Why MTY Food Group Is Buying BBQ Holdings (BBQ) For About $200 Million

By Amit Chowdhry ● Aug 9, 2022
  • MTY Food Group Inc. (MTY) and BBQ Holdings, Inc. (BBQ) announced they have entered into a definitive merger agreement under which MTY would buy BBQ Holdings for about $200 million. These are the details.

MTY Food Group Inc. (MTY) and BBQ Holdings, Inc. (BBQ) announced they have entered into a definitive merger agreement under which MTY would acquire all of the issued and outstanding common shares of BBQ Holdings for cash consideration of US$17.25 per BBQ Holdings share representing total transaction value of approximately US$200 million (C$257 million), including BBQ Holdings’ net debt. 

The terms and conditions of the merger agreement were unanimously approved by the Board of Directors of both companies. The Transaction is subject to customary closing conditions including receipt of applicable regulatory approvals. Upon completion of the Transaction, BBQ Holdings will become a subsidiary of MTY and the shares of BBQ Holdings will be de-listed from NASDAQ.

BBQ Holdings is known as a franchisor and operator of casual and fast casual dining restaurants across 37 states in the U.S., Canada, and the United Arab Emirates. And its flagship restaurant brands operate under the “Famous Dave’s,” “Village Inn,” “Barrio Queen,” and “Granite City” banners. As of August 9, 2022, BBQ Holdings operates over 200 franchised and over 100 corporate-owned restaurants. 

For the 2022 fiscal year ending January 1, 2023, and as publicly disclosed by BBQ Holdings, the company is expected to generate twelve-month run-rate system sales and cash EBITDA between US$685M to US$725M and US$25.5M and US$27.5M, respectively.

MTY is a leading franchisor in the North American restaurant industry. And as of May 31, 2022, its network had 6,660 locations in operation, 99% of which are franchised. 

The company established its presence in the U.S. with the acquisition of Kahala Brands in July 2016 and has since continued to grow its footprint in the country through new restaurant openings and acquisitions. And with this deal, MTY will add leading restaurant brands to its network which will reach a total of approximately 7,000 locations, including over 3,900 in the United States.

Deal Highlights

1.) Adds well-established quality brands to MTY’s portfolio of restaurants

a.) 9 new restaurant brands adding to MTY’s portfolio

b.) System sales expected to exceed C$4.8B in aggregate following the Transaction based on BBQ Holdings projected sales representing an increase of 23% compared to MTY’s current levels

2.) Further expands MTY’s geographic footprint in the United States

a.) Broadens MTY’s U.S. footprint with over 3,900 locations in the country, representing an increase of 9% in locations

b.) MTY’s system sales from the U.S. expected to increase from 58% to 66% of total system sales post Transaction

2.) Diversifies MTY’s restaurant concepts with greater exposure to casual dining and fast casual dining concepts

a.) Casual dining and fast casual dining concepts expected to increase from 29% of current MTY system sales to 43% of MTY’s total pro forma system sales at transaction close

b.) BBQ Holdings’ brands bring a complementary restaurant concept mix while reducing the level of seasonality of the business

3.) Highly talented management and employee base

a.) Seasoned management team with a strong operational track record and history of successful M&A

b.) Supported by a well-established organizational structure and experienced employee base

4.) Expected to be immediately accretive to MTY’s free cash flow per share

a.) The Transaction represents a 7.5x multiple of BBQ Holdings’ mid-point FY2022E run-rate cash EBITDA guidance of US$26.5M

Transaction Financing

The transaction is not subject to any financing condition and the consideration will be 100% funded in cash. MTY will use its cash on hand and its existing credit facility to fund the cash consideration and to repay BBQ Holding’s net debt outstanding as of the close of the Transaction.

MTY’s pro forma Net Debt / EBITDA (excluding leases) expected to stand at approximately 2.4x upon closing, which remains within a comfortable zone offering good flexibility should more opportunities surface in the near future.

Transaction Details

Under the terms of the Merger Agreement, a subsidiary of MTY will commence a tender offer to purchase all of the outstanding shares of BBQ Holdings common stock for US$17.25 per share in cash. And the tender offer is subject to customary conditions, including antitrust clearance and the tender of a majority of the outstanding shares of BBQ Holdings common stock. Following the successful completion of the tender offer, MTY would acquire all remaining shares not tendered in the offer through a merger at the same price as in the tender offer.

The deal is expected to close by Q4, 2022. There is no assurance the Transaction will be completed as described above or at all, or that the anticipated closing date will materialize. Following the close of the deal, the shares of BBQ Holdings will be de-listed from NASDAQ, BBQ Holdings will become a privately held subsidiary of MTY, and its restaurants will continue to be operated as independent brands.

Transaction Approvals & Support

The deal has been unanimously approved by the board of directors of MTY and has the unanimous support of the BBQ Holdings board of directors. And certain key shareholders of BBQ Holdings have signed support agreements in favor of the Merger Agreement, representing in aggregate approximately 37% of the shares currently outstanding. The consummation of the Transaction is conditioned upon, among other things, the tender of at least 50% of BBQ Holdings fully-diluted shares of common stock and receipt of applicable regulatory approvals.


“This transaction represents another key acquisition for MTY as we further scale and enhance our existing U.S. portfolio through the addition of nine unique brands. The transaction combines highly complementary businesses, including BBQ Holdings’ exciting casual and fast casual brands. BBQ Holdings’ restaurants are well established within each of their respective markets with a strong network of franchise partners, well-run corporate owned locations, and a best-in-class management team. We are excited about the prospects of adding BBQ Holdings’ brands to the MTY family and we look forward to welcoming Jeff Crivello and his team and their franchise partners.”

— Eric Lefebvre, Chief Executive Officer of MTY

“We are thrilled to partner with MTY and its talented team of restaurant operators. Over the past four years we have significantly grown revenue and our restaurant portfolio while building a world-class team of entrepreneurs. We look forward to continuing the execution of our three pillars of growth, which we believe align very closely with MTY’s vision. With more than 80 brands, MTY brings vast buying power and a team of industry leaders who will provide additional support to our franchise partners. As our founder Dave Anderson says, we strive to deliver famous experiences with our ‘yes is the answer, what’s the question’ hospitality.”

— Jeff Crivello, Chief Executive Officer of BBQ Holdings