The Canadian food court king's appetite for deals shows no signs of letting up.
Stanley Ma's MTY Food Group Inc. is making a friendly bid to acquire Imvescor Restaurant Group Inc. for $248-million in cash and stock, a transaction aimed at diversifying the business by boosting the number of casual sit-down restaurants in its stable.
Those chains include well-known Quebec and Maritimes banners, such as Baton Rouge, Score's Chicken & Ribs and Pizza Delight. Imvescor had spent the past three years streamlining and modernizing its operations, having made its own sizable acquisition earlier this year, buying breakfast chain Ben & Florentine.
Mr. Ma, whose company's numerous food-court and counter-service brands include Jugo Juice, Taco Time, Mucho Burrito and Thai Express, said the deal will increase revenue from casual dining restaurants under the company's umbrella to 22 per cent from 10 per cent of the total.
When the deal closes, MTY will have more than 5,700 locations across North America under 75 brands. Annual revenue is pegged at $2.9-billion, an increase of about $400-million.
"One of the very key factors for MTY to consider is that it opens up the Maritimes market, where MTY has very little presence right now," Mr. Ma, the company's chairman, said in an interview. "I think that will open up a big opportunity for MTY."
Imvescor shareholders are being offered $4.10 for each of their shares, consisting of about 20 per cent cash – $50-million in total – and the rest in MTY shares. Shareholders are slated to vote on the deal in February. Imvescor investors with 18 per cent of the stock have agreed to tender, the companies said.
Elizabeth Johnston, analyst at Laurentian Bank Securities, said she believes the deal is attractively priced for MTY, but Imvestcor shareholders could be selling out too cheaply. She previously estimated a takeout value of $4.25 to $4.65 a share.
The deal comes amid a push in the industry to bulk up, as franchisees seek more buying power with suppliers to compete with that of major grocery retailers. The industry also faces rising staff costs in locales including Ontario, where the minimum wage is set to increase on Jan. 1.
"Something like this helps our franchisees get to a more level playing field, whether that's on food buying, or dealing with landlords and leases or simply helping our franchisees hire people," said Frank Hennesey, Imvescor's chief executive officer.
Imvesco was approached by a mystery bidder with a non-binding indication of interest in late October. MTY reached out to Imvesco shortly after and the companies began exclusive talks, Imvescor chairman François-Xavier Seigneur said during a conference call.
Imvescor's board liked the proposal because it offers both cash and the ability for shareholders to take advantage of potential gains in MTY's shares. Both companies have made stock-market gains this year.
The deal marks the largest for MTY since snapping up Arizona-based Kahala Brands for $310-million (U.S.) last year, a deal that added 2,900 locations in 25 countries.
MTY has been a frequent acquisitor, inking almost 40 deals in the past 15 years. Still, Mr. Ma disputes any notion that acquisition is his only means of expansion. He points out the company opens up to 130 locations among its existing banners each year.
"The market conception is MTY is an M&A firm, but that's not 100 per cent true," he said.