MONTREAL, April 11, 2019 /CNW Telbec/ - MTY Food Group
Inc. ("MTY") (TSX: MTY) and Papa Murphy's Holdings, Inc. ("Papa
Murphy's") (NASDAQ: FRSH) today announced they have entered into a
definitive merger agreement (the "Merger Agreement") under which
MTY would acquire all of the issued and outstanding shares of
common stock of Papa Murphy's for cash consideration of
US$6.45 per share, representing total
transaction value of approximately US$190.0 million (C$253.2 million) (the "Transaction"), including
Papa Murphy's net debt outstanding. The purchase price per share of
Papa Murphy's common stock implies a premium of 31.9% to the Papa
Murphy's closing price on April 10,
2019 and 46.3% to the unaffected Papa Murphy's closing price
on November 7, 2018 prior to the
announcement by Papa Murphy's that it was conducting a process to
explore and evaluate strategic alternatives to maximize shareholder
value and had engaged a financial advisor to assist with the
review. 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.
MTY is a leading franchisor in the North American restaurant
industry. MTY's multi-concept model allows MTY to position itself
across a broad range of demographic, economic and geographic
sectors. As at February 28, 2019, its
network had 5,941 locations in operation, mostly all franchised,
including over 500 locations operating in 39 countries outside
North America.
Papa Murphy's is a franchisor and operator of the largest Take
'n' Bake pizza brand and the 5th largest pizza chain in
the United States, selling fresh,
hand-crafted pizzas ready for customers to bake at home. In
addition to scratch-made pizzas, Papa Murphy's offers a growing
menu of grab 'n' go items, including salads, sides and desserts.
Papa Murphy's was founded in 1981 and operated 1,331 franchised and
106 corporate-owned stores in 37 U.S. states, Canada and the United Arab Emirates as of December 31, 2018.
Eric Lefebvre, Chief Executive
Officer of MTY said, "This is an important transaction for MTY as
we add a brand with a differentiated position in pizza to our
existing U.S. portfolio. We are thrilled about the prospect of
welcoming the Papa Murphy's brand, its franchise partners and
employees, to the MTY family. Papa Murphy's is a unique concept
with over a 35 year history of providing a superior quality product
made with fresh ingredients. We believe the pizza segment is highly
attractive due to its size, fragmented nature and growth potential.
The Papa Murphy's brand is well loved by its loyal customers and is
supported by a strong network of franchise partners. We expect the
combination of these two companies and the expertise it brings to
produce tremendous opportunities for MTY's U.S. expansion
objectives."
"The board of directors and our advisors have thoroughly
evaluated all options available to us and are confident that this
agreement provides immediate value to our stockholders at a premium
over our current share price. Merging our unique, differentiated
brand with a global leader in franchised restaurant concepts will
accelerate on-going efforts to enhance our convenience and
relevance and maintain our position as the number one Take 'n' Bake
pizza chain in the United States."
said Jean Birch, Chairperson of the
board of directors of Papa Murphy's.
Transaction Highlights
- Strengthens MTY's leading portfolio of brands through the
acquisition of the 5th largest pizza chain in the
U.S.
-
- Leading Take 'n' Bake pizza concept serving award-winning,
superior quality products made with fresh ingredients.
- Increasing MTY's exposure to the robust and growing U.S. pizza
market.
- MTY's combined network to have approximately 7,378 locations
globally after completion of the Transaction with future runway for
growth.
- Complements MTY's U.S. operations and reduces seasonality of
its results.
-
- Papa Murphy's had US$809 million
System-wide Sales for the twelve-month period ended December 31, 2018.
- Papa Murphy's generated US$22.3
million in Adjusted EBITDA for the twelve-month period ended
December 31, 2018.
- Strategically timed as Papa Murphy's system is building
momentum after implementation of refreshed corporate strategy and
refocus on the brand.
-
- MTY anticipates working with Papa Murphy's to make capital
investments focused on growing top line sales and increasing
franchise partner profitability.
- MTY welcomes a seasoned management team and looks forward to
building on Papa Murphy's employees' expertise and maintaining the
current support center in Vancouver,
WA.
- Expected to be immediately accretive to MTY's EBITDA and cash
flow per share.
- MTY remains committed to pursuing its acquisition strategy. Pro
Forma MTY is expected to continue to generate significant cash flow
allowing for deleveraging and providing liquidity to pursue future
M&A opportunities.
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 Papa Murphy's common stock for US$6.45 per share in cash. The closing of the
tender offer is subject to customary conditions, including
antitrust clearance and the tender of a majority of the outstanding
shares of Papa Murphy's 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 not subject to any financing condition and
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 Papa Murphy's net debt outstanding as of
the close of the Transaction, which today is approximately
US$77.4 million.
