Cara lands The Keg in $200M acquisition

TORONTO Cara Operations Ltd. has further solidified its foothold in a more upscale dining mass market, acquiring Keg Restaurants Ltd. more than two decades after setting its sights on the Canadian steakhouse chain.

Cara, which has fortified its stature as the largest full-service dining operator in Canada through a series of acquisitions over the past four years, will also change its name as it seeks to distance itself from its legacy airline catering business that was sold off in 2010, chief executive Bill Gregson said Tuesday.

“Today’s announcement is about really making our brands better,” Gregson said, announcing details of the $200-million deal alongside The Keg’s chief executive David Aisenstat. Aisenstat is joining Cara’s board as vice-chairman and will run a division of Cara dedicated to its premium restaurants. In addition to the Keg, the portfolio includes Milestones, Bier Markt, and Landing. Cara’s corporate name change was not revealed Tuesday, but will be made public after the deal closes this spring.

“We are not looking to turn those three brands into the Keg,” said Gregson, saying the company is eager to apply Aisenstat’s knowledge and experience to the restaurants. “What we are looking to do is have those brands excel in their own niche just like the Keg excels across all niches when it comes to restaurants in Canada.”

Gregson said The Keg, which had same-restaurant sales growth of 4.8 per cent in the first nine months of 2017, has been outperforming the three Cara banners.

Purchasing The Keg has been a long-standing ambition of Cara’s, said Robert Levy, president of Toronto market research firm BrandSpark International and a former vicepresident of branding at Cara.

Cara was outbid by David Aisenstat when it tried to acquire The Keg in the 1990s, said Levy, who worked at Cara from 1994 to 2001. “They bought Kelseys, Montanas and Outback after they were not successful in buying The Keg the first time around.”

Since then, the restaurant market has shifted dramatically, with the quick-service restaurant sector typified by players such as McDonald’s overtaking the market share of sit-down dining establishments.

Cara, operator of 1,259 restaurants and 16 banners including the veteran full-service dining brands Swiss Chalet, St. Hubert and East Side Mario’s, has been working to improve a business segment that continues to lag.

Cara shareholders liked the deal. Shares of the Torontobased company jumped 9.8 per cent, ending the day at $27.38 in Toronto trading.