This morning prior to the market opening, Kahala Brands, Ltd. (OTC Pink: KAHL) announced it had signed an agreement to merge with a wholly-owned subsidiary of MTY Food Group Inc. (OTC Grey Market: MTYFF) (TSX: MTY).
The deal is valued Kahala at approximately $300 million (before closing adjustments) which includes $240 million in cash and 2,253,930 of MTY common shares which at the time of the announcement last traded at CAD$35.68. According to the press release, this valued shares of Kahala at approximately $149 per share or a 1,286% premium over the most recent closing price of Kahala shares. No, that is not a typo. Shares of Kahala last traded at $10.75 and most shareholders can expect to receive $149 per share in cash.
Of course this announcement lit a fire under the shares. Shares soared to $117 per share up nearly 1000%. Very few investors were able to get in on the action if they did not own shares prior today as it appears less than 1000 shares traded hands.
Kahala is a franchisor of multiple restaurant brands such as Cold Stone Creamery, Blimpie, TacoTime and many more. The company was fully reporting until it went dark in 2003. The company later reduced its number of shares outstanding via a 1-for-100 reverse stock split in 2005.
MTY Foods Group is a Canadian franchisor operating in the quick service food industry. The company’s brands include TacoTime Canada, Vanellis, Mr. Sub and many more. Investors cheered the news of the Kahala acquisition sending shares of MTY up 18%.
The deal is expected to close in the next 75 days and investors of Kahala should expect to see Confidential Proxy Statements in the next 10 business days.
Congratulations to all Kahala investors. It was a good day and I am sure a long road for many.
Disclosure: The author owned shares of KAHL at the time this article was published.