Pursuant to the terms of the Merger Agreement, Papa Murphy's has
agreed that it will not solicit or initiate discussions regarding
any other business combination or sale of material assets. MTY has
the right to match any superior proposals. The Transaction provides
for a termination fee of approximately US$5.7 million payable by Papa Murphy's to MTY in
certain circumstances if the Transaction is not completed.
The Transaction is expected to close in the second calendar
quarter of 2019. 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, Papa Murphy's will be a wholly-owned subsidiary of MTY
and will continue to be operated as an independent brand.
Transaction Approvals
The Transaction has been unanimously approved by the board of
directors of MTY and has been unanimously approved by the board of
directors of Papa Murphy's. Each director and executive officer of
Papa Murphy's, cumulatively having beneficial ownership and control
over 2.2% of Papa Murphy's shares outstanding, have signed support
agreements to tender all of their shares into the offer. Moreover,
certain additional Papa Murphy's shareholders having beneficial
ownership and control over 49.8% of Papa Murphy's shares
outstanding have also signed such agreement to tender all of their
shares into the offer. In total, holders of approximately 52.1% of
Papa Murphy's shares have agreed to tender their shares into the
offer, subject to potential adjustments in certain circumstances
provided in the support agreement. The consummation of the
Transaction is conditioned upon the tender of a majority of Papa
Murphy's issued and outstanding shares of common stock.
Financial and Legal Advisors
National Bank Financial Inc. is acting as exclusive financial
advisor to MTY and Fasken Martineau DuMoulin LLP and Morrison &
Foerster LLP are acting as its legal advisors. North Point Advisors
LLC is acting as exclusive financial advisor to Papa Murphy's and
Perkins Coie LLP is acting as its legal advisor.
Conference Call
MTY will be available for questions on the Transaction during
its quarterly earnings conference call today April 11, 2019 at
8:30 AM EDT and will provide
supplemental slides on its corporate website at
https://mtygroup.com/. Participants are invited to access the
conference call by dialing 647-788-4922 (For all Toronto and overseas participants) and
1-877-223-4471 (For all other North American participants).
If you are unable to call in at this time, you may access a
recording of the meeting by calling 1-800-585-8367 and entering the
passcode 1483329 on your phone. This recording will be available on
April 11, 2019 as of 11:30 AM until 11:59 PM on May 10, 2019.
Notice to Investors
The tender offer described in this press release has not yet
commenced. This press release is for informational purposes only
and is not a recommendation, an offer to purchase or a solicitation
of an offer to sell shares of Papa Murphy's. The solicitation and
offer to buy Papa Murphy's shares will only be made pursuant to an
offer to purchase and related materials. At the time the
tender offer is commenced, MTY Franchising USA, Inc., a wholly owned subsidiary of MTY,
and its acquisition subsidiary will file a tender offer statement
and related exhibits with the U.S. Securities and Exchange
Commission (the "SEC") and Papa Murphy's will file a
solicitation/recommendation statement with respect to the tender
offer. Investors and stockholders of Papa Murphy's 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, including the
terms and conditions of the offer, 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 MTY Franchising
USA, Inc. or its acquisition
subsidiary files with the SEC will be made available to all
stockholders of Papa Murphy's free of charge from the information
agent for the tender offer. The solicitation/recommendation
statement and the other documents filed by Papa Murphy's with the
SEC will be made available to all stockholders of Papa Murphy's
free of charge at investors.papamurphys.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.
All dollar values herein presented in Canadian dollars unless
otherwise indicated. US dollar values converted to Canadian dollars
at 1.3326.
Non‑IFRS and Non-GAAP Measures
This news release makes reference to certain non‑IFRS and
non-GAAP measures. These measures are not recognized measures under
IFRS or GAAP, do not have a standardized meaning prescribed by IFRS
or GAAP 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 and
GAAP measures by providing further understanding of MTY or Papa
Murphy's results of operations from their respective management's
perspective. Accordingly, they should not be considered in
isolation nor as a substitute for analysis of MTY or Papa Murphy's
financial information reported under IFRS or GAAP, respectively.
MTY or Papa Murphy's use non-IFRS and non-GAAP measures including
"Adjusted EBITDA" "System-wide Sales" and "EBITDA" to provide
investors with a supplemental measure of their operating
performance and thus highlight trends in their core businesses that
may not otherwise be apparent when relying solely on IFRS or GAAP
financial measures. MTY and Papa Murphy's also believe that
securities analysts, investors and other interested parties
frequently use non-IFRS or non-GAAP measures in the evaluation of
issuers and other reporting companies. MTY or Papa Murphy's
management also uses non-IFRS and non-GAAP 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-wide Sales" represents the net sales received from
restaurant guests at both corporate and franchise restaurants
including take-out and delivery customer orders. System-wide Sales
includes sales from both established restaurants as well as new
restaurants. MTY and Papa Murphy's management believes
System-wide Sales provides meaningful information to investors
regarding the size of MTY's and Papa Murphy's 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 Papa Murphy's consolidated financial
performance.
