MTY Food Group Inc. and Papa Murphy s Holdings, Inc. Announce Definitive Merger Agreement

Transcription

1 MTY Fd Grup Inc. and Papa Murphy s Hldings, Inc. Annunce Definitive Merger Agreement MONTREAL, April 11, MTY Fd Grup Inc. ( MTY ) (TSX:MTY) and Papa Murphy s Hldings, Inc. ( Papa Murphy s ) (NASDAQ:FRSH) tday annunced they have entered int a definitive merger agreement (the Merger Agreement ) under which MTY wuld acquire all f the issued and utstanding shares f cmmn stck f Papa Murphy s fr cash cnsideratin f US$6.45 per share, representing ttal transactin value f apprximately US$190.0 millin (C$253.2 millin) (the Transactin ), including Papa Murphy s net debt utstanding. The purchase price per share f Papa Murphy s cmmn stck implies a premium f 31.9% t the Papa Murphy s clsing price n April 10, 2019 and 46.3% t the unaffected Papa Murphy s clsing price n Nvember 7, 2018 prir t the annuncement by Papa Murphy s that it was cnducting a prcess t explre and evaluate strategic alternatives t maximize sharehlder value and had engaged a financial advisr t assist with the review. The terms and cnditins f the Merger Agreement were unanimusly apprved by the bards f directrs f bth cmpanies. The Transactin is subject t custmary clsing cnditins including receipt f applicable regulatry apprvals. MTY is a leading franchisr in the Nrth American restaurant industry. MTY s multi-cncept mdel allws MTY t psitin itself acrss a brad range f demgraphic, ecnmic and gegraphic sectrs. As at February 28, 2019, its netwrk had 5,941 lcatins in peratin, mstly all franchised, including ver 500 lcatins perating in 39 cuntries utside Nrth America. Papa Murphy's is a franchisr and peratr f the largest Take n Bake pizza brand and the 5 th largest pizza chain in the United States, selling fresh, hand-crafted pizzas ready fr custmers t bake at hme. In additin t scratch-made pizzas, Papa Murphy s ffers a grwing menu f grab 'n' g items, including salads, sides and desserts. Papa Murphy s was funded in 1981 and perated 1,331 franchised and 106 crprate-wned stres in 37 U.S. states, Canada and the United Arab Emirates as f December 31, Eric Lefebvre, Chief Executive Officer f MTY said, This is an imprtant transactin fr MTY as we add a brand with a differentiated psitin in pizza t ur existing U.S. prtfli. We are thrilled abut the prspect f welcming the Papa Murphy s brand, its franchise partners and emplyees, t the MTY family. Papa Murphy s is a unique cncept with ver a 35 year histry f prviding a superir quality prduct made with fresh ingredients. We believe the pizza segment is highly attractive due t its size, fragmented nature and grwth ptential. The Papa Murphy s brand is well lved by its lyal custmers and is supprted by a strng netwrk f franchise partners. We expect the cmbinatin f these tw cmpanies and the expertise it brings t prduce tremendus pprtunities fr MTY s U.S. expansin bjectives. The bard f directrs and ur advisrs have thrughly evaluated all ptins available t us and are cnfident that this agreement prvides immediate value t ur stckhlders at a premium ver ur current share price. Merging ur unique, differentiated brand with a glbal leader in franchised restaurant cncepts will accelerate n-ging effrts t enhance ur cnvenience and relevance and maintain ur psitin as the number ne Take n Bake pizza chain in the United States. said Jean Birch, Chairpersn f the bard f directrs f Papa Murphy s. Transactin Highlights Strengthens MTY s leading prtfli f brands thrugh the acquisitin f the 5 th largest pizza chain in the U.S. Leading Take n Bake pizza cncept serving award-winning, superir quality prducts made with fresh ingredients. Increasing MTY s expsure t the rbust and grwing U.S. pizza market. 1

