Foodtastic bids US$702M for MTY after CEO Eric Lefebvre exits

By Elena Vasquez

Foodtastic Inc. has offered about US$702 million to acquire MTY Food Group Inc. at C$43 per share, as MTY replaced Chief Executive Officer Eric Lefebvre on Tuesday. The proposal, first communicated Oct. 15 and repeated five days later, went directly to shareholders after MTY’s board rejected two earlier approaches.

Why the bid moved to shareholders

Foodtastic said MTY’s board rejected the Oct. 15 proposal and a repeat five days later without providing reasons or suggesting a path to continued negotiations. In a public letter, Foodtastic expressed disappointment over the dismissal and said it was taking its case to shareholders. MTY did not immediately respond to requests for comment.

Both companies are Montreal-based Canadian multi-brand franchisors. Foodtastic has 30 brands and nearly 1,200 units, with operations on both sides of the U.S.-Canada border. Its portfolio includes Freshii, Pita Pit, Dunkin’ and Milestones. MTY is the franchisor and operator behind more than 80 brands in 40 countries, with nearly 7,000 units, including about 4,100 in the United States.

MTY’s brands include Wetzel’s Pretzels, Papa Murphy’s, Pinkberry, Planet Smoothie and Cold Stone Creamery. Foodtastic also has acquisition experience: it bought Freshii in 2023, when the chain had 353 units and same-store sales were declining by double digits.

MTY began a strategic review last year to consider ways to increase shareholder value, including selling part or all of the company. In October, Lefebvre said MTY might divest weaker-performing brands. On Tuesday, the company announced that the board had ousted him effective immediately and appointed board member Victor Mandel as CEO.

The C$43 offer represents a 32% premium to MTY’s Oct. 30 closing price and a 37% premium to its 30-day volume-weighted average price for the period ended that date, Foodtastic said. The company added that the offer exceeded Canadian analysts’ calculated price targets, which had assumed MTY would grow.

Why Foodtastic says MTY needs a reset

Foodtastic argued that MTY’s earnings, same-store sales and unit counts have declined over the past decade except during the COVID-19 years. Its shares also fell about 40% over five years, according to Peter Mammas, Foodtastic’s president and CEO.

“We believe MTY owns many wonderful brands and has many terrific franchisee partners,” Mammas wrote. “However, over the past decade, MTY became undisciplined in its operations and acquisitions.”

Mammas said MTY acquired too many concepts, some good and some bad, without producing aggregate organic growth. He argued that repairing the portfolio requires patient, long-term focus, which he described as difficult under public-market pressure to produce near-term results. Foodtastic also asserted that its privately held structure gives it a stronger foundation for that work than MTY’s public-company status.

Mandel, a former vice president in Goldman Sachs’ investment research department, said MTY would pursue asset-light strategies designed to improve profitability, find growth opportunities and generate strong free cash flow.

“This is an opportunity to establish a new chapter for MTY, grounded in accountability, operational excellence and a clear commitment to delivering value for our shareholders,” he said. Mandel also promised to share his roadmap with shareholders.

What does the bid change for operators?

For MTY’s operators and franchisees, no immediate operating changes have been announced. The materials provide no detail on transaction financing, brand divestitures, franchise agreements, menu pricing, sourcing or labor costs. They also do not specify how many MTY units are company-operated rather than franchised, or offer cost-of-goods, labor-percentage and franchisee-margin targets.

The strategic signals are clearer than the operating plan. Foodtastic wants to impose what Mammas calls greater acquisition discipline and a long-term focus. Mandel has promised profitability, growth and free cash flow under an asset-light strategy. The next test is whether shareholders support Foodtastic’s direct approach and whether MTY can reverse its same-store-sales and unit-count decline under Mandel’s roadmap before any ownership change.