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MTY Food Group to Acquire Restaurant Operator BBQ Holdings for USD 200m
Friday 12 August 2022

Canada-based restaurant franchisor MTY Food Group Inc (TSX: MTY) has entered into a definitive merger agreement under which it will acquire all of the issued and outstanding common shares of US-based restaurant franchisor and operator BBQ Holdings, Inc (NASDAQ: BBQ) for cash consideration of USD 17.25 per BBQ Holdings share representing total transaction value of approximately USD 200m (CDN 257m), including BBQ Holdings' net debt, the group said.

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 US, 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 9, 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 USD 685m to USD 725m and USD 25.5m and USD 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 US 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 restaurant brands to its network which will reach a total of approximately 7,000 locations, including over 3,900 in the United States.

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.

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.

National Bank Financial is acting as sole financial advisor to MTY and Morrison and 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.

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 multibranded strategy.
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Date Published: 12/08/2022

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