2 MTY s cmbined netwrk t have apprximately 7,378 lcatins glbally after cmpletin f the Transactin with future runway fr grwth. Cmplements MTY s U.S. peratins and reduces seasnality f its results. Papa Murphy s had US$809 millin System-wide Sales fr the twelve-mnth perid ended December 31, Papa Murphy s generated US$22.3 millin in Adjusted EBITDA fr the twelve-mnth perid ended December 31, Strategically timed as Papa Murphy s system is building mmentum after implementatin f refreshed crprate strategy and refcus n the brand. MTY anticipates wrking with Papa Murphy s t make capital investments fcused n grwing tp line sales and increasing franchise partner prfitability. MTY welcmes a seasned management team and lks frward t building n Papa Murphy s emplyees expertise and maintaining the current supprt center in Vancuver, WA. Expected t be immediately accretive t MTY s EBITDA and cash flw per share. MTY remains cmmitted t pursuing its acquisitin strategy. Pr Frma MTY is expected t cntinue t generate significant cash flw allwing fr deleveraging and prviding liquidity t pursue future M&A pprtunities. Transactin Details Under the terms f the Merger Agreement, a subsidiary f MTY will cmmence a tender ffer t purchase all f the utstanding shares f Papa Murphy s cmmn stck fr US$6.45 per share in cash. The clsing f the tender ffer is subject t custmary cnditins, including antitrust clearance and the tender f a majrity f the utstanding shares f Papa Murphy s cmmn stck. Fllwing successful cmpletin f the tender ffer, MTY wuld acquire all remaining shares nt tendered in the ffer thrugh a merger at the same price as in the tender ffer. The Transactin is nt subject t any financing cnditin and cnsideratin will be 100% funded in cash. MTY will use its cash n hand and its existing credit facility t fund the cash cnsideratin and t repay Papa Murphy s net debt utstanding as f the clse f the Transactin, which tday is apprximately US$77.4 millin. Pursuant t the terms f the Merger Agreement, Papa Murphy s has agreed that it will nt slicit r initiate discussins regarding any ther business cmbinatin r sale f material assets. MTY has the right t match any superir prpsals. The Transactin prvides fr a terminatin fee f apprximately US$5.7 millin payable by Papa Murphy s t MTY in certain circumstances if the Transactin is nt cmpleted. The Transactin is expected t clse in the secnd calendar quarter f There is n assurance the Transactin will be cmpleted as described abve r at all, r that the anticipated clsing date will materialize. Fllwing the clse f the transactin, Papa Murphy s will be a whlly-wned subsidiary f MTY and will cntinue t be perated as an independent brand. 2

3 Transactin Apprvals The Transactin has been unanimusly apprved by the bard f directrs f MTY and has been unanimusly apprved by the bard f directrs f Papa Murphy s. Each directr and executive fficer f Papa Murphy s, cumulatively having beneficial wnership and cntrl ver 2.2% f Papa Murphy s shares utstanding, have signed supprt agreements t tender all f their shares int the ffer. Mrever, certain additinal Papa Murphy s sharehlders having beneficial wnership and cntrl ver 49.8% f Papa Murphy s shares utstanding have als signed such agreement t tender all f their shares int the ffer. In ttal, hlders f apprximately 52.1% f Papa Murphy s shares have agreed t tender their shares int the ffer, subject t ptential adjustments in certain circumstances prvided in the supprt agreement. The cnsummatin f the Transactin is cnditined upn the tender f a majrity f Papa Murphy s issued and utstanding shares f cmmn stck. Financial and Legal Advisrs Natinal Bank Financial Inc. is acting as exclusive financial advisr t MTY and Fasken Martineau DuMulin LLP and Mrrisn & Ferster LLP are acting as its legal advisrs. Nrth Pint Advisrs LLC is acting as exclusive financial advisr t Papa Murphy s and Perkins Cie LLP is acting as its legal advisr. Cnference Call MTY will be available fr questins n the Transactin during its quarterly earnings cnference call tday April 11, 2019 at 8:30 AM EDT and will prvide supplemental slides n its crprate website at Participants are invited t access the cnference call by dialing (Fr all Trnt and verseas participants) and (Fr all ther Nrth American participants). If yu are unable t call in at this time, yu may access a recrding f the meeting by calling and entering the passcde n yur phne. This recrding will be available n April 11, 2019 as f 11:30 AM until 11:59 