MTY Food Group Inc. (“MTY”) (TSX:MTY) and Papa Murphy’s Holdings, Inc. (“Papa Murphy’s”) (NASDAQ:FRSH) today announced they have entered into a definitive merger agreement (the “Merger Agreement”) under which MTY would acquire all of the issued and outstanding shares of common stock of Papa Murphy’s for cash consideration of US$6.45 per share, representing total transaction value of approximately US$190.0 million (C$253.2 million) (the “Transaction”), including Papa Murphy’s net debt outstanding. The purchase price per share of Papa Murphy’s common stock implies a premium of 31.9% to the Papa Murphy’s closing price on April 10, 2019 and 46.3% to the unaffected Papa Murphy’s closing price on November 7, 2018 prior to the announcement by Papa Murphy’s that it was conducting a process to explore and evaluate strategic alternatives to maximize shareholder value and had engaged a financial advisor to assist with the review. The terms and conditions of the Merger Agreement were unanimously approved by the boards of directors of both companies. The Transaction is subject to customary closing conditions including receipt of applicable regulatory approvals.

MTY is a leading franchisor in the North American restaurant industry. MTY’s multi-concept model allows MTY to position itself across a broad range of demographic, economic and geographic sectors. As at February 28, 2019, its network had 5,941 locations in operation, mostly all franchised, including over 500 locations operating in 39 countries outside North America.

Papa Murphy’s is a franchisor and operator of the largest Take ‘n’ Bake pizza brand and the 5th largest pizza chain in the United States, selling fresh, hand-crafted pizzas ready for customers to bake at home. In addition to scratch-made pizzas, Papa Murphy’s offers a growing menu of grab ‘n’ go items, including salads, sides and desserts. Papa Murphy’s was founded in 1981 and operated 1,331 franchised and 106 corporate-owned stores in 37 U.S. states, Canada and the United Arab Emirates as of December 31, 2018.

Eric Lefebvre, Chief Executive Officer of MTY said, “This is an important transaction for MTY as we add a brand with a differentiated position in pizza to our existing U.S. portfolio. We are thrilled about the prospect of welcoming the Papa Murphy’s brand, its franchise partners and employees, to the MTY family. Papa Murphy’s is a unique concept with over a 35 year history of providing a superior quality product made with fresh ingredients. We believe the pizza segment is highly attractive due to its size, fragmented nature and growth potential. The Papa Murphy’s brand is well loved by its loyal customers and is supported by a strong network of franchise partners. We expect the combination of these two companies and the expertise it brings to produce tremendous opportunities for MTY’s U.S. expansion objectives.”

“The board of directors and our advisors have thoroughly evaluated all options available to us and are confident that this agreement provides immediate value to our stockholders at a premium over our current share price. Merging our unique, differentiated brand with a global leader in franchised restaurant concepts will accelerate on-going efforts to enhance our convenience and relevance and maintain our position as the number one Take ‘n’ Bake pizza chain in the United States,” said Jean Birch, Chairperson of the board of directors of Papa Murphy’s.

Transaction Highlights

Strengthens MTY’s leading portfolio of brands through the acquisition of the 5th largest pizza chain in the U.S.

° Leading Take ‘n’ Bake pizza concept serving award-winning, superior quality products made with fresh ingredients.

° Increasing MTY’s exposure to the robust and growing U.S. pizza market.

° MTY’s combined network to have approximately 7,378 stores globally after completion of the Transaction with future runway for growth.

Complements MTY’s U.S. operations and reduces seasonality of its results.

° Papa Murphy’s had US$809 million System-wide Sales for the twelve-month period ended December 31, 2018.

° Papa Murphy’s generated US$22.3 million in Adjusted EBITDA for the twelve-month period ended December 31, 2018.

Strategically timed as Papa Murphy’s system is building momentum after implementation of refreshed corporate strategy and refocus on the brand.

° MTY anticipates working with Papa Murphy’s to make capital investments focused on growing top line sales and increasing franchise partner profitability.

MTY welcomes a seasoned management team and looks forward to building on Papa Murphy’s employees’ expertise and maintaining the current support center in Vancouver, WA.

Expected to be immediately accretive to MTY’s EBITDA and cash flow per share.

MTY remains committed to pursuing its acquisition strategy. Pro Forma MTY is expected to continue to generate significant cash flow allowing for deleveraging and providing liquidity to pursue future M&A opportunities.
Transaction Details

Under the terms of the Merger Agreement, a subsidiary of MTY will commence a tender offer to purchase all of the outstanding shares of Papa Murphy’s common stock for US$6.45 per share in cash. The closing of the tender offer is subject to customary conditions, including antitrust clearance and the tender of a majority of the outstanding shares of Papa Murphy’s common stock. Following successful completion of the tender offer, MTY would acquire all remaining shares not tendered in the offer through a merger at the same price as in the tender offer.

The Transaction is not subject to any financing condition and consideration will be 100% funded in cash. MTY will use its cash on hand and its existing credit facility to fund the cash consideration and to repay Papa Murphy’s net debt outstanding as of the close of the Transaction, which today is approximately US$77.4 million.

Pursuant to the terms of the Merger Agreement, Papa Murphy’s has agreed that it will not solicit or initiate discussions regarding any other business combination or sale of material assets. MTY has the right to match any superior proposals. The Transaction provides for a termination fee of approximately US$5.7 million payable by Papa Murphy’s to MTY in certain circumstances if the Transaction is not completed.

The Transaction is expected to close in the second calendar quarter of 2019. There is no assurance the Transaction will be completed as described above or at all, or that the anticipated closing date will materialize. Following the close of the transaction, Papa Murphy’s will be a wholly-owned subsidiary of MTY and will continue to be operated as an independent brand.

April 11, 2019