Foodtastic Inc.
announced that it entered into an agreement to acquire Freshii Inc. (TSX:FRII). Under the terms of the agreement, Foodtastic will purchase all of Freshii’s shares for $2.30 in cash per share, totaling approximately $74.4 million. This price represents a premium of 148% over Freshii’s 20-day volume-weighted average price per share as of December 16, 2022, and a 142% premium over the closing price on the same date.
In 2021, Freshii booked revenue of $23.6 million and a loss of $9.9 million and currently has a Trailing-12-Month (TTM) revenue of $ 39.5 million. Taking cash and debt into consideration, the implied enterprise value (EV) of the transaction is $59.6 million and values Freshii at 2.5x EV-to-Revenue (2021) or 1.5x EV-to-Revenue (TTM).
The all-cash transaction delivers immediate and certain liquidity to Freshii’s shareholders at a premium to the market price. The transaction is expected to close in the first quarter of 2023, subject to various approvals and other customary closing conditions, and is not subject to a financing condition.
Freshii
Freshii is a fast-casual restaurant chain that specializes in healthy food options such as salads, wraps, and smoothies. Starting in 2005, Freshii was a first-mover in the healthy food-focused franchise restaurant concept and currently operates 343 locations in North America and internationally. Almost all of Freshii’s stores are franchised. Freshii has expanded its business lines to include consumer-packaged goods (CPG), nutritional supplements, and e-commerce retail, following the acquisition of a majority interest in Natura Market. Freshii’s CPG retail partners include Walmart Canada and Air Canada.
Daniel Haroun, the CEO of Freshii, believes that the acquisition recognizes the value of the Freshii brand and the mission of making healthy food accessible. He also believes that Freshii’s brand, franchise network, and talent will benefit from Foodtastic’s greater scale which will improve Freshii’s potential for growth, enhance franchisee profitability, and generate additional opportunities for Freshii’s consumer packaged goods business.
Foodtastic Growing its Portfolio of Brands
Foodtastic is a franchisor of restaurant brands, primarily in Canada, and would operate more than 1,200 restaurants and generate over $950 million in annual sales, including the recently announced acquisitions of Quesada and Freshii. Foodtastic is expanding internationally and currently operates more than 150 restaurants outside of Canada. Its portfolio of brands includes Second Cup, Pita Pit, Milestones, Fionn MacCool’s, and Shoeless Joe’s.
Peter Mammas, the CEO of Foodtastic, stated that they have been interested in Freshii for some time as he believes it is a great fit for Foodtastic and helps it expand into a new category. He also expressed excitement about continuing to expand and enhance the Freshii brand.
The acquisition will be subject to the approval of at least two-thirds of the votes cast by shareholders of Freshii at a special meeting of Freshii shareholders that is expected to be called in the first quarter of 2023.
Matthew Corrin, the founder and Executive Chairman of Freshii, and the other directors and officers of the company have entered into agreements to vote in favor of the acquisition. Mr. Corrin beneficially owns Class A subordinate voting shares and Class B multiple voting shares that represent approximately 69.4% of the votes attaching to all issued and outstanding Freshii shares.
Oragin Foods Inc. (TSXV:OG)
The value of this transaction bodes well for covered company Oragin Foods Inc. (TSXV:OG) which booked revenue in Fiscal Year 2022, which ended January 31, of $25.7 million, with a loss of $2.98 million, as it is currently valued at EV-to Revenue (F2022) at only 0.5x.
operates an independent, Canadian chain of organic and natural product grocery stores in Toronto and the Greater Toronto Area in southern Ontario, Canada, under the name Organic Garage. Organic Garage focuses on providing customers with healthy choices at a low cost. Its ability to efficiently source organic products allows it to pass along the savings to customers. Its store concept checks multiple boxes with today’s food customers: healthy food, good value, small store convenience, and an overall premium shopping experience.
Oragin Foods also operates a CPG division under the name “The Future of Cheese” and continues to manufacture and sell the company’s products. The company is also working on several new products and plans to launch them in late Q1 or early Q2. Additionally, the company is looking to expand its presence in the US market, including working with a US-based co-packer and onboarding new retailers.
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