News

Carrols completes acquisition of 165 Burger King, 55 Popeyes units

May 1, 2019

Carrols Restaurant Group Inc — the largest franchise of Restaurant Brands International Inc, which owns Burger King, Popeyes and Tim Hortons — just got a little bigger. It has finalized its deal to buy 165 Burger King and 55 Popeyes restaurants for $238 million from Cambridge Franchise Holdings LLC, taking Carrols' unit count to 1,010 Burger King and 55 Popeyes restaurants across 23 states, according to a company press release. Carrols has also entered into an area development and remodeling agreement with Burger King Corporation, which pre-approved the company for continued growth through both acquisitions and restaurant development. 

"This transaction is an exciting growth catalyst for Carrols," Dan Accordino, Carrols chairman and CEO, said in the release. "We believe it strengthens our position in the Burger King system by providing us the opportunity to continue executing our acquisition and expansion strategy, and adds Popeyes, a growing brand that further enhances our expansion alternatives. We also believe that we have the potential to improve the performance of the Cambridge restaurants and to leverage their footprint and development team as we launch the next phase of growth for the benefit of Carrols' shareholders."

Under the terms of the agreement, Carrols' right-of-first refusal assigned to it by Burger King Corporation allows for the acquisition of 500 additional Burger King restaurants, and it has also assumed Cambridge's existing Popeyes  development agreement and its right-of-first refusal for Popeyes restaurant acquisitions in Tennessee and Kentucky. As part of these agreements, Carrols has agreed to develop 200 Burger King and 70 Popeyes units over the next six years and to remodel or upgrade several Burger Kings to the "Burger King of Tomorrow" image over the same period. 

"Matt (Perelman) and I are excited to join the Carrols Board and support the next phase of the Company's growth," Alex Sloane, co-founder of Cambridge Franchise Holdings, said in the release. "We believe that Carrols' strong management team, efficient financing structure, partnership with RBI and compelling capital allocation plan provide for a long runway to enhance shareholder value," 

Along with its own, Carrols has refinanced Cambridge's indebtedness and entered into a $550 million secured senior credit facility that includes a $425 million Term Loan B facility due by 2026 that bears interest at LIBOR + 3.25% and was issued at an OID of 99.5, according to the company. Use of proceeds included:

• Paying off Cambridge's indebtedness.
• Refinancing Carrols' existing 8% notes.
• Paying certain fees and expenses related to the financing and the Cambridge transaction. The secured senior credit facility also included a $125 million, undrawn 5-year revolving credit facility that will be used to execute Carrols' growth initiatives as needed.

Total consideration to Cambridge included:

• 7.36 million shares of Carrols common stock (a 16.6% equity interest).
• Shares of 9% PIK Series C Convertible Preferred Stock that will be convertible into approximately 7.45 million shares of Carrols common stock. The conversion of the preferred stock will be subject to a vote of Carrols' stockholders to occur at the Company's 2019 Annual Meeting of Stockholders and will automatically convert into common stock upon stockholder approval of such conversion. 

Cambridge Franchise Holdings — controlled by Garnett Station Partners — was founded in 2014, when Perelman and Sloane partnered with Ray Meeks to grow his 23-unit Burger King business. Since 2014, Meeks, Perelman and Sloane have grown Cambridge to include 165 Burger King and 55 Popeyes restaurants throughout the Southeast. Garnett Station Partners, founded by Sloane and Perelman, is an investment firm focused on retail and consumer companies.