MTY Food Surges as it Enters U.S. Burrito Market

MTY Food Group Inc., a Canadian franchiser of fast-food restaurants, jumped the most in almost 2 1/2 years after buying pita and burrito chains from Extreme Brandz for C$45 million in its first foray into the U.S. market.

MTY, based in St. Laurent, Quebec, rose 10 percent to C$25.10 at 4 p.m. in Toronto, the most since December 2010. The stock has risen 13 percent this year.

“We’re happy with the way they are expanding into the U.S., because they’re starting small,” said Jesse Gamble, a research analyst with Donville Kent Asset Management Inc. which manages about C$70 million ($67.4 million) in Toronto, including shares of MTY. “They’re not risking a lot so it’s a win-win.”

The firm has no plans to sell its existing positions in MTY and will wait to see how the acquisitions fit into the company when the deal closes in September before deciding whether to buy more stock.

The deal, for the Extreme Pita, Mucho Burrito and PurBlendz brands and assets of closely held Extreme Brandz, is the biggest acquisition in MTY’s history and will be paid with cash and a line of credit, the company said in a release.

“The 40 stores in the United States will be MTY’s first stores on American territory. The ice is now broken,” said Stanley Ma, chief executive officer of MTY, in a statement.

Extreme Brandz, based in Mississauga, Ontario, operates 235 Extreme Pita and more than 70 Mucho Burrito restaurants in Canada and the U.S., including two company-owned storefronts for each brand. PurBlendz is an add-on concept at about 70 Extreme Pita locations.

System-wide sales for the most recent fiscal period for Extreme Brandz was more than C$103 million, MTY said.

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