MISSISSAUGA, ON, Feb. 8, 2021
/CNW/ - Aegis Brands Inc., ("Aegis" or the "Company") (TSX:
AEG) today announced that it has entered into a definitive
agreement (the "Purchase Agreement") to sell substantially all of
the assets comprising its specialty coffee brand Second Cup Coffee
Co. ("Second Cup") to Quebec-based
Foodtastic Inc. ("Foodtastic"), an emerging leader in the
restaurant franchising industry (the "Transaction").
"Second Cup has been a Canadian staple for almost 45 years and
we're excited to welcome them into the Foodtastic family" said
Peter Mammas, President and CEO of Foodtastic. "We look forward to
working with all our new franchisees and emerging through this
pandemic with a revitalized Canadian leader in the premium coffee
segment. This acquisition is consistent with our strategy of
acquiring quality Canadian brands with growth potential."
"We are pleased that the Second Cup brand and franchisees have
the opportunity to evolve with a new Canadian partner," said
Steven Pelton, President and CEO of
Aegis. "At Aegis we will now focus on further development of
Bridgehead Coffee and Hemisphere Cannabis, while seeking out
exciting new growth and acquisition opportunities."
The purchase price under the Transaction consists of
$14 million in cash payable on
closing (subject to customary closing adjustments), as well as a
post-closing earn-out based on royalties earned from certain Second
Cup cafés opened following closing. The Transaction will
significantly strengthen Aegis' balance sheet and permit the
Company to accelerate its previously announced growth strategy
through accretive acquisitions.
Aegis inherently believes in the power of the entrepreneur.
Future acquisition targets will ideally have a strong vision for
their brand and the founder at the helm.
"This is a pivotal moment for Aegis Brands. We see many
potential opportunities to help talented entrepreneurs and strong
brands as they emerge from the challenges of the pandemic," said
Pelton. "We are excited about the opportunity to uncover new
opportunities for growth. Aegis was created with the vision of
building a portfolio of amazing brands that can grow and flourish
with access to our resources and expertise. We are committed to
letting each company operate as an independent brand, while
supporting, promoting, and protecting the Company through its many
stages of growth."
Shareholder Approval and Recommendation of the Board
The Transaction is subject to approval by at least two-thirds of
the votes cast by common shareholders of Aegis at a special meeting
of common shareholders currently expected to be held in
March 2021. The directors and
executive officers of the Company and certain other major
shareholders, collectively holding approximately 43% of the
Company's issued and outstanding common shares, have entered into
support agreements agreeing to vote their common shares in favour
of the Transaction.
The board of directors of Aegis, after consultation with
management and its legal advisors, and for reasons to be more fully
described in the management information circular to be filed and
mailed to common shareholders in connection with the Transaction,
has unanimously approved the Transaction and determined that the
Transaction is in the best interests of the Company and recommends
that common shareholders vote in favour of the Transaction.
The Purchase Agreement
Under the terms of the Purchase Agreement, an affiliate of
Foodtastic (the "Purchaser") will acquire substantially all of the
assets of the Second Cup business and will assume the post-closing
liabilities of the business and pre-closing contractual lease
liabilities of Aegis associated with franchised cafés (subject to
certain limited exceptions).
The closing of the Transaction is subject to the receipt of
certain third-party consents, as well as a number of other
customary conditions, including with respect to the truth and
accuracy of the parties' representations and warranties and
material compliance with their respective covenants.
The Purchase Agreement includes customary non-solicitation
provisions, including Aegis' right to consider and accept
unsolicited superior proposals in certain circumstances, subject to
a right to match in favor of the Purchaser. A termination fee of
$336,000 will be payable by Aegis to
the Purchaser should the Transaction not close under certain
circumstances, including if the Transaction is not completed as a
result of Aegis accepting an unsolicited superior proposal. A
reverse termination fee of $336,000
will be payable by the Purchaser to Aegis should the Transaction
not close as a result of an uncured breach by the Purchaser of the
Purchase Agreement (provided Aegis is not then in breach of the
Purchase Agreement).
Copies of the Purchase Agreement and the management information
circular to be mailed to common shareholders in connection with the
Transaction will be filed with Canadian securities regulators and
will be available on the SEDAR profile of Aegis at www.sedar.com.
Shareholders are urged to read the management information circular
and the other relevant materials when they become available, as
such materials will contain important information regarding the
Transaction.
About Foodtastic
Foodtastic is the franchisor of
multiple restaurant concepts including, Au Coq, La Belle et La
Boeuf, Monza, Carlos & Pepe's, Souvlaki Bar, Nickels,
Rotisseries Benny, Chocolato, Big Rig and Bacaro. Foodtastic is a
leader in the restaurant franchising business with over 130
restaurants and $240 million in
annualized sales.
About Aegis Brands Inc.
Founded in 1975, Aegis Brands
Inc., formerly The Second Cup Ltd., is a Canadian specialty coffee
retailer operating franchised and company-owned cafés across
Canada. In November 2019, the Company announced its
intention to implement a new operating structure in support of its
new strategy. The Company now owns and operates the existing Second
Cup Coffee Co. specialty coffee business as part of a portfolio of
brands that also includes Bridgehead and Hemisphere Cannabis Co.
