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The Book Wars 'Trilogy'

[Toronto, CANADA] In an effort to both mollify shareholders and flex its financial muscle, Chapters Inc. has announced it expects to generate revenues of $770-million (CDN) and EBITDA (earnings before interest, taxes, depreciation and amortization) of $60.8-million (CDN) in the upcoming fiscal year, which ends March, 2002.

Chapter's forecast arrives on the heels of a hostile takeover bid mounted by Trilogy Retail Enterprises, a private company owned by Gerald Schwartz, chief executive officer of Onex Corp., and his wife, Heather Reisman, chief executive officer of rival book behemoth Indigo Books, Music and more Inc.

Trilogy announced its takeover bid for Chapters on November 28, 2000, which includes the purchase of approximately 43 percent of the outstanding common shares of Chapters at $13 per common share. Between December 14 and December 21, Trilogy acquired an aggregate of 125,000 common shares of Chapters through The Toronto Stock Exchange. Such shares were acquired at an average price of $11.74 per share.

However, according to Ian Young, chief financial officer of Chapters, Trilogy's bid is far off base. "Clearly, [our financial forecast] demonstrates how inadequate Trilogy's partial bid is; even if Trilogy's bid were for all the shares at $13, and including the company's $54 million of long term debt, with 11.4 million shares outstanding, Trilogy's bid would value Chapters at less than 3.5 times EBITDA."

In response to Trilogy's bid, Chapters has proposed to buy back the 31 percent stake in Chapters Online it does not own for $18.4-million (CDN) and the 15 percent of its warehouse division, Pegasus, for $7.5-million in shares.



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