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From Home Furnishing Business

Franchise Group Enters Merger Agreement and Plans to Go Private

Franchise Group, Inc. announced that it has entered into a definitive agreement and plan of merger pursuant to which members of the senior management team of Franchise Group led by Brian Kahn, the Company’s chief executive officer, (collectively with affiliates and related parties of the senior management team, the “Management Group”), in financial partnership with a consortium that includes B. Riley Financial, Inc. and Irradiant Partners, will acquire the approximately 64% of the Company’s issued and outstanding common stock that the Management Group does not presently own or control. 

The transaction has an enterprise value of approximately $2.6 billion, including the Company’s net debt and outstanding preferred stock.

Under the terms of the proposed merger, Franchise Group common stockholders will receive $30.00 in cash for each share of Franchise Group common stock they hold. This represents a premium of 31.9% to the Company’s unaffected closing common stock price on March 17, 2023, the last trading day before the Company announced the receipt of an unsolicited proposal to acquire the Company from a third party.

“This transaction is an exciting milestone for our company,” said Matt Avril, chairman of the board of directors and the special committee of Franchise Group. Mr. Avril continued that “The Special Committee and its advisors conducted an independent process and review of the strategic alternatives available to the Company, with a focus on obtaining the best outcome for public stockholders.”

“We believe the proposed transaction delivers immediate and certain value for public stockholders at a significant premium to the unaffected share price, and we have the flexibility to explore other potential transaction opportunities during the go shop period under the Merger Agreement.”

Brian Kahn, CEO of Franchise Group stated, “We are excited to have this opportunity to continue our business strategy of partnering with high quality franchisees, operators and financial institutions, while also delivering certain value to our public stockholders despite a challenging business environment.”

The independent directors of Franchise Group’s Board of Directors have unanimously approved the proposed merger based upon the unanimous recommendation of a Special Committee of the Board of Directors, which was composed of independent directors not affiliated with the Management Group and was advised by its own financial and legal advisors.

The Management Group has agreed to rollover their shares of common stock of the Company in connection with, and vote their shares of common stock in favor of, the proposed merger, with such voting obligation terminating should the Merger Agreement be validly terminated, including in connection with a “superior proposal.”

The consortium has also received definitive financing commitments from third party lenders and institutional investors, including B. Riley Financial Inc. and Irradiant Partners, to finance a portion of the purchase price.

The proposed merger is anticipated to close in the second half of 2023, subject to satisfaction or waiver of customary closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act and the approval of the Company’s stockholders, including approval by a majority of the shares of common stock of the Company not owned or controlled by the Management Group or other members of the buyer consortium.

The Merger Agreement also includes a 30 day “go shop” period that will allow the Company to affirmatively solicit alternative proposals from interested parties. At the current time, the Company is not permitted to pay dividends on its outstanding shares of common stock under its existing indebtedness agreements. In addition, the Merger Agreement does not permit the Company to pay additional dividends on the outstanding shares of common stock during the pendency of the proposed merger.

The Company expects to file a Current Report on Form 8-K with the Securities and Exchange Commission which will include the merger agreement as an exhibit and more fully describe the terms and conditions of the proposed merger.

Upon completion of the proposed merger, Franchise Group will become a private company and will no longer be publicly listed or traded on NASDAQ. Franchise Group’s management team, including Brian Kahn, is expected to continue to lead the Company. Franchise Group plans to continue to operate its current portfolio of highly recognized brands.



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