Canada’s MTY Food Group Inc. surged to a record after the quick-service restaurant chain agreed to buy Kahala Brands Ltd. for about $300 million in cash and stock, almost doubling its stores in a major U.S. expansion.
The transaction will be immediately add to earnings, Montreal-based MTY said Wednesday in a statement. Based in Scottsdale, Arizona, closely held Kahala franchises and operates about 2,800 stores worldwide under 18 brands such as TacoTime, Blimpie and Coldstone Creamery, generating annual sales of more than C$950 million ($727 million). It will add to MTY’s brands in Canada which include Thai Express and Mucho Burrito.
“MTY had been searching for the right foundation for its U.S. expansion for the last three years, and it has finally found the perfect match," MTY CEO Stanley Ma, said in a statement.
The deal “provides MTY with a platform for growth in the U.S.,” Elizabeth Johnston, a Laurentian Bank Securities analyst, said in a note to clients.
MTY jumped 17 percent to C$41.91 at 11:14 a.m.. Earlier the stock advanced as much as 30 percent to C$46.25, the highest intraday level since MTY began trading, data compiled by Bloomberg show. MTY adopted its current name in 2003.
Once the transaction closes, probably in the next 75 days, the combined entity will operate about 5,500 stores under 57 brands. It’s expected to generate more than C$90 million in earnings before taxes, interest, depreciation and amortization in the 12 months after closing, as well as C$2 billion in sales, MTY said.