MISSISSAUGA, Ont. — Aegis Brands Inc. has entered into a definitive agreement to sell substantially all of the assets comprising its specialty-coffee brand Second Cup Coffee Co. to Quebec-based Foodtastic Inc.
“Second Cup has been a Canadian staple for almost 45 years and we’re excited to welcome them into the Foodtastic family,” says 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.”
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.
“We’re pleased that the Second Cup brand and franchisees have the opportunity to evolve with a new Canadian partner,” says 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 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 per cent 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 has unanimously approved the transaction and determined that it’s in the best interests of the company and recommends that common shareholders vote in favour of the transaction.
Under the terms of the purchase agreement, an affiliate of Foodtastic 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.
