MTY takeover of Imvescor creates food giant

More than 5,700 stores under 75 brands

• is growing beyond the shopping mall food court with a $248-million stock-and-cash deal to buy

and its full-service restaurant and grocery products businesses.

The friendly deal will bring together such MTY banners as Thai Express, Vanellis and Manchu Wok with Imvescor’s Baton Rouge, Pizza Delight and Scores restaurants to create a company with a portfolio of more than 5,700 stores under 75 brands.

Under the deal, MTY will pay $4.10 per share for Imvescor with the cash portion of the deal totalling about $50 million and the rest in stock.

The companies said Tuesday the offer implies a 13.3-per-cent premium to Imvescor’s 10-day volume weighted average before it disclosed it had received a non-binding expression of interest from an unidentified potential buyer on Oct. 26.

Analyst Elizabeth Johnston of Laurentian Bank Securities said the deal is good for MTY, but undervalues Imvescor. She recently pegged a takeout of Imvescor’s shares at $4.25 to $4.65 per share.

“Imvescor’s brands have a strong growth profile, with positive same-store sales growth and outlook for net new store openings,” she wrote in a report.

Imvescor chairman François-Xavier Seigneur said joining forces with MTY creates opportunities for Imvescor shareholders from an offer he described as representing a “full and fair value.” The combined company is expected to generate about $2.9 billion in annual sales.

“This share exchange and cash deal provides our shareholders with … the opportunity to participate in the growth of a strong North American, Montreal-based company that will be better equipped to face the challenges that are in front of our industry,” he said Tuesday.

The restaurant industry is facing a number of headwinds, including rising minimum wages in several provinces and growing competition for scarce consumer dollars.

MTY’s offer was submitted after Imvescor received an unsolicited bid from an unnamed group. The activity prompted Imvescor to contact several potential partners, but it didn’t proceed with a bidding process.

MTY chief financial officer Eric Lefebvre said the deal represents a “compelling value proposition.”

“Both sets of shareholders will become owners in a more diversified business with more brands in more corners of the market and in more locations,” he told analysts.

MTY said it will gain experience and reach from Imvescor’s full-service restaurants, retail food business and network in the Maritimes.

“MTY has expanded into that direction (but) I think there will be a substantial amount of potential for MTY to learn from the Imvescor’s in-house expertise to grow that side of the business,” added MTY chairman and CEO Stanley Ma.

Ma said he doesn’t foresee making too many changes given Imvescor efforts over the past few years to improve its operations. Thai Express, owned by MTY, will be joined by brands such as Pizza Delight under a merger with Imvescor.