PM n May 10, Ntice t Investrs The tender ffer described in this press release has nt yet cmmenced. This press release is fr infrmatinal purpses nly and is nt a recmmendatin, an ffer t purchase r a slicitatin f an ffer t sell shares f Papa Murphy s. The slicitatin and ffer t buy Papa Murphy s shares will nly be made pursuant t an ffer t purchase and related materials. At the time the tender ffer is cmmenced, MTY Franchising USA, Inc., a whlly wned subsidiary f MTY, and its acquisitin subsidiary will file a tender ffer statement and related exhibits with the U.S. Securities and Exchange Cmmissin (the SEC ) and Papa Murphy s will file a slicitatin/recmmendatin statement with respect t the tender ffer. Investrs and stckhlders f Papa Murphy s are strngly advised t read the tender ffer statement (including the related exhibits) and the slicitatin/recmmendatin statement, as they may be amended frm time t time, when they becme available, because they will cntain imprtant infrmatin, including the terms and cnditins f the ffer, that stckhlders shuld cnsider befre making any decisin regarding tendering their shares. The tender ffer statement (including the related exhibits) and the slicitatin/recmmendatin statement will be available at n charge n the SEC s website at In additin, the tender ffer statement and ther dcuments that MTY Franchising USA, Inc. r its acquisitin subsidiary files with the SEC will be made available t all stckhlders f Papa Murphy s free f charge frm the infrmatin agent fr the tender ffer. The slicitatin/recmmendatin statement and the ther dcuments filed by Papa Murphy s with the SEC will be made available t all stckhlders f Papa Murphy s free f charge at investrs.papamurphys.cm. Further infrmatin regarding the Transactin will be cntained in the Merger Agreement, cpies f the Agreement will be available n SEDAR at 3

4 All dllar values herein presented in Canadian dllars unless therwise indicated. US dllar values cnverted t Canadian dllars at Nn-IFRS and Nn-GAAP Measures This news release makes reference t certain nn-ifrs and nn-gaap measures. These measures are nt recgnized measures under IFRS r GAAP, d nt have a standardized meaning prescribed by IFRS r GAAP and are therefre unlikely t be cmparable t similar measures presented by ther cmpanies. Rather, these measures are prvided as additinal infrmatin t cmplement thse IFRS and GAAP measures by prviding further understanding f MTY r Papa Murphy s results f peratins frm their respective management s perspective. Accrdingly, they shuld nt be cnsidered in islatin nr as a substitute fr analysis f MTY r Papa Murphy s financial infrmatin reprted under IFRS r GAAP, respectively. MTY r Papa Murphy s use nn-ifrs and nn-gaap measures including Adjusted EBITDA System-wide Sales" and EBITDA" t prvide investrs with a supplemental measure f their perating perfrmance and thus highlight trends in their cre businesses that may nt therwise be apparent when relying slely n IFRS r GAAP financial measures. MTY and Papa Murphy s als believe that securities analysts, investrs and ther interested parties frequently use nn-ifrs r nn-gaap measures in the evaluatin f issuers and ther reprting cmpanies. MTY r Papa Murphy s management als uses nn- IFRS and nn-gaap measures in rder t facilitate perating perfrmance cmparisns frm perid t perid, t prepare annual perating budgets, and t determine cmpnents f management cmpensatin. System-wide Sales represents the net sales received frm restaurant guests at bth crprate and franchise restaurants including take-ut and delivery custmer rders. System-wide Sales includes sales frm bth established restaurants as well as new restaurants. MTY and Papa Murphy s management believes System-wide Sales prvides meaningful infrmatin t investrs regarding the size f MTY s and Papa Murphy s restaurant netwrks, the ttal market share f their brands and the verall financial perfrmance f their brands and restaurant wner bases, which ultimately impacts MTY and Papa Murphy s cnslidated financial perfrmance. EBITDA is a nn-ifrs measure presented by MTY and is defined as net earnings (lss) frm cntinuing peratins befre net interest expense and ther financing charges, lsses (gains) n derivative, incme taxes, depreciatin f prperty, plant and equipment, amrtizatin f intangible assets, and impairment f assets, net f reversals. Adjusted EBITDA is a nn-gaap measure presented by Papa Murphy s and is defined as net incme (lss) befre interest expense, prvisin fr (benefit frm) incme taxes and depreciatin and amrtizatin, with further adjustments t reflect the eliminatin f varius expenses that Papa Murphy s cnsiders nt indicative f nging peratins. Fr a recnciliatin f Adjusted EBITDA f Papa Murphy s t net incme (lss) f Papa Murphy s, the mst directly cmparable GAAP measure, see the earnings release f Papa Murphy s dated March 14, 2019, filed as Exhibit N t Papa Murphy s Current Reprt n Frm 8-K dated March 14, Frward Lking Infrmatin Certain infrmatin in this news release may cnstitute frward-lking statements within the meaning f the Private Securities Litigatin Refrm Act f 1995, as amended. Frward-lking statements invlve knwn and unknwn risks and uncertainties future expectatins and ther factrs which may cause the actual results, perfrmance r achievements f MTY, Papa Murphy s r the cmbined cmpany t be materially different frm any future results, perfrmance r achievements expressed r implied by such frward-lking infrmatin. All statements ther than statements f histrical facts included in this news release may cnstitute frward lking statements. In particular, this news release cntains statements that may cnstitute frward lking statements regarding, withut limitatin, the ptential benefits and effects f the Transactin, the ability f the parties t cmplete the Transactin and the expected timing f cmpletin f the Transactin and the ptential impact f the Transactin n the cmbined entity's future peratins, the suitability f the Transactin fr MTY and Papa Murphy s, the effect f the Transactin n 4

5 Papa Murphy s stakehlders; the expected EBITDA, revenue, liquidity, cash flw, System-wide Sales and ptential grwth f the cmbined entity; and ptential future acquisitin pprtunities and capital investments. Frward-lking statements can generally be identified by the use f frward-lking terminlgy such as anticipate, estimate, may, will, expect, believe, plan r variatins f such wrds and phrases, r by the use f wrds r phrases which state that certain actins, events r results may, culd, wuld, r might ccur r be achieved. These frward-lking statements are nt facts r guarantees f future perfrmance, but nly reflectins f estimates and expectatins f MTY s and Papa Murphy s management and invlve a number f risks, uncertainties, and assumptins. The frward-lking infrmatin cntained in this news release reflects MTY s and Papa Murphy s current expectatins and assumptins regarding future events and perating perfrmance and speaks nly as f the date f this news release. These expectatins and assumptins include, but are nt limited t: the currency exchange rates used t derive Canadian dllar expectatins; market acceptance f the Transactin; the satisfactry fulfilment f all f the cnditins precedent t the Transactin; the receipt f all required apprvals and cnsents; future results f Papa Murphy s business and peratins meeting r exceeding histrical results; the success f the integratin f Papa Murphy s peratins and management team with MTY s peratins and business; and market acceptance f ptential future acquisitins and capital investments by MTY. While these assumptins and expectatins are cnsidered reasnable, a number f factrs culd cause the actual results, level f activity, perfrmance r achievements t be materially different frm the expectatins and assumptins f MTY and Papa Murphy s, including thse discussed in MTY s public filings available at and in particular in its mst recent annual infrmatin frm under Risk Factrs and in its management s discussin and analysis fr its fiscal year ended Nvember 30, 2018 under Risk and Uncertainties and in Papa Murphy s public filings with the Securities and Exchange Cmmissin, available at ww.sec.gv, including under thse discussed under Risk Factrs in Papa Murphy s mst recent annual reprt n Frm 10-K fr the fiscal year ended December 31, Risks and uncertainties inherent in the nature f the Transactin include withut limitatin, the failure t receive all required apprvals and cnsents r t therwise fulfill all f the cnditins precedent t the Transactin, in a timely manner, r at all; significant transactin csts r unknwn liabilities; failure t realize the expected benefits f the Transactin; and general ecnmic cnditins. Failure t receive all required apprvals and cnsents r t therwise fulfill all f the cnditins precedent t the Transactin may result in the Transactin nt being cmpleted n the prpsed terms, r at all. There can be n assurance that the anticipated strategic benefits and peratinal, cmpetitive and cst synergies resulting frm the Transactin will be realized. In additin, if the Transactin is nt cmpleted and Papa Murphy s cntinues as an independent entity, there are risks that the annuncement f the Transactin and the dedicatin f substantial resurces f Papa Murphy s t the cmpletin f the Transactin culd have an impact n Papa Murphy s business and strategic relatinships, perating results and businesses generally, and culd have a material adverse effect n the current and future peratins, financial cnditin and prspects f Papa Murphy s. Furthermre, the terminatin f the Merger Agreement may, in certain circumstances, result in Papa Murphy s being required t pay a fee t MTY, the result f which culd have a material adverse effect n Papa Murphy s financial psitin and results f peratins and its ability t fund grwth pprtunities and current peratins. Readers are further cautined nt t place undue reliance n frward-lking infrmatin as there can be n assurance that the plans, intentins r expectatins upn which they are placed will ccur. Frwardlking infrmatin cntained in this news release is expressly qualified by this cautinary statement. Except as required by law, neither f MTY r Papa Murphy s assumes n bligatin t update r revise frward-lking infrmatin t reflect new events r circumstances. All such frward-lking statements are made pursuant t the safe harbur prvisins f applicable securities laws. Abut MTY Fd Grup MTY Grup franchises and perates quick-service and casual dining restaurants under apprximately 75 different banners in Canada, the United States and internatinally. Based in Mntreal, MTY is a family 5

6 whse heart beats t the rhythm f its brands, the very sul f its multibranded strategy. Fr ver 35 years, it has been increasing its presence by delivering new cncepts in quick-service restaurants and making acquisitins and strategic alliances that have allwed it t reach new heights year after year. By cmbining new trends with peratinal knw-hw, the brands frming the MTY Grup nw tuch the lives f millins f peple every year. With apprximately 6,000 lcatins, the many flavurs f the MTY Grup have the key t respnding t the different tastes and needs f cnsumers tday and tmrrw. Fr mre infrmatin abut MTY r the Transactin, please cntact Pierre Bucher r Jennifer McCaughey, MaisnBrisn, at r by at pierre@maisnbrisn.cm r jennifer@maisnbrisn.cm r visit ur website, r SEDAR s website at under the Cmpany s name. Abut Papa Murphy s Hldings Papa Murphy s Hldings, Inc. is a franchisr and peratr f the largest Take n Bake pizza brand in the United States, selling hand-crafted, fresh pizzas fr custmers t bake at hme. The Cmpany was funded in 1981 and currently perates ver 1,400 franchised and crprate-wned stres in 37 U.S. states, Canada, and the United Arab Emirates. Papa Murphy s cre purpse is t help anyne with an ven and 15 minutes serve a scratch-made meal. In additin t fresh pizzas, the Cmpany ffers hand-crafted salads, sides and desserts t cmplete the meal. Order nline tday at fr easy pick up everywhere, and find Papa Murphy s n yur favrite delivery apps in select markets. Fr mre infrmatin abut Papa Murphy s r the Transactin, please cntact Maurice Hines, Investr Relatins at r by at maurice.hines@papamurphys.cm r visit ur website, investrs.papamurphys.cm r the SEC website at and under the Papa Murphy s name. 6