News

Papa Murphy's to be acquired for $190M by MTY Foods

April 11, 2019

Papa Murphy's has signed a $190 million definitive merger agreement with MTY Food Group Inc, a restaurant franchisor with nearly 6,000 stores in North America as well as 500 locations outside the continent. MTY is acquiring all of Papa Murphy's common stock at $6.45 per share and net debt outstanding. The brand closed yesterday on the Nasdaq at $4.89, net debt outstanding, a news release said. 

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 and 46.3% to the unaffected Papa Murphy's closing price on Nov. 7, 2018, when Papa Murphy's said it was looking into options to increase shareholder. The boards of both companies unanimously approved the deal. 

"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," Papa Murphy's Board Chair Jean Birch said in the release. "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."

 Papa Murphy's is considered the largest Take 'n' Bake pizza brand, and the news release said the brand is the fifth largest U.S. pizza chain. The chain, founded in 1981, had 1,331 franchised and 106 corporate-owned stores in 37 U.S. states, Canada and the United Arab Emirates at the end of December.

"This is an important transaction for MTY as we add a brand with a differentiated position in pizza to our existing U.S. portfolio," MTY CEO Eric Lefebvre, said in the release. "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 news release said some of the transactions highlights include: 

• Transaction will boost MTY's combined network to approximately 7,378 stores globally. Among MTY's brands are Pinkberry, Café Depot and Big Smoke Burger.                          
• Papa Murphy's had $809 million system-wide sales for 12 months ending Dec. 31, 2018. 
• Papa Murphy's generated $22.3 million in adjusted EBITDA for same period. 

The release said the deal was strategically timed to follow Papa Murphy's refresh of its corporate strategy and a refocus on the brand as a whole. MTY plans to make capital investments focused on growing top-line sales and increasing franchise partner profitability.