MONTREAL, Aug. 9, 2022
/CNW Telbec/ - MTY Food Group Inc. ("MTY" or the "Company")
(TSX: MTY) and BBQ Holdings, Inc. ("BBQ Holdings") (NASDAQ: BBQ)
today announced they have entered into a definitive merger
agreement (the "Merger Agreement") under which MTY would acquire
all of the issued and outstanding common shares of BBQ Holdings for
cash consideration of US$17.25 per BBQ Holdings share representing
total transaction value of approximately US$200 million
(C$257 million) (the "Transaction"),
including BBQ Holdings' net debt. The terms and conditions of the
Merger Agreement were unanimously approved by the Boards of
Directors of both companies. The Transaction is subject to
customary closing conditions including receipt of applicable
regulatory approvals. Upon completion of the Transaction, BBQ
Holdings will become a subsidiary of MTY and the shares of BBQ
Holdings will be de-listed from NASDAQ.
BBQ Holdings is a franchisor and operator of casual and fast
casual dining restaurants across 37 states in the U.S.,
Canada, and United Arab Emirates. Its flagship restaurant
brands operate under the "Famous Dave's", "Village Inn", "Barrio
Queen", and "Granite City", banners. As of August 8, 2022, BBQ Holdings operates over 200
franchised and over 100 corporate-owned restaurants. For the 2022
fiscal year ending January 1, 2023,
and as publicly disclosed by BBQ Holdings, the company is expected
to generate twelve-month run-rate system sales and cash EBITDA
between US$685M to US$725M and US$25.5M and US$27.5M, respectively.
MTY is a leading franchisor in the North American restaurant
industry. As of May 31, 2022, its
network had 6,660 locations in operation, 99% of which are
franchised. The Company established its presence in the U.S. with
the acquisition of Kahala Brands in
July 2016 and has since continued to
grow its footprint in the country through new restaurant openings
and acquisitions. With this Transaction, MTY will add leading
restaurant brands to its network which will reach a total of
approximately 7,000 locations, including over 3,900 in the United States.
"This transaction represents another key acquisition for MTY as
we further scale and enhance our existing U.S. portfolio through
the addition of nine unique brands. The transaction combines highly
complementary businesses, including BBQ Holdings' exciting casual
and fast casual brands. BBQ Holdings' restaurants are well
established within each of their respective markets with a strong
network of franchise partners, well-run corporate owned locations,
and a best-in-class management team. We are excited about the
prospects of adding BBQ Holdings' brands to the MTY family and we
look forward to welcoming Jeff
Crivello and his team, and their franchise
partners," commented Eric
Lefebvre, Chief Executive Officer of MTY.
Jeff Crivello, Chief Executive
Officer of BBQ Holdings, commented "We are thrilled to partner with
MTY and its talented team of restaurant operators. Over the
past four years we have significantly grown revenues and our
restaurant portfolio while building a world-class team of
entrepreneurs. We look forward to continuing the execution of our
three pillars of growth, which we believe align very closely with
MTY's vision. With more than 80 brands, MTY brings vast
buying power and a team of industry leaders who will provide
additional support to our franchise partners. As our founder
Dave Anderson says, we strive to
deliver famous experiences with our 'yes is the answer, what's the
question' hospitality."
Transaction Highlights
- Adds well-established quality brands to MTY's portfolio of
restaurants
-
- 9 new restaurant brands adding to MTY's portfolio
- System sales expected to exceed C$4.8B in aggregate following the Transaction
based on BBQ Holdings projected sales representing an increase of
23% compared to MTY's current levels
- Further expands MTY's geographic footprint in the United States
-
- Broadens MTY's U.S. footprint with over 3,900 locations in the
country, representing an increase of 9% in locations
- MTY's system sales from the U.S. expected to increase from 58%
to 66% of total system sales post Transaction
- Diversifies MTY's restaurant concepts with greater exposure to
casual dining and fast casual dining concepts
-
- Casual dining and fast casual dining concepts expected to
increase from 29% of current MTY system sales to 43% of MTY's total
pro forma system sales at transaction close
- BBQ Holdings' brands bring a complementary restaurant concept
mix while reducing the level of seasonality of the business
- Highly talented management and employee base
-
- Seasoned management team with a strong operational track record
and history of successful M&A
- Supported by a well-established organizational structure and
experienced employee base
- Expected to be immediately accretive to MTY's free cash flow
per share
-
- The Transaction represents a 7.5x multiple of BBQ Holdings'
mid-point FY2022E run-rate cash EBITDA guidance of US$26.5M
Transaction Financing
The Transaction is not subject to any financing condition and
the consideration will be 100% funded in cash. MTY will use its
cash on hand and its existing credit facility to fund the cash
consideration and to repay BBQ Holding's net debt outstanding as of
the close of the Transaction.
