accompanies this announcement.

Indicative Timetable and Next Steps

Patties shareholders do not need to take any action at the present time.

An Explanatory Booklet containing among other things information relating to the Scheme, reasons for the Directors' unanimous recommendation, details of the Scheme meeting and the Independent Expert's report is expected to be sent to shareholders in July 2016.

Shareholders will be given the opportunity to vote on the Scheme at a meeting which is expected to be held in late August 2016. Subject to shareholder approval and the other conditions of the Scheme being satisfied, the Scheme is expected to be implemented in September 2016.

Patties is being advised by Greenhill & Co. and Minter Ellison.

ENDS

For further information please contact:

Analysts / Investors: Media:

Roger Feletto Peter Brookes

Managing Director Managing Director - Sydney

& Co-Head of Greenhill Australia Citadel MAGNUS Greenhill & Co.

[phone] [phone]

About Patties Foods Limited

Patties Foods Limited (ASX:PFL) listed in November 2006 and is the leading Australian-owned branded frozen food company, with market leadership in the frozen savoury and frozen dessert segments. Iconic brands in the Patties Foods portfolio include FOUR'N TWENTY, Patties, Herbert Adams, Nanna's and Chef's Pride. PFL manufactures and markets quality food products for the supermarket, petrol & convenience, catering and general foodservice channels in all parts of Australia.

FOUR'N TWENTY is Australia's favourite meat pie. It is the number 1 branded range of meat pies in Australia across all retail markets including supermarkets, route trade and convenience stores. It is the number 1 selling pie at the footy being available at most major sporting venues in Australia.

Page 4 of 6