Zoe's Kitchen, Inc. has announced that it signed a definitive merger agreement under which it will be acquired by a privately held Mediterranean culinary brand, Cava Group, Inc. The acquisition is slated to be financed by Act III Holdings. Both the companies expect to close the merger deal in the fourth quarter of 2018. Shares of Zoe’s Kitchen have increased 33.3% during the trading session on Aug 17, on the day of the declaration of the news.
Details of the Deal
The terms of the agreement allow Zoe’s Kitchen’s shareholders to receive $12.75 in cash for each share of common stock. This represents roughly 33% premium to Zoe’s Kitchen’s closing share price on Aug 16, 2018. Also, the premium is approximately 33% to Zoe’s Kitchen 30-day volume weighted average price ended on Aug 16, 2018, and an enterprise value of roughly $300 million.
Under the agreement, CAVA is supposed to pay Zoe’s Kitchen a $17-million fee in the case of cancellation of the deal due to unforeseen circumstances. Moreover, Zoe’s kitchen is permitted to actively implore alternative merger proposals in a 35-day period. If the company plans on accepting any other proposal and terminate the proposed merger, it will require paying a fee of $8.5 million for the termination.
Synergies to be Realized From Acquisition
Zoe’s Kitchen currently has 261 domestic restaurant locations and has been extensively relying on unit expansion to drive its top line. On the closing of the acquisition deal, the combined company will have 327 restaurants in 24 states throughout the United States. This will further help the company to leverage the power of its brand through enhanced scale.
Moreover, Zoe’s Kitchen has been struggling with negative comps and high costs of operation for quite some time now. It also posted lower-than-expected earnings in three of the trailing six quarters. Subsequently, Zoe’s Kitchen’s shares have lost 0.3% in the past year, underperforming the industry’s collective growth of 7.1% during the period.
We believe that the merger will help the company in terms of managing its finance and revive its business in the future.
Zacks Rank & Stocks to Consider
Zoe’s Kitchen presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include BJ’s Restaurants (BJRI - Free Report) , Carrols Restaurant Group (TAST - Free Report) and Darden (DRI - Free Report) . While BJ’s Restaurants sports a Zacks Rank #1 (Strong Buy), Darden and Carrol carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BJ’s Restaurants, Carrol and Darden’s earnings for the current fiscal year is expected to increase 50.4%, 80% and 14.4% respectively.
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Zoe's Kitchen, Inc. has announced that it signed a definitive merger agreement under which it will be acquired by a privately held Mediterranean culinary brand, Cava Group, Inc. The acquisition is slated to be financed by Act III Holdings. Both the companies expect to close the merger deal in the fourth quarter of 2018. Shares of Zoe’s Kitchen have increased 33.3% during the trading session on Aug 17, on the day of the declaration of the news.
Details of the Deal
The terms of the agreement allow Zoe’s Kitchen’s shareholders to receive $12.75 in cash for each share of common stock. This represents roughly 33% premium to Zoe’s Kitchen’s closing share price on Aug 16, 2018. Also, the premium is approximately 33% to Zoe’s Kitchen 30-day volume weighted average price ended on Aug 16, 2018, and an enterprise value of roughly $300 million.
Under the agreement, CAVA is supposed to pay Zoe’s Kitchen a $17-million fee in the case of cancellation of the deal due to unforeseen circumstances. Moreover, Zoe’s kitchen is permitted to actively implore alternative merger proposals in a 35-day period. If the company plans on accepting any other proposal and terminate the proposed merger, it will require paying a fee of $8.5 million for the termination.
Synergies to be Realized From Acquisition
Zoe’s Kitchen currently has 261 domestic restaurant locations and has been extensively relying on unit expansion to drive its top line. On the closing of the acquisition deal, the combined company will have 327 restaurants in 24 states throughout the United States. This will further help the company to leverage the power of its brand through enhanced scale.
Moreover, Zoe’s Kitchen has been struggling with negative comps and high costs of operation for quite some time now. It also posted lower-than-expected earnings in three of the trailing six quarters. Subsequently, Zoe’s Kitchen’s shares have lost 0.3% in the past year, underperforming the industry’s collective growth of 7.1% during the period.
We believe that the merger will help the company in terms of managing its finance and revive its business in the future.
Zacks Rank & Stocks to Consider
Zoe’s Kitchen presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include BJ’s Restaurants (BJRI - Free Report) , Carrols Restaurant Group (TAST - Free Report) and Darden (DRI - Free Report) . While BJ’s Restaurants sports a Zacks Rank #1 (Strong Buy), Darden and Carrol carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BJ’s Restaurants, Carrol and Darden’s earnings for the current fiscal year is expected to increase 50.4%, 80% and 14.4% respectively.
Looking for Stocks With Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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