For more information, please visit www.aegisbrands.ca or find the
Company on Facebook and Twitter.
Cautionary Note on Forward Looking Statements
This press release contains forward-looking statements within
the meaning of Canadian securities laws. These forward-looking
statements contain statements of intent, belief or current
expectations of Aegis. Forward-looking information is often, but
not always identified by the use of words such as "anticipate",
"believe", "expect", "plan", "intend", "forecast", "target",
"project", "may", "will", "should", "could", "estimate", "predict"
or similar words suggesting future outcomes or language suggesting
an outlook.
The forward-looking statements included in this press
release, including statements regarding the Transaction, the
receipt of necessary shareholder approvals and satisfaction of
other closing conditions, the anticipated timing of the special
meeting of the Company's common shareholders, the earn-out
component of the purchase price, the nature of Aegis' growth
strategy going forward and execution on any of its potential plans
(including with respect to the growth and development of Bridgehead
Coffee and Hemisphere Cannabis and identification of future
acquisition targets) are not guarantees of future results and
involve risks and uncertainties that may cause actual results to
differ materially from the potential results discussed in the
forward-looking statements. In respect of the forward-looking
statements and information included in this press release, Aegis
has provided such in reliance on certain assumptions that it
believes are reasonable at this time, including assumptions as to
the timing of the mailing of the management information circular,
the timing of the common shareholder meeting, the ability of the
parties to receive, in a timely manner and on satisfactory terms,
the necessary shareholder approvals, the ability of the parties to
satisfy, in a timely manner, the other conditions to the closing of
the Transaction, the ability of the Company to manage the risks
(economic, operational, financial, and other risks) associated with
the COVID-19 pandemic, the ability of the Company to identify
new acquisition opportunities and to successfully integrate past
and future acquisition targets into the Company's business, and the
Company's ability to generally execute on its strategy going
forward. Accordingly, readers should not place undue reliance on
the forward-looking statements and information contained in this
news release.
Risks and uncertainties that may cause such differences
include but are not limited to: the risk that the Transaction may
not be completed on a timely basis, if at all; risks that the
conditions to the consummation of the Transaction may not be
satisfied; the risk that the Transaction may involve unexpected
costs, liabilities or delays; the risk that, prior to the
completion of the Transaction, Aegis' business may experience
significant disruptions, including loss of customers or employees,
due to transaction-related uncertainty or other factors; the
possible occurrence of an event, change or other circumstance that
could result in termination of the Transaction; risks that the
Transaction may have a negative impact on the market price and
liquidity of the common shares; risks related to the diversion of
management's attention from Aegis' ongoing business operations;
risks relating to the failure to obtain necessary shareholder
approvals; risks related to the Company's strategy going forward;
risks related to the COVID-19 pandemic; and other risks inherent in
the industry in which Aegis operates.
The risks associated with the COVID-19 pandemic include: the
ultimate extent, duration and severity of the pandemic itself and
the associated government restrictions; effects on consumer and
commercial behavior and other factors associated with or resulting
from such pandemic, including that the outbreak of the COVID-19
pandemic could result in additional cafés temporarily suspending
operations; a decrease in the willingness of guests to patronize
the Company's cafés; shortages of employees to staff the Company's
cafés; interruption of supplies from third parties upon which the
Company relies; the imposition of governmental regulations that
adversely impact the Company's business; the availability of the
Canada Emergency Commercial Rent
Assistance program; landlord willingness to consider franchisees'
requests for deferrals of rent or loan repayments and/or the
Company's requests to amend or terminate certain café leases; that
franchisees may request that the Company take certain steps to
support its franchisees (whether financially or otherwise); and
that the pandemic and the consumer, governmental and commercial
response to it could materially impact economic activity in general
and otherwise have a material adverse effect on the Company's
business, financial condition and results of operations. Such
adverse effects could be rapid and unexpected.
Failure to obtain the requisite approvals or the failure of
the parties to otherwise satisfy the conditions to or complete the
Transaction, may result in the Transaction not being completed on
the proposed terms, or at all. In addition, if the Transaction is
not completed, and Aegis continues in its current form, the
announcement of the Transaction and the dedication of substantial
resources of Aegis to the completion of the Transaction could have
a material adverse impact on Aegis' share price, its current
business relationships (including with future and prospective
employees, customers and partners) and on the current and future
operations, financial condition and prospects of Aegis. When
relying on forward-looking statements to make decisions, investors
and others should carefully consider the foregoing factors and
other uncertainties and potential events. Readers are cautioned
that the foregoing list of factors is not exhaustive. Additional
information on these and other factors that could affect Aegis'
operations or financial results are included in reports on file
with applicable securities regulatory authorities and may be
accessed through the SEDAR website (www.sedar.com).
The forward-looking statements in this press release are made
as of the date it was issued and Aegis does not undertake any
obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by applicable law.
By their very nature, forward-looking statements involve inherent
risks and uncertainties, both general and specific, and risks that
outcomes implied by forward-looking statements will not be
achieved. Aegis cautions readers not to place undue reliance on
these statements.
SOURCE Aegis Brands Inc.