MTY's pro forma Net Debt / EBITDA (excluding leases) expected to
stand at approximately 2.4x upon closing, which remains within a
comfortable zone offering good flexibility should more
opportunities surface in the near future.
Transaction Details
Under the terms of the Merger Agreement, a subsidiary of MTY
will commence a tender offer to purchase all of the outstanding
shares of BBQ Holdings common stock for US$17.25 per share in cash. The tender offer is
subject to customary conditions, including antitrust clearance and
the tender of a majority of the outstanding shares of BBQ Holdings
common stock. Following successful completion of the tender offer,
MTY would acquire all remaining shares not tendered in the offer
through a merger at the same price as in the tender offer.
The Transaction is expected to close by Q4, 2022. There is no
assurance the Transaction will be completed as described above or
at all, or that the anticipated closing date will materialize.
Following the close of the Transaction, the shares of BBQ Holdings
will be de-listed from NASDAQ, will be a privately held subsidiary
of MTY and will continue to be operated as independent brands.
Transaction Approvals &
Support
The Transaction has been unanimously approved by the board of
directors of MTY and has the unanimous support of the BBQ Holdings
board of directors. Certain key shareholders of BBQ Holdings have
signed support agreements in favor of the Merger Agreement,
representing in aggregate approximately 37% of the shares currently
outstanding. The consummation of the Transaction is conditioned
upon, among other things, the tender of at least 50% of BBQ
Holdings fully-diluted shares of common stock and receipt of
applicable regulatory approvals.
Financial and Legal
Advisors
National Bank Financial Inc. is acting as sole financial advisor
to MTY and Morrison & Foerster LLP is acting as its legal
advisor. Kroll, LLC is acting as financial advisor to BBQ Holdings
and Dentons Sirote PC and Lathrop GPM LLP are acting as its legal
advisors.
Notice to Investors
The tender offer described in this press release has not yet
commenced. This press release is not a recommendation, an offer to
purchase or a solicitation of an offer to sell shares of BBQ
Holdings. At the time the tender offer is commenced, Grill Merger
Sub, Inc., a Minnesota corporation
("Merger Sub") and wholly owned subsidiary of MTY Franchising
USA, Inc., a wholly owned
subsidiary of MTY, will file a tender offer statement and related
exhibits with the U.S. Securities and Exchange Commission (the
"SEC") and BBQ Holdings will file a solicitation/recommendation
statement with respect to the tender offer. Investors and
stockholders of BBQ Holdings are strongly advised to read the
tender offer statement (including the related exhibits) and the
solicitation/recommendation statement, as they may be amended from
time to time, when they become available, because they will contain
important information that stockholders should consider before
making any decision regarding tendering their shares. The tender
offer statement (including the related exhibits) and the
solicitation/recommendation statement will be available at no
charge on the SEC's website at www.sec.gov. In addition, the tender
offer statement and other documents that Merger Sub files with the
SEC will be made available to all stockholders of BBQ Holdings free
of charge from the information agent for the tender offer. The
solicitation/recommendation statement and the other documents filed
by BBQ Holdings with the SEC will be made available to all
stockholders of BBQ Holdings free of charge at
https://ir.bbqholdco.com.
Further information regarding the Transaction will be contained
in the Merger Agreement, copies of the Agreement will be available
on SEDAR at www.sedar.com and EDGAR at www.sec.gov.
All dollar values herein presented in Canadian dollars unless
otherwise indicated. US dollar values converted to Canadian dollars
at 1.29.
Non–IFRS Measures
This news release makes reference to certain non–IFRS measures.
