Bregman mum on whether he will tender

Michael Bregman, Second Cup chairman, would not comment on whether he would consider tendering his 24.4% stake in Second Cup, but said the revised offer from Cara is preferable because it is for all outstanding shares.

The National Post
December 18, 2001

Bregman mum on whether he will tender
Cara takeover offer
Hollie Shaw

Coffee chain Second Cup Ltd. held a subdued annual meeting yesterday as investors contemplated the fate of the company, target of a recently sweetened takeover bid from shareholder Cara Operations Ltd.

Michael Bregman, Second Cup chairman, would not comment on whether he would consider tendering his 24.4% stake in Second Cup, but said the revised offer from Cara is preferable because it is for all outstanding shares.

However, Robert Haft, who heads a special committee of independent Second Cup directors examining the bid, said about 50% of shareholders have indicated they will not tender to the sweetened offer.

"We are hearing that the price is still below the price at which they are willing to tender," he said.

Late Friday, Cara, the operator of the Harveys and Swiss Chalet restaurant chains, increased its offer to $7.50 in cash for all of Second Cup's outstanding shares. Cara had earlier bid $7 for three million shares, which would have increased its 39% stake to 71%. The revised offer expires on Jan. 10.

At the meeting, chief executive Alton McEwen, who was president of the company from 1988 to 1996 and returned last year to reinvigorate the chain, said Second Cup had to reclaim its "obsession for operating standards" in its stores.

Standards slid at Canada's biggest specialty coffee chain a couple of years ago when the company began to focus on external marketing and not enough on in-store operations, he said.

The chain, which grew sales 8% to $171.6-million in its latest fiscal year, still has great growth opportunities in Quebec, Mr. McEwen said. There are just 40 Second Cup outlets in the province, but sales average about 20% to 30% higher than in the rest of the country.

Gabe Tsampalieros, chief executive of Cara, attended yesterday's meeting and echoed Mr. McEwen's remarks about Second Cup's need to focus on daily operations.

"We felt our original offer was a very fair offer to begin with — this is just an enhancement," he added.

Shareholders seemed less certain.

"Why would you tender to a $7.50 bid when you can sell your shares today for $7.60 on the open market?" said Ronald Mayers, president and chief investment officer at Montreal-based shareholder Genoa Capital Inc.

TD Securities Inc. has valued Second Cup's common shares at $8.25 to $9.75. Second Cup has hired RBC Dominion Securities to seek out other offers, but company officials would not comment yesterday on whether their advisors had been successful in attracting competing bids.

Mr. Tsampalieros said Cara's bid more accurately reflects the value of the shares, as part of TD's valuation was based on "pre-[Sept. 11]" expectations of future sales and earnings.

Second Cup shares closed up 20ยข yesterday at $7.60.

moc.tsoplanoitan|wahsh#moc.tsoplanoitan|wahsh


Brought to you by WikidFranchise.org

Risks: Franchisor sells out, Canada, 20011218 Bregman mum

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License