Cara completes acquisition of St-Hubert

September 6, 2016 – Cara Operations Limited recently announced that it has successfully completed the St-Hubert acquisition.  The company announced on March 31, 2016, that it entered into a definitive agreement to acquire 100 per cent of Group St-Hubert, Quebec’s leading full-service restaurant operator as well as a fully-integrated food manufacturer for $537 million.

Jean-Pierre Léger, the outgoing Chairman and CEO of St-Hubert commented, “I’m proud of the St-Hubert legacy and confident that this new alliance with Cara will open up opportunities for St-Hubert associates as well as new possibilities, both inside and outside of Quebec, for the St-Hubert business”. 

Cara’s Chief Executive Officer, Bill Gregson, commented, “This acquisition represents a historic alliance and an excellent strategic fit for both companies. It gives St-Hubert the opportunity to expand its restaurant network as well as to drive a national retail food program on behalf of Cara, leveraging St-Hubert’s existing management, Quebec manufacturing facilities and supplier network”. 

Cara has acquired St-Hubert for a purchase price of $537 million on a cash-free, debt-free basis.  The purchase price is subject to customary working capital adjustments. St-Hubert generates approximately $620 million in System Sales, including sales from its food operations division, and approximately $44.8 million in Operating EBITDA. The St-Hubert transaction is immediately accretive to Cara’s Adjusted Net Earnings per Share, before synergies are considered. Cara and St-Hubert will leverage their combined businesses to achieve an estimated $10 million of annual run-rate synergies within 3 years.  Cara has financed the St-Hubert acquisition through the issuance of $50 million in Cara subordinate voting shares (“Shares”) to the vendor, approximately $230 million in proceeds from Cara’s previously announced offering of subscription receipts (the “Subscription Receipts”), on a private placement basis, and through upsizing its credit facility with Scotiabank and a syndicate of lenders.  At closing, Cara’s Pro Forma Net Debt to Operating EBITDA ratio is expected to be approximately 1.9x, providing Cara with room on the balance sheet to fund further growth, including acquisitions.

In accordance with the terms of the agreement pursuant to which the Subscription Receipts were issued, each outstanding Subscription Receipt will be exchanged today for one Share, resulting in the issuance of 7,863,280 Shares and a cash payment equal to $0.20 per Subscription Receipt. The cash payment is equal to the aggregate amount of dividends per Share for which record dates occurred since the issuance of the Subscription Receipts, less withholding taxes, if any. The Shares issued in exchange for the Subscription Receipts will be listed for trading on the Toronto Stock Exchange.

Non-IFRS Measures

This press release makes reference to certain non-IFRS measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Cara’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of Cara’s financial information reported under IFRS. Cara uses non-IFRS measures including “System Sales”, “Operating EBITDA”, “Adjusted Net Earnings per Share” and “Pro Forma Operating EBITDA” to provide investors with supplemental measures of its operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. Cara also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Cara’s management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets, and to determine components of management compensation.

“System Sales” represents top line sales received from restaurant guests at both corporate and franchise restaurants including take-out and delivery customer orders. System Sales includes sales from both established restaurants as well as new restaurants.  Pro forma System Sales for the acquisition of St-Hubert include third party sales from the food division which consist of sales to franchise restaurants, grocery, industrial and food service clients net of commercial expenses.  Management believes System Sales provides meaningful information to investors regarding the size of Cara’s restaurant network, the total market share of Cara’s brands and the overall financial performance of its brands and restaurant owner base, which ultimately impacts Cara’s consolidated financial performance.

“Operating EBITDA” is defined as net earnings (loss) from continuing operations before: (i) net interest expense and other financing charges; (ii) gain (loss) on derivative; (iii) write-off of financing fees; (iv)  income taxes; (v) depreciation of property, plant and equipment; (vi) amortization of other assets; (vii) impairment of assets, net of reversals; (viii) losses on early buyout / cancellation of equipment rental contracts; (ix) restructuring; * conversion fees; (xi) net (gain) / loss on disposal of property, plant and equipment; (xii) stock based compensation; (xiii) change in onerous contract provision; and (xiv) lease costs and tenant inducement amortization.

“Adjusted Net Earnings per Share” is defined as net earnings per share attributable to shareholders of Cara adjusted for the following: (i) gain (loss) on derivative; (ii) write-off of financing fees; (iii) impairment of assets, net of reversals; (iv) losses on early buyout / cancellation of equipment rental contracts; (v) restructuring; (vi) conversion fees; (vii) net (gain) / loss on disposal of property, plant and equipment; (viii) change in onerous contract provision; (ix) normalized interest expense, which adjusts for proceeds from the IPO and certain capital changes related to the IPO; and, normalized income tax expense.

“Pro Forma Operating EBITDA” is defined as Operating EBITDA adjusted for full-year contribution of New York Fries and the acquisition of St-Hubert, as if the acquisitions had occurred on December 27, 2015.

Forward Looking Information

This press release contains “forward-looking information” within the meaning of applicable securities laws. Forward-looking information in this press release includes statements regarding the timing and completion of the proposed Original Joe’s acquisition, timing and value of expected synergies, the effective accretion, growth prospects, future business strategy and expectations regarding operations. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects”, “estimates”, “intends”, “anticipates”, “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “will” or “achieve”.

Forward-looking information is necessarily based on a number of assumptions and estimates that, while considered reasonable by Cara as of the date such statements are made, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results to be materially different from those expressed or implied by such forward-looking information, including: the accuracy of management’s assessment of the effects of the acquisition, including the ability to generate synergies consistent with management’s expectations; and the ongoing performance of the businesses of Cara and St-Hubert. These assumptions and estimates are not intended to represent a complete list of the assumptions and estimates that could affect Cara.

There are several factors that could cause actual results to differ materially from those contained in forward-looking information, including: future operating results; future general economic and market conditions, including equity capital markets; changes in laws and regulations; and such other factors and risks as described in detail from time to time in documents filed by Cara with securities regulatory authorities in Canada. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. Cara does not undertake to update any forward-looking information contained herein, except as required by applicable securities laws.