These measures are not recognized measures under IFRS, do not have
a standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other
companies. Rather, these measures are provided as additional
information to complement those IFRS measures by providing further
understanding of the MTY or BBQ Holdings results of operations from
management's perspective. Accordingly, they should not be
considered in isolation nor as a substitute for analysis of MTY or
BBQ Holdings financial information reported under IFRS. [MTY or BBQ
Holdings use non-IFRS measures including "System Sales" and
"EBITDA" to provide investors with supplemental measures of its
operating performance and thus highlight trends in its core
business that may not otherwise be apparent when relying solely on
IFRS financial measures. MTY and BBQ Holdings also believe that
securities analysts, investors and other interested parties
frequently use non-IFRS measures in the evaluation of issuers. MTY
or BBQ Holdings management also uses non-IFRS measures in order to
facilitate operating performance comparisons from period to period,
to prepare annual operating budgets, and to determine components of
management compensation.
"System Sales" represents the net sales received from restaurant
guests at both corporate and franchise restaurants including
take-out and delivery customer orders. System Sales includes sales
from both established restaurants as well as new
restaurants. MTY and BBQ Holdings management believes System
Sales provides meaningful information to investors regarding the
size of MTY's and BBQ Holdings restaurant networks, the total
market share of their brands and the overall financial performance
of their brands and restaurant owner bases, which ultimately
impacts MTY and BBQ Holdings consolidated financial
performance.
"EBITDA" is defined as net earnings (loss) from continuing
operations before net interest expense and other financing charges,
losses (gains) on derivative, income taxes, depreciation of
property, plant and equipment, amortization of intangible assets,
and impairment of assets, net of reversals.]
Forward Looking
Information
Certain information in this news release constitutes
"forward-looking" information that involves known and unknown risks
and uncertainties future expectations and other factors which may
cause the actual results, performance or achievements of MTY, BBQ
Holdings or the combined company to be materially different from
any future results, performance or achievements expressed or
implied by such forward-looking information. All statements other
than statements of historical facts included in this news release
may constitute forward looking statements within the meaning of
Canadian securities legislation and regulation. In particular, this
news release contains statements that may constitute forward
looking statements within the meaning of Canadian securities
legislation and regulation regarding, without limitation, the
completion of the Transaction, the potential closing date of the
Transaction and the potential impact of the Transaction on the
combined entity's future operations, the suitability of the
Transaction for MTY and BBQ Holdings; the effect of the Transaction
on BBQ Holdings stakeholders; the expected EBITDA, revenue, system
sales and potential growth of the combined entity; potential future
acquisition opportunities. Forward-looking statements can generally
be identified by the use of forward-looking terminology such as
"anticipate", "estimate", "may", "will", "expect", "believe",
"plan" or variations of such words and phrases, or by the use of
words or phrases which state that certain actions, events or
results may, could, would, or might occur or be achieved. These
forward-looking statements are not facts or guarantees of future
performance, but only reflections of estimates and expectations of
MTY's and BBQ Holdings management and involve a number of risks,
uncertainties, and assumptions.
The forward-looking information contained in this news release
reflects MTY's and BBQ Holdings current expectations and
assumptions regarding future events and operating performance and
speaks only as of the date of this news release. These expectations
and assumptions include, but are not limited to: the currency
exchange rates used to derive Canadian dollar expectations; market
acceptance of the Transaction; the satisfactory fulfilment of all
of the conditions precedent to the Transaction; the receipt of all
required approvals and consents including any regulatory approvals;
future results of BBQ Holdings business and operations meeting or
exceeding historical results; the success of the integration of BBQ
Holdings operations and management team with MTY's operations and
business; and market acceptance of potential future acquisitions by
MTY. While these assumptions and expectations are considered
reasonable, a number of factors could cause the actual results,
level of activity, performance or achievements to be materially
different from the expectations and assumptions of MTY and BBQ
Holdings, including those discussed in MTY's and BBQ Holdings
public filings available at www.sedar.com and www.sec.gov and in
particular for MTY, in its most recent annual information form
under "Risk Factors" and in its management's discussion and
analysis for its fiscal year ended November
30, 2021 under "Risk and Uncertainties".
