MTY Food Group Inc., a Canada-based franchisor in the restaurant industry, announced plans to acquire Papa Murphy's Holdings, Inc., Vancouver, Wash., for $190 million.
Papa Murphy's is a franchisor and operator of the Take 'n' Bake pizza brand as well as a menu of grab-and-go items, including salads, sides and desserts. Papa Murphy's operates 1,331 franchised and 106 corporate-owned stores in 37 U.S. states, Canada and the United Arab Emirates.
"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," says Eric Lefebvre, chief executive officer of MTY.
"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 ongoing efforts to enhance our convenience and relevance and maintain our position as the No. 1 Take 'n' Bake pizza chain in the United States," adds Jean Birch, chairperson of the board of directors of Papa Murphy's.
Transaction highlights entail:
- Strengthens MTY's portfolio of brands.
- Leading Take 'n' Bake pizza concept serving 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 $809 million system-wide sales for the 12-month period ended Dec. 31, 2018.
- Papa Murphy's generated $22.3 million in Adjusted EBITDA for the 12-month period ended Dec. 31, 2018.
- 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 building on Papa Murphy's employees' expertise and maintaining the current support center in Vancouver, Wash.
- 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 merger and acquisition opportunities.