"EBITDA" is a non-IFRS measure presented by MTY and 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.
"Adjusted EBITDA" is a non-GAAP measure presented by Papa
Murphy's and is defined as net income (loss) before interest
expense, provision for (benefit from) income taxes and depreciation
and amortization, with further adjustments to reflect the
elimination of various expenses that Papa Murphy's considers not
indicative of ongoing operations. For a reconciliation of Adjusted
EBITDA of Papa Murphy's to net income (loss) of Papa Murphy's, the
most directly comparable GAAP measure, see the earnings release of
Papa Murphy's dated March 14, 2019,
filed as Exhibit No. 99.1 to Papa Murphy's Current Report on Form
8-K dated March 14, 2019.
Forward Looking Information
Certain information in this news release may constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, as amended.
Forward-looking statements involve known and unknown risks and
uncertainties future expectations and other factors which may cause
the actual results, performance or achievements of MTY, Papa
Murphy's 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. In particular, this news
release contains statements that may constitute forward looking
statements regarding, without limitation, the potential benefits
and effects of the Transaction, the ability of the parties to
complete the Transaction and the expected timing of completion 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 Papa Murphy's, the effect of the
Transaction on Papa Murphy's stakeholders; the expected EBITDA,
revenue, liquidity, cash flow, System-wide Sales and potential
growth of the combined entity; and potential future acquisition
opportunities and capital investments. 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 Papa Murphy's management and involve
a number of risks, uncertainties, and assumptions.
The forward-looking information contained in this news release
reflects MTY's and Papa Murphy's 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; future results of Papa Murphy's
business and operations meeting or exceeding historical results;
the success of the integration of Papa Murphy's operations and
management team with MTY's operations and business; and market
acceptance of potential future acquisitions and capital investments
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 Papa Murphy's, including those discussed in MTY's public
filings available at www.sedar.com and in particular 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, 2018 under "Risk and
Uncertainties" and in Papa Murphy's public filings with the
Securities and Exchange Commission, available at www.sec.gov,
including under those discussed under "Risk Factors" in Papa
Murphy's most recent annual report on Form 10-K for the fiscal year
ended December 31, 2018.
Risks and uncertainties inherent in the nature of the
Transaction include without limitation, the failure to receive all
required approvals and consents 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 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 Papa Murphy's
continues as an independent entity, there are risks that the
announcement of the Transaction and the dedication of substantial
resources of Papa Murphy's to the completion of the Transaction
could have an impact on Papa Murphy's 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 Papa Murphy's.
Furthermore, the termination of the Merger Agreement may, in
certain circumstances, result in Papa Murphy's being required to
pay a fee to MTY, the result of which could have a material adverse
effect on Papa Murphy's financial position and results of
operations and its ability to fund growth opportunities 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 Papa Murphy's assumes no
obligation to update or revise forward-looking information to
reflect new events or circumstances. All such forward-looking
statements are made pursuant to the "safe harbour" provisions of
applicable securities laws.
About MTY Food Group
MTY Group franchises and operates quick-service and casual
dining restaurants under approximately 75 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. For over 35 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
approximately 6,000 locations, 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 Pierre Boucher or
Jennifer McCaughey, MaisonBrison, at
1-514-731-0000 or by email at pierre@maisonbrison.com or
jennifer@maisonbrison.com or visit our website,
https://mtygroup.com or SEDAR's website at www.sedar.com under
the Company's name.
About Papa Murphy's Holdings
Papa Murphy's Holdings, Inc. is a franchisor and operator of the
largest Take 'n' Bake pizza brand in the
United States, selling hand-crafted, fresh pizzas for
customers to bake at home. The Company was founded in 1981 and
currently operates over 1,400 franchised and corporate-owned stores
in 37 U.S. states, Canada, and the
United Arab Emirates. Papa
Murphy's core purpose is to help anyone with an oven and 15 minutes
serve a scratch-made meal. In addition to fresh pizzas, the Company
offers hand-crafted salads, sides and desserts to complete the
meal. Order online today at www.papamurphys.com for easy pick
up everywhere, and find Papa Murphy's on your favorite delivery
apps in select markets.
For more information about Papa Murphy's or the Transaction,
please contact Maurice Hines,
Investor Relations at 1-360-449-4008 or by email at
maurice.hines@papamurphys.com or visit our website,
investors.papamurphys.com or the SEC website at and www.sec.gov
under the Papa Murphy's name.
SOURCE MTY Food Group Inc.