Risks and uncertainties inherent in the nature of the
Transaction include without limitation the failure to receive all
required approvals and consents including any regulatory approvals
or to otherwise fulfill all of the conditions precedent to the
Transaction, in a timely manner, or at all; significant transaction
costs or unknown liabilities; failure to realize the expected
benefits of the Transaction; and general economic conditions.
Failure to receive all required approvals and consents including
regulatory, Toronto Stock Exchange, shareholder and any other
approvals or to otherwise fulfill all of the conditions precedent
to the Transaction may result in the Transaction not being
completed on the proposed terms, or at all. There can be no
assurance that the anticipated strategic benefits and operational,
competitive and cost synergies resulting from the Transaction will
be realized. In addition, if the Transaction is not completed, and
BBQ Holdings continues as an independent entity, there are risks
that the announcement of the Transaction and the dedication of
substantial resources of BBQ Holdings to the completion of the
Transaction could have an impact on BBQ Holdings business and
strategic relationships, operating results and businesses
generally, and could have a material adverse effect on the current
and future operations, financial condition and prospects of BBQ
Holdings. Furthermore, the failure of BBQ Holdings to comply with
the terms of the Agreement may, in certain circumstances, result in
BBQ Holdings being required to pay a fee to MTY, the result of
which could have a material adverse effect on BBQ Holdings
financial position and results of operations and its ability to
fund growth prospects and current operations.
Readers are further cautioned not to place undue reliance on
forward-looking information as there can be no assurance that the
plans, intentions or expectations upon which they are placed will
occur. Forward-looking information contained in this news release
is expressly qualified by this cautionary statement. Except as
required by law, neither of MTY or BBQ Holdings assumes no
obligation to update or revise forward-looking information to
reflect new events or circumstances. The purpose of the
forward-looking information contained in this new release is to,
inter alia, provide a potential financial outlook of the combined
entity and this information may not be appropriate for other
purposes. All such forward-looking statements are made pursuant to
the "safe harbor" provisions of applicable securities laws
About MTY Food Group
MTY Group franchises and operates quick-service and casual
dining restaurants under approximately 80 different banners in
Canada, the United States and internationally. Based
in Montreal, MTY is a family whose
heart beats to the rhythm of its brands, the very soul of its
multi-branded strategy. For over 40 years, it has been increasing
its presence by delivering new concepts in quick-service
restaurants and making acquisitions and strategic alliances that
have allowed it to reach new heights year after year. By combining
new trends with operational know-how, the brands forming the MTY
Group now touch the lives of millions of people every year. With
6,660 locations in operation, the many flavours of the MTY Group
have the key to responding to the different tastes and needs of
consumers today and tomorrow.
For more information about MTY or the Transaction, please
contact Eric Lefebvre, Chief
Executive Office at 1-514-336-8885 or by email at
ir@mtygroup.com or visit our website, https://mtygroup.com or
SEDAR's website at www.sedar.com under the Company's name.
About BBQ Holdings
BBQ Holdings, Inc. (NASDAQ: BBQ) is an international restaurant
company engaged in the business of franchising, and operating
casual and fast casual dining restaurants. As of August 8, 2022, BBQ Holdings has multiple brands
with over 100 Company-owned locations and over 200 franchised
locations, including ghost kitchens operating out of the kitchen of
another restaurant location or shared kitchen space. While BBQ
Holdings continues to diversify its ownership in the restaurant
community, it was founded with the principle of combining the "art
and science" of barbecue to serve up the very best of the best to
barbecue lovers everywhere. Along with a wide variety of BBQ
favorites, BBQ Holdings also operates Granite City Food and Brewery
restaurants which offer award winning craft beer and a
made-from-scratch, chef driven menu featuring contemporary American
cuisine. Village Inn and Bakers Square add a legendary family
dining element to BBQ Holdings specializing in breakfast and pies.
Tahoe Joe's is known for their
steaks and chops cooked over an open wood pellet broiler. Recently
acquired Barrio Queen adds an authentic Mexican cuisine to the
Company, and the Famous Craft Concepts brands add bar-centric
restaurants to further diversify our portfolio.
For more information about BBQ Holdings or the Transaction,
please contact InvestorRelations@bbq-holdings.com or visit our
website, https://ir.bbqholdco.com/ or the SEC website at
www.sec.gov under the BBQ Holdings name.
SOURCE MTY Food Group Inc.