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Pinkberry’s owner to buy Papa Murphy’s in a $190M deal

The Canadian brand operator will pay $6.45 per share for the take-and-bake pizza chain.
Photograph: Shutterstock

MTY Group, the Canadian brand operator that owns Cold Stone Creamery, Pinkberry and dozens of other brands, is adding another to its collection after agreeing Thursday to acquire Papa Murphy’s Holdings.

Montreal-based MTY said it has agreed to buy the struggling take-and-bake pizza chain for $6.45 per share, giving the deal a valuation of $190 million.

The price is a 32% premium off of Papa Murphy’s closing price on Wednesday and a 46% premium off the company’s price in November, when the Vancouver, Wash.-based chain said it was looking for a buyer.

Yet the price is less than 60% of Papa Murphy’s stock value on the day of its initial public offering in 2011.

The deal will give MTY another franchised brand and one of its biggest. Papa Murphy’s operates more than 1,300 locations in the U.S., Canada and the United Arab Emirates.

MTY will have 7,400 locations globally under all of its brands once the Papa Murphy’s purchase is complete. “This is an important transaction for MTY as we add a brand with a differentiated position in pizza to our existing U.S. portfolio,” MTY CEO Eric Lefebvre said in a statement. He called the pizza segment “highly attractive due to its size, fragmented nature and growth potential.”

But it also takes on a chain that has struggled in recent years amid intense competition in the pizza space.

System sales at Papa Murphy’s declined by 4.5% and unit count declined 5.6% in the U.S., according to data from the Technomic Top 500 Chain Restaurant Report.

Same-store sales, meanwhile, have declined for 13 straight quarters, including a 1.3% decline in the fourth quarter of 2018.

In its announcement of the deal, MTY said that Papa Murphy’s “is building momentum” after implementing a brand refocus and a new corporate strategy.

The company also said it plans to make capital investments that will help increase same-store sales and franchisee profits.

The agreement “provides immediate value to our stockholders at a premium over our current share price,” Papa Murphy’s Chair Jean Birch said in a statement. She said that the merger would “accelerate ongoing efforts to enhance our convenience and relevance and maintain our position as the No. 1 take-and-bake pizza chain in the United States.”

Papa Murphy’s joins a string of publicly traded restaurant chains that have been sold to strategic buyers. Sonic Drive-In and Zoes Kitchen, among others, have been sold to existing operators as companies consolidate and increasingly look to partner with other chains to gain a size advantage.

It is also yet another deal for MTY, which has been on a perpetual buying binge for more than a decade, including the acquisition of Kahala Brands in 2016 and the purchase of The Counter last year. 

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