Montreal fast-food mogul Stanley Ma has made his biggest purchase ever, a $23-million cash takeover of the Mr. Sub sandwich chain.
Mr. Ma's MTY Food Group Inc. , a TSX-listed company that has seen its revenue triple in the past four years, has added the 335-outlet Mr. Submarine Ltd. chain to its vast array of fast-food restaurants. The deal gives the company its first foothold in the submarine sandwich market, and a bigger footprint in Ontario where most of the Mr. Sub outlets are located.
MTY has been on an acquisition streak for the past several years, and announced two deals this week alone. In addition to the Mr. Sub takeover, on Monday MTY said it will pay $1.8-million for Koryo Korean BBQ Franchise Corp., a food chain with 20 outlets in British Columbia, Alberta, Saskatchewan, Ontario, and Quebec.
MTY is also in the process of closing a deal to buy the 133-outlet Jugo Juice Canada Inc. chain for $15.5-million.
Mr. Ma, who immigrated to Canada from Hong Kong in the 1960s, started with a single restaurant serving Chinese and Polynesian food that he opened in 1979. His company now owns a vast network of more than two dozen chains, including Cultures, Thai Express, TacoTime, Yogen Früz Canada and the large coffee and doughnut chain Country Style, which it bought for $16.5-million in 2009. Together, they add up to more than 1,700 restaurants, almost all of which are franchised.
After trading for years on the TSX Venture exchange, MTY migrated to the main exchange in May, 2010. Mr. Ma still owns about 26 per cent of the firm.
The purchase of the privately held Mr. Sub gives the company a strong presence in the sandwich market, where the company was absent, said MTY vice-president of finance Eric Lefebvre. "Strategically it fits our portfolio ... and it does not cannibalize any of our other chains," he said.
He said the company has not yet decided if it will make any substantial changes to the Mr. Sub chain, a 43-year-old business that has faced stiff competition in recent years from other sub sandwich restaurants such as Subway and Quiznos.
Mr. Lefebvre said MTY will continue to make acquisitions of various sizes, and is in a financial position to gobble up bigger targets as it expands. "The fact that we are still debt free certainly helps," he said. "If we are going for a larger target there are many opportunities for financing [through]issuing equity or debt."
The company has already opened some restaurants outside Canada, but only in the Middle East. It will make more international purchases "if the strategic fit is there and the price is right," Mr. Lefebvre said. The company has no properties in the United States but it is considering a "careful" move there, he said. Still, "Canada is a very big country and we still have a lot of room to grow here."
The company considered buying some of the restaurants put up for sale by Priszm Income Fund, but they "weren't the right fit for us," Mr. Lefebvre said. Priszm, which owned dozens of KFC, Taco Bell and Pizza Hut restaurants, is now in court protection from creditors.
Analyst Vincent Perri of Laurentian Bank Securities, said MTY has done an excellent job of absorbing its acquisitions over the past few years. "They are a proven and solid consolidator," he said.
MTY generated about $66.9-million in revenue in 2010, and profit of $15.4-million.