Foodtastic makes aggressive $700M bid to acquire MTY Group, as CEO exits

Wetzel's Pretzels is one of about 80 brands operated or franchised by MTY Group. Photo: Shutterstock

The Canadian franchisor Foodtastic Inc. on Tuesday made a bid to acquire the multi-brand MTY Food Group Inc. for about $700 million (U.S.), or $43 per share (Canadian).

The offer was made to shareholders after MTY’s board has rebuffed two previous attempts to acquire the Montreal-based company, which is the franchisor and operator of more than 80 brands in 40 countries, with nearly 7,000 units, including about 4,100 in the U.S. MTY is the franchisor of brands such as Wetzel’s Pretzels, Papa Murphy’s, Pinkberry, Planet Smoothie, Cold Stone Creamery and more.

MTY last year announced it had initiated a strategic review process to explore options for enhancing shareholder value, including the possibility of a sale of part or all of the company. In October, MTY’s CEO Eric Lefebvre said it may offload some of its weaker-performing brands.

On Tuesday, however, MTY announced that Lefebvre has been ousted, effective immediately, and replaced by board member Victor Mandel.

Foodtastic is another large Canadian franchisor with operations on both sides of the border, and also based in Montreal, with a portfolio of 30 brands and nearly 1,200 units, operating brands like Freshii, Pita Pit, Dunkin’, Milestones and more.

Foodtastic said it first communicated an offer to acquire MTY on Oct. 15, which was reiterated five days later, only to be “repeatedly rebuffed.”

As a result, Foodtastic said it is taking the bid directly to shareholders.

On Tuesday, Foodtastic issued a public letter to MTY’s board, expressing disappointment that the offer was dismissed without reason or suggestions for a pathway to continued engagement.

The $43 per share (in Canadian dollars) offer represents a 32% premium to the closing price on Oct. 30, and a 37% premium to the 30-day volume-weighted average price of the shares for the period that ended on that date, Foodtastic said. That’s greater than Canadian analysts have calculated as a price target, the company said, which assumed growth for MTY.

“Yet this growth has failed to materialize,” wrote Foodtastic’s President and CEO Peter Mammas in the letter to the board.

MTY’s earnings, same-store sales and unit counts have been in decline over the last decade, aside from the COVID-19 years, Mammas said, and the company’s stock price has also underperformed, declining about 40% over five years, Mammas wrote.

“We believe MTY owns many wonderful brands and has many terrific franchisee partners,” Mammas wrote. “However, over the past decade, MTY became undisciplined in its operations and acquisitions.”

MTY has acquired too many concepts, he said, “some good and some bad,” and is not generating organic growth in the aggregate.

“We believe getting MTY’s portfolio back on track requires patient, long-term focus, which is very difficult to do under the short-term pressure of public markets,” the letter said.

Mammas argues that the privately held Foodtastic is uniquely qualified to take on MTY's business. Foodtastic, however, has also been an active collector of brands, including most recently the struggling 353-unit Freshii in 2023, which took that company private at a time when its same-store sales were down in double digits.

MTY did not immediately respond to requests for comment.

However, the new CEO of MTY Mandel said in a statement that the company’s focus will be “executing our asset-light value creation strategies to drive profitability, pursue growth opportunities and generate strong free cash flow.

“This is an opportunity to establish a new chapter for MTY, grounded in accountability, operational excellence and a clear commitment to delivering value for our shareholders,” said Mandel, a former vice president in the investment research department at Goldman Sachs. “I look forward to sharing our roadmap with shareholders.”