After two rejected acquisition proposals, Canadian restaurant operator Foodtastic is taking its $43-per-share offer for MTY Food Group (MTY-T) directly to shareholders, arguing the bid delivers a significant premium and a better path forward for the restaurant franchisor.

“We are therefore disappointed that MTY has rejected the proposed transaction without engaging in substantive dialogue. Nevertheless, we are confident that MTY’s shareholders will recognize the compelling value of our proposed transaction and that it represents a superior path forward to MTY’s standalone strategy,” Peter Mammas, Foodtastic president and chief executive officer said in an open letter published on Nov. 3.

The company first proposed the acquisition on Oct. 15, then again on Oct. 20, according to the release.

“I have long had tremendous respect for Stanley Ma and the organization he built. MTY is a great company with excellent opportunities but it has unfortunately not lived up to its full potential in recent years,” Mammas said.

More than 30 per cent premium offered

The offer — at $43 per share — represents a 32-per-cent premium as of Oct. 30, and a 37-per-cent premium from its 30-day volume, according to Foodtastic.

The company’s shares were trading at $32.75 as of Tuesday afternoon.

“$43 per share is greater than the price target calculated by every major Canadian bank analyst. Their average one-year forward price target, discounted to present value, does not project an increase above today’s price of approximately $32 per share. Notably, these price targets are calculated based on forecasts that assume the company’s EBITDA stabilizes and grows,” Mammas said.

MTY, which operates such brands such as Country Style, Mr. Sub and Thai Express in Canada, was started in Montreal in 1979 by founder Ma. Its U.S. operations include Pinkberry, TacoTime and Wetzel’s Pretzels. It has 6,966 locations.

The company has responded to the letter with a press release that was issued shortly after 2 pm.

“Following a robust review process and careful consideration of those proposals, the board unanimously determined that pursuing the October proposals was not in the best interests of the corporation or its shareholders. Accordingly, the corporation rejected the October proposals and formally terminated discussions with Foodtastic. No agreement, understanding or arrangement was entered into in connection with those October proposals,” the release stated

While making it public and well known now, Mammas insisted the open letter is an “expression of interest only and does not constitute a binding offer or agreement.”

On Nov. 4, Foodtastic issued a response to MTY. “Foodtastic was not able to come to an agreement with MTY during the strategic review process, or subsequently, because the company had unrealistic expectations about its value."

As well, it pushed back against MTY’s comments about financing, calling it a “red herring.” A Foodtastic press relations representative quoted financial services firm Raymond James Ltd. in an email sent to FoodNX. “We feel confident that Foodtastic has the capability to secure financing.”

Foodtastic operates more than 30 diverse brands and nearly 1,200 establishments across the country with brands like Milestones, Pita Pit, Second Cup and Freshii.

Continuing its expansion

Back in June, Foodtastic purchased Kinton Ramen. Earlier, it reached a deal to open hundreds of Dunkin’ locations in Canada.

MTY has experienced some financial troubles in recent years and has achieved $220 million in acquisition write-downs since 2020, according to Foodtastic. Its total shareholder return has declined by 40 per cent in the past 10 years.

It also announced a change in leadership today as Eric Lefebvre stepped down as chief executive officer and will be replaced by Victor E. Mandel, current MTY director.

“Mandel is uniquely qualified to lead MTY through the next phase of strategic deployment and growth. Mandel is a seasoned senior leader with deep experience in the U.S. market. With Mandel’s extensive understanding of our business, he’s already well positioned to execute on our priorities of strategically growing sales of our franchise network,” Ma, who is alse chairman of the board, said in the announcement.

In its most recent quarterly results, MTY confirmed it had net decrease of 74 locations during the third quarter and its revenue dipped 7.1 per cent to $277.7 million.