NEW YORK, NY--(Marketwired - August 22, 2016) - Adam Wyden of ADW Capital Partners, L.P. ("ADW Capital") and Eric Shahinian of Camac Partners, LLC ("Camac"), New York City based investment firms, transmitted today a letter to the board of directors and management of Imvescor Restaurant Group Inc. (the "Company" or "Imvescor") (TSX: IRG) seeking a strategic sale of the Company. ADW Capital and Camac along with their affiliates (which collectively hold approximately 16.4% of the Company's shares and warrants) believe that in seeking a strategic/financial partner it will ensure that the Company can best continue on its growth plan while maximizing shareholder value.
Found below is the full text of the fund's letter to the Company:
August 22, 2016
Imvescor Restaurant Group Inc.
c/o François-Xavier Seigneur, Chairman
8250 Decarie Suite 310
Montreal, QC H4P 2P5 Canada
Dear Board and Management of Imvescor Restaurant Group Inc. (TSX: IRG),
We would like to begin by commending the Board and management on the Company's successful turnaround and implementation of its restaurant rejuvenation plan. Specifically, we think the hiring of Frank Hennessy almost two years ago has brought a great deal of stability and focus to an organization that had been orphaned of leadership and strategy for many years prior. To that end, it is not surprising that the operational results have followed suit with a material reversal in same store sales trends and increased profitability at both the franchisee and corporate levels. We also expect these trends to continue for the foreseeable future.
As you know, ADW Capital and Camac have been long-term shareholders of the Company with certain purchases dating back almost 5 years. We have also almost unilaterally approved with the capital markets and operational decisions the Company has made in the last few years, including its recent implementation of a quarterly dividend. Notwithstanding these accomplishments, we believe the Company is at a crossroads today and as likely its two largest shareholders, believe we have identified the most advantageous path for the Company going forward. Frankly, we do not think it makes sense for Imvescor to continue as a publicly "traded" entity and that it should hire a financial advisor to pursue a sale of the Company immediately, if you have not done so already.
We have arrived at this conclusion for the following reasons:
- While the Company has averaged trading volume of ~ CAD $330,000 over the last 200 days, the Company has gone days in the not-too-distant past without trading a single share.
- This lack of trading activity is due in large part to the very closely held nature of the shares today. We estimate across a few select institutions/shareholders, over 50 percent of the Company's shares are in firm hands and are not "for sale."
- We think it is fair to assume that these shares are not "for sale" because the Company's concentrated investor base (many of whom have owned its shares for several years now) have followed its progress closely and recognize the Company's continued discounted value and business trajectory.
- In addition to the sparse liquidity barring new investors from taking a meaningful stake in the Company, Management has been unwilling to share certain segment/unit information in its disclosures and generally engage in open dialog with its shareholders about its long-term growth and monetization strategy.
- We believe the Company could ameliorate this issue and continue growing with the help of the right strategic/financial partner. In addition to being able to provide capital to accelerate the growth of Imvescor's platform, which is already taking hold, we think the Company could benefit immensely from substantial cost and revenue synergies by joining with a larger strategic partner while not being burdened by the disclosure requirements of being an independent public company.
Perhaps most relevant to our analysis is that we think a transaction benefits all the Company's stakeholders -- franchisees included! In our conversations with franchisees, owners often cite high food costs and burdensome payments for their share of advertising costs. If the Company were to merge with a strategic partner, some of the savings from combined food procurement and pooled advertising could be shared with the Company's franchisees.
In fiscal 2015, Corporate G&A, ex one-time restructuring charges, amounted to approximately CAD $8.7 MM. It is our belief that additional corporate costs may also be getting allocated to the Company's "Franchising" segment. Notwithstanding any such allocation, we believe a strategic partner could reduce at minimum CAD $10 MM costs from the platform inclusive of procurement savings on ~ CAD $400 MM of system sales. We expect the Company to earn on a standalone basis roughly CAD $21 - 22 MM of EBITDA in Fiscal 2017, with minimal maintenance capital expenditures. In the hands of the right strategic buyer, we could expect Imvescor's contribution to approximate CAD $31 -- 32 MM of EBITDA. At a multiple of 8.0x to 10x this would amount to exit values of CAD $4.10 - 5.30 per share.
It should also not be lost on Management and the board that control premiums in the marketplace for portfolios of franchised restaurants are at record highs as evidenced by the recent St. Hubert and Kahala Brands acquisitions. We think the Company could structure a stock-for-stock transaction (or partial cash and stock) with a larger public company that would allow current shareholders to receive a premium for their stock, while allowing them to participate in the tremendous value and synergy Imvescor will add to the new platform.
Another interesting option for the Company would be to explore a transaction with a financial buyer. Given the durability and predictability of franchise restaurant company cash flows, companies like Imvescor are favored for platform roll-up strategies. A well-capitalized private equity firm could take advantage of Imvescor's lower Canadian tax base, coupled with a low cost of debt capital, and use it as a platform to roll up additional franchise concepts. Or better yet, many private equity firms already have portfolios of franchise restaurants and could inure many of the same strategic cost saves (as well as tax basis savings) by combining their portfolios with Imvescor.
We are asking management to do the right thing for all stakeholders today. By seeking a strategic/financial partner at this stage in the game, it will ensure that the Company can grow significantly without many of the competitive risks of staying a small and illiquid independent public company.
ADW Capital Partners, L.P. and Camac Partners, LLC and its affiliates collectively hold approximately 16.4% of the Company's shares and urge the board to take our recommendations seriously.
We look forward to hearing your response.
Adam D. Wyden
Managing Member of ADW Capital Partners, L.P.
Managing Member of Camac Partners, LLC
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements. All statements that are not clearly historical in nature or that necessarily depend on future events are forward-looking, and the words "anticipate," "believe," "expect," "estimate," "plan," and similar expressions are generally intended to identify forward-looking statements. These statements are based on current expectations of ADW Capital Partners and Camac Partners and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict, and are based upon assumptions as to future events that may not prove to be accurate. Accordingly, readers should not place undue reliance on forward looking information. ADW Capital Partners and Camac Partners do not assume any obligation to update any forward-looking statements contained in this press release, except as required by applicable law.
SOURCE: ADW Capital Partners, L.P. and Camac Partners, LLC