Multi-franchised business Franchise Brands (FRAN:AIM) has agreed to acquire franchised fryer management firm Filta Group (FLTA:AIM) in an all-share deal which values the company at 170.7p per share, representing a 7.7% premium to yesterday's 158.5p closing price.
Investors might complain that the implied premium looks a little skinny, but it would represent around 30% to the average volume weighted share prices of the two firms over the last month, the company says.
Franchise brands said it has received agreement from Filta directors and connected parties who control in aggregate 62.1% of the shares.
In addition, the company has also received acceptance from Gresham House Asset Management Limited which controls 19.6% of the shares, contingent on Filta not receiving a higher offer at least 10% above the current offer.
The combined acceptance equating to 81.7% of Filta’s shares satisfies the 75% threshold required to get the deal over the line.
Filta shareholders are being offered 1.157 new Franchise Brands shares for each Filta share based on a closing price of 147.5p and will also be entitled to receive any final dividend paid in respect of the year ended 31 December 2021.
Shareholders of both companies appeared a little underwhelmed with Franchise Brands shares 1.7% lower at 145p and Filta Group shares off 2.2% at 155p.
SCALING UP
Management insist that the enlarged group would command greater scale and be able to leverage combined franchising experience and resources to drive growth in revenues and profits.
There is a good geographical fit with Franchise Brands operating in the UK while around 80% of Filta’s business operates in the US, with relatively small operations in the UK and Europe.
Franchise Brands’ B2B businesses Metro Rod, Metro Plumb and Willow Brands are primarily focused on ‘reactive’ work while Filta’s business is focused on planned maintenance and installation services.
By combining the two management believe the enlarged group would be able to offer a broader range of services which convey competitive advantages. The goal is to offer a ‘Water in, Waste Out’ service to the commercial sector across the UK.
In addition, the enlarged group would be better positioned to drive growth in the US and Europe.
Filta chief executive Jason Sayers and finance chief Brian Hogan will remain in the business and join the board of Franchise Brands.
