Boston Pizza is one of Canada’s leading brands, and most significant and well-known restaurant businesses. It has achieved a tremendous track record of growth, profitable results and market recognition since its inception, becoming Canada’s largest franchisor of casual dining restaurants.
Jim opened his first Boston Pizza franchise in Penticton, British Columbia in 1968. Joined by George in 1973, the two built a chain of 16 restaurants throughout the province over the next 10 years.
In 1983, Jim and George purchased Boston Pizza International and its chain of 44 restaurants, and in July 2002 Boston Pizza completed the highly successful Boston Pizza Royalties Income Fund IPO on the TSX.
Today, Boston Pizza is Canada’s No.1 casual dining brand with more than 380 restaurants from coast to coast, serving 40 million guests annually, generating over $1 billion of total sales.
After almost 50 years of successful partnership, Jim and George decided to investigate a transaction that would enable George to sell his 50% ownership interest to Jim.
There were many challenges in this complex, market-sensitive transaction, but the major areas of focus for the client were:
Valuation – Deriving a robust and defensible valuation was a significant process given the multifaceted structure of Boston Pizza International, which included its listed Royalty Income Fund, diverse franchise operations and store estate, international rights, future store opening prospects and corporate stores.
Other jointly-owned assets – After almost 50 years of partnership, Jim and George jointly owned a number of other legal entities, operating companies and real-estate holdings. This made determining the valuation and succession planning for each of these additional assets highly challenging.
Transaction structure – Once a valuation was determined, designing and implementing a suitable capital structure to fund the transaction, in a manner that would gain the approval of all Boston Pizza International’s diverse stakeholders, was pivotal to getting a deal done.
Both PwC Corporate Finance’s relationship with George, and in-depth knowledge and experience of the retail, franchise, consumer and leisure sectors, meant that we were well-positioned to advise our client on this transaction.
Approaching the complex valuation, PwC Corporate Finance enlisted the expertise of our Valuations and Modelling colleagues, and working together seamlessly, developed a “sum of parts” approach that enabled us to derive the valuation of each unique element of Boston Pizza International’s business.
Through valuing the additional assets, listening to our client’s succession hopes and working closely with tax advisors and legal counsel, we assembled and proposed a plan on the allocation of the additional assets between Jim and George.
The creative funding solution that we proposed enabled Jim to acquire 100% of the economic interest in Boston Pizza International, with George continuing to own units in the Boston Pizza Royalties Income Fund.
The transaction produced an excellent result for our client, George, through the sale of his 50% ownership interest in Boston Pizza International to his long-time business partner, Jim.
Jim acquired 100% of the economic interest in Boston Pizza International, while George became the single largest individual owner of units in the Boston Pizza Royalties Income Fund, enabling him to participate in the continued success of the business.
This sale transaction was achieved based on the derivation, and negotiation of a highly competitive valuation of George’s interest in Boston Pizza International and related assets, as well as the implementation and execution of a creative transaction structure.
Furthermore, the sale transaction enabled a seamless transition that did not negatively impact the trading of the business, providing a great result for stakeholders.
Speaking of the transaction, George said, “I am very proud of the success that Jim and I have had as partners and it has been a real honour to work with the many talented people and great franchisees of Boston Pizza. I am happy that we have plans for a restructuring and I am confident that Jim and his team will continue the success. I want to thank my family for all the years of support and I am extremely excited about the future.”
Jim added, “Having been involved with the Boston Pizza brand for almost 50 years, I am thrilled to continue my commitment to this business by acquiring all the outstanding shares of Boston Pizza International Inc. Success is not achieved alone and I want to thank George for his unwavering commitment to our partnership, BPI and the Fund. I see incredible potential for the continued growth of Boston Pizza, and together with our strong leadership team and committed franchisees, I am confident about our plans to lead Boston Pizza into the future.”
To learn more about our Corporate Finance services and how we can help your organization, please contact Jim McGuigan.
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