10:04:55 EDT Mon 22 Oct 2018
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Imvescor Restaurant Group Inc
Symbol C : IRG
Shares Issued 60,538,834
Close 2018-01-12 C$ 4.16
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Imvescor to hold meeting Feb. 19 for merger vote

2018-01-12 21:18 ET - Shareholders Letter

Mr. Francois-Xavier Seigneur reports


Imvescor Restaurant Group Inc. has issued a letter to the shareholders of the company and has filed its management information circular with the securities regulatory authorities in each of the provinces and territories of Canada in preparation for its special meeting of shareholders to be held on Feb. 19, 2018, at 11 a.m. Montreal time at Hotel Ruby Foo's, 7655 Decarie Blvd., Montreal, Que., H4P 2H2.

At the meeting, the shareholders will be asked to approve the previously announced amalgamation under Section 181 of the Canada Business Corporations Act involving the company and an entity to be incorporated, which will be a direct or indirect wholly owned subsidiary of MTY Food Group Inc. in accordance with the terms of the combination agreement dated Dec. 11, 2017, entered into between the company and MTY.

Shareholders of record as at the close of business on Jan. 3, 2018, will receive notice of and be entitled to vote at the meeting. The circular, which shareholders are expected to receive in the coming days, provides information on, among other things, the amalgamation and voting procedures. Completion of the amalgamation is conditional upon approval of at least two-thirds (66-2/3rds per cent) of the votes cast by the holders of common shares of the company present in person or represented by proxy at the meeting and entitled to vote and satisfaction of other customary closing conditions. It is expected that the amalgamation will be completed in the first half of calendar year 2018.

The board of directors of the company has unanimously determined that the amalgamation is in the best interests of the company and unanimously recommends, for the reasons set out in the circular, that the shareholders vote for the special resolution to approve the amalgamation well in advance of the voting deadline of 5 p.m. Montreal time on Feb. 15, 2018. Reference is made to the letter to shareholders included in the circular and available on the company's website and on the company's issuer profile at SEDAR. A copy of the letter to shareholders is also included herein.

Letter to the shareholders of Imvescor Restaurant Group

Dear fellow shareholders,

You have a value creation opportunity.

Participate in the upside of a stronger, more diversified restaurant franchisor.

On Dec. 12, 2017, we announced an exciting next step for our company: an amalgamation with MTY to create a leading North American restaurant franchisor with a strong balance sheet and significant growth potential. The transaction offers our shareholders:

  • Immediate value and future upside: with the offer to be paid approximately 20 per cent in cash and approximately 80 per cent in MTY shares, shareholders will receive immediate value and liquidity, and the opportunity to participate in the future upside of the new amalgamated company: a leading restaurant franchisor in a good position to generate future growth and face industry pressures;
  • Enhanced liquidity: upon the completion of the amalgamation, the combined company will have a broader shareholder base with increased market liquidity and a larger public float;
  • Fair value: as determined by an independent fairness opinion.

The amalgamation is already more valuable to shareholders today than when it was first announced on Dec. 12, 2017.

  • Based on the five-day volume-weighted average trading price of MTY shares as of Jan. 11, 2018, the last trading day prior to the date of the circular, the total consideration represents $252-million to existing shareholders, or an enterprise value of $267-million, offering shareholders an equivalent of $4.16 per Imvescor share.
  • This represents a premium of 15.6 per cent based on the five-day volume-weighted average trading price of MTY shares as of Jan. 11, 2018, the last trading day prior to the date of the circular, and the unaffected Imvescor share price on Oct. 26, 2017, compared with an initial premium of 13.3 per cent on the announcement day.
  • The EBITDA (earnings before interest, taxes, depreciation and amortization) multiple applied to this transaction reflects one of the highest business valuation EBITDA multiples identified in comparable transactions of businesses operating in the quick-service restaurant and casual dining segments of the restaurant industry in recent years: 15.0 times fiscal 2017 EBITDA of $17.5-million or 15.2 times based on the five-day volume-weighted average trading price of MTY shares as of Jan. 11, 2018, the last trading day prior to the date of the circular.

Through the share exchange offered, Imvescor shareholders gain exposure to the future growth potential of the amalgamated company -- a multibrand industry leader with a portfolio of over 5,700 stores under 75 brands, $2.9-billion in system sales and anticipated annual EBITDA in the range of approximately $125-million to $130-million.

Note that MTY shares have increased in value 152 per cent over the last five-year period ended Dec. 31, 2017, and 11 per cent over the last one-year period ended Dec. 31, 2017. Over the same periods, the business has generated total returns of 161 per cent and 12 per cent, respectively.

The amalgamation is the right move for Imvescor and its shareholders

This value-creating transaction is the culmination of over three years of hard work, commitment and dedication by Imvescor's management, employees and franchisees. Many of you will remember that Frank Hennessey was named chief executive officer in September of 2014. At that time, we had just concluded a strategic review process that found no interested buyers for a company with negative growth, declining key performance metrics and a share price hovering at $1.73. This is in sharp contrast to the value offered to shareholders today with the MTY offer. The value offered to shareholders of Imvescor is a result of the successful execution of our continuing turnaround strategy.

Synergy plus size plus scale equals accelerated growth potential

While we believe that more growth could be possible for Imvescor, we need to be realistic about the amount and rate at which further organic growth can occur within our key business areas. Competition is coming from the highly consolidated grocery sector that is aggressively competing for consumers' share of mouth. Further, the changes to the minimum wage in Ontario, effective at the beginning of this year, could have a negative financial impact on franchisees and limit the company's ability to grow in the Ontario market.

Given these headwinds, as well as the limited opportunities for meaningful growth that can come from synergistic and complementary acquisitions, our pace of growth as a stand-alone company may decelerate.

In contrast, a combined Imvescor and MTY will have the enhanced ability to face the challenges noted above and the requisite size, scale, geographic reach and balance sheet needed to succeed in an increasingly challenging operating environment, where purchasing power, synergies and acquisition capabilities matter even more.

Join the Imvescor board and major shareholders in supporting the amalgamation with MTY

For all the reasons set out in the management information circular, the board is unanimous in its support of this transaction. As set out in the section entitled "The amalgamation -- background to the amalgamation" of the circular, we did not reach this conclusion lightly. Over the past three-plus years, as part of the board's mandate to strengthen the business and enhance value for the company's shareholders, the board has regularly reviewed Imvescor's corporate strategy and considered various strategic options and other opportunities that may be in the best interests of the company. This included extensive strategic review processes in 2014 and 2016 considering potential opportunities with strategic partners and selected private equity firms in Canada and in the United States.

Based on this in-depth work canvassing the market in recent years, the extensive negotiations with MTY to surface the greatest possible value for shareholders and the other reasons outlined in the circular, the proposed amalgamation with MTY is the best strategic alternative available to Imvescor shareholders.

We encourage you to carefully read the circular, including the sections entitled "The amalgamation -- background to the amalgamation" and "The amalgamation -- reasons for the determinations and recommendations," which contain a summary of the main events that led to the execution of the combination agreement and certain meetings, negotiations, discussions, suspensions, pauses and other similar actions of the parties that preceded the public announcement of the amalgamation on Dec. 12, 2017.

To receive the value from the transaction with MTY, I urge you to vote for the amalgamation resolution well in advance of the voting deadline of 5 p.m. Montreal time on Feb. 15, 2018. Together with MTY, Imvescor will be best positioned to grow and create value for all shareholders.

You can vote your proxy on the dedicated voting page on our website. If you require any assistance in voting your proxy, please contact Kingsdale Advisors, our strategic shareholder adviser and proxy solicitation agent, at 1-855-682-2023 toll-free in North America, or 416-867-2272 outside of North America, or by e-mail at contactus@kingsdaleadvisors.com.

On behalf of the entire board, I thank you for your support over the last few years as we worked hard to turn around our company and surface the value of our portfolio. It is because of the outstanding efforts of our franchisees, employees and management team that we are in a position to take this next step. Today, as a shareholder, your patience is being rewarded.

Signed by Francois-Xavier Seigneur, chairman of the board of directors

About Imvescor Restaurant Group Inc.

Imvescor is primarily engaged in the business of franchising and developing a system of distinctive family/mid-scale dining, casual dining, and takeout and delivery restaurants, serving high-quality food. Imvescor's restaurants operate under the Pizza Delight, Toujours Mikes, Scores, Baton Rouge and Ben & Florentine brands. Imvescor's business, which consists primarily of franchised restaurants and company-owned restaurants, including both takeout and sit-down restaurants licensed to serve alcohol, and also includes licensed retail products manufactured and sold by third parties under licence under the Pizza Delight, Toujours Mikes, Scores and Baton Rouge brands. Imvescor's network of restaurants is easily identified by the Pizza Delight, Toujours Mikes, Scores, Baton Rouge and Ben & Florentine banners and has established a high recognition throughout the communities they each respectively serve.

We seek Safe Harbor.

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