Cara Operations to Merge with Keg Restaurants Ltd.

Cara Operations to Merge with Keg Restaurants Ltd.

VAUGHAN, ON/CNW/ – Cara Operations Limited (TSX: CARA) (“Cara”), Keg Restaurants Ltd. (“KRL”) and The Keg Royalties Income Fund (the “Fund”) are pleased to announce that Cara and KRL have agreed to merge pursuant to the terms of a binding letter of intent.

Vancouver-based KRL is the owner/operator and franchisor of casual dining steakhouse restaurants operating under the trade name “The Keg Steakhouse & Bar” in Canada and select markets in the United States.  Over its 45 year history and under Chief Executive Officer David Aisenstat’s leadership for the last 20 years, The Keg has established an enviable brand name and reputation as the leader in service, food and ambiance in full service restaurants. Cara is Canada’slargest operator and franchisor of full service restaurants and is the third largest of all restaurant groups in Canada.

With this merger, Mr. Aisenstat will assume oversight of Cara’s higher-end casual brands, namely The Bier Markt, the Landing Group and Milestones restaurants.  This will enable Cara to introduce into these brands the key success factors experienced by The Keg. Cara’s size combined with The Keg will also provide synergistic opportunities in marketing, real estate and overall costs that will help further grow the Keg and Cara brands.

Mr. Aisenstat is currently President and CEO of KRL and will remain in this position while overseeing the three additional Cara brands. David will also join the Cara Board of Directors as Vice-Chairman.  Bill Gregson will remain as President and CEO of Cara and will remain as