On March 31, 2016, Cara Operations Limited announced that it entered into a definitive agreement to acquire 100% of Group St-Hubert, Quebec’s leading full-service restaurant operator as well as a fully-integrated food manufacturer for $537 million. Cara announced on Sept. 2 that it has successfully completed the St-Hubert acquisition.
Jean-Pierre Léger, the outgoing Chairman and CEO of St-Hubert commented, “I’m proud of the St-Hubert legacy and confident that this new alliance with Cara will open up opportunities for St-Hubert associates as well as new possibilities, both inside and outside of Quebec, for the St-Hubert business”.
Cara’s Chief Executive Officer, Bill Gregson, commented, “This acquisition represents a historic alliance and an excellent strategic fit for both companies. It gives St-Hubert the opportunity to expand its restaurant network as well as to drive a national retail food program on behalf of Cara, leveraging St-Hubert’s existing management, Quebec manufacturing facilities and supplier network”.
Cara has acquired St-Hubert for a purchase price of $537 million on a cash-free, debt-free basis. The purchase price is subject to customary working capital adjustments. St-Hubert generates approximately $620 million in System Sales, including sales from its food operations division, and approximately $44.8 million in Operating EBITDA. The St-Hubert transaction is immediately accretive to Cara’s Adjusted Net Earnings per Share, before synergies are considered. Cara and St-Hubert will leverage their combined businesses to achieve an estimated $10 million of annual run-rate synergies within 3 years. Cara has financed the St-Hubert acquisition through the issuance of $50 million in Cara subordinate voting shares (“Shares”) to the vendor, approximately $230 million in proceeds from Cara’s previously announced offering of subscription receipts (the “Subscription Receipts”), on a private placement basis, and through upsizing its credit facility with Scotiabank and a syndicate of lenders. At closing, Cara’s Pro Forma Net Debt to Operating EBITDA ratio is expected to be approximately 1.9x, providing Cara with room on the balance sheet to fund further growth, including acquisitions.
In accordance with the terms of the agreement pursuant to which the Subscription Receipts were issued, each outstanding Subscription Receipt will be exchanged today for one Share, resulting in the issuance of 7,863,280 Shares and a cash payment equal to $0.20 per Subscription Receipt. The cash payment is equal to the aggregate amount of dividends per Share for which record dates occurred since the issuance of the Subscription Receipts, less withholding taxes, if any. The Shares issued in exchange for the Subscription Receipts will be listed for trading on the Toronto Stock Exchange.
St-Hubert was originally founded by the Léger family in 1951. St-Hubert is one of Québec’s most admired and recognized restaurant companies and is known for its great tasting rotisserie chicken, courteous service and warm, trendy atmosphere. Based on total sales, St-Hubert is Québec’s top full-service restaurant operator and Canada’s fourth largest full-service restaurant operator. As at December 31, 2015, St-Hubert had 117 restaurants: 80 full-service restaurants & 37 express locations. 89% of St-Hubert restaurants are operated by franchisees and 92% are based in Québec.
In addition to its restaurant business, St-Hubert manufactures and distributes fresh, frozen and non-perishable food products under the St-Hubert brand name as well as under several private label brands. The company operates 2 manufacturing plants in Boisbriand and Blainville and 2 distribution centers in Anjou and Boisbriand. Further information about the company is available at www.st-hubert.com.
Founded in 1883, Cara is Canada’s oldest and largest full-service restaurant company. Cara franchises and/or operates restaurant brands that include Swiss Chalet, Harvey’s, Kelsey’s, East Side Mario’s, Montana’s, Milestones, Prime Pubs, Bier Markt, New York Fries and Landing restaurants. As at June 26, 2016, Cara had 1,003 restaurants, 958 of which were located in Canada and the remaining 45 locations were located internationally. Of Cara’s 1,003 restaurants, 88% are operated by franchisees and 65% are based in Ontario. With the addition of 117 restaurants from the St-Hubert acquisition, Cara’s total restaurant count now grows to 1,120 locations. Cara’s restaurant count is expected to grow by an additional 99 locations (to approximately 1,219 total restaurants) as a result of its recently announced acquisition of Original Joe’s, which is expected to close late in 2016. Cara is a publicly traded company whose shares trade on the Toronto Stock Exchange under the ticker symbol CAO. More information about Cara is available at www.cara.com.