Cara still thirsts for Second Cup

The Toronto company, which owns the Harvey's, Swiss Chalet and Kelsey's restaurant chains, said it acquired only enough shares to increase its stake in Second Cup to 43 per cent by the takeover offer's deadline yesterday.

The Toronto Star
January 11, 2002

Cara still thirsts for Second Cup
Stake up to 43% after poison pill removed
Paula Arab

Food services giant Cara Operations Ltd. is not giving up despite failing in its heated battle to take control of the Second Cup coffee shop chain.

The Toronto company, which owns the Harvey's, Swiss Chalet and Kelsey's restaurant chains, said it acquired only enough shares to increase its stake in Second Cup to 43 per cent by the takeover offer's deadline yesterday.

The offer to buy shares has now been extended to Jan. 21.

Cara held 39 per cent of Second Cup and made a $42 million cash offer to acquire the rest of the specialty coffee retailer, which operates 400 outlets across Canada. Second Cup opposed the bid, which it said was too low.

Cara said it acquired 390,000 more common shares under the offer, increasing its stake in Second Cup to just over 4 million shares.

Most of the shares tendered "are actually in dispute," said Robert Haft, chairman of a special Second Cup committee examining the bid.

"There's some controversy regarding the majority of shares that Cara did acquire today. The board is going to have to review whether those shares are validly tendered," he said in an interview.

The $7.50-a-share bid expired a day after Cara won a legal victory by having the Ontario securities regulator kill Second Cup's "poison-pill" defence — which would have meant issuing new shares to make a takeover prohibitively expensive.

The Ontario Securities Commission ruled Wednesday it was in the public interest to scrap the shareholder rights plan.

Gabe Tsampalieros, Cara's chief executive, said the takeover battle "has been a long and difficult process" but the company has no intention of selling its Second Cup stake even though it failed to get control of the coffee company.

In an interview, he said shareholders didn't have enough time to tender to the bid after the OSC's decision Wednesday.

"I don't think people had the opportunity to tender to the bid in an orderly fashion," Tsampalieros said. "The pill was removed yesterday (Wednesday). Twenty-four hours is a minimum time that brokerage houses require to process these things."

Tsampalieros called the offer fair and ruled out a sweetened bid.

"No, if we were going to do that we would have done that. We believe that the offer is more than adequate and the fact that a significant number of independent shareholders have tendered to the bid in such a short period of time is good evidence of that."

Second Cup shares closed unchanged yesterday at $8 on the Toronto Stock Exchange.

"I think the problem is there isn't enough money," said Michael Bregman, whose family owns 24 per cent of Second Cup and opposed the offer.

"The stock was trading at $8 (yesterday), so why would anyone tender at $7.50? The problem isn't time — the problem is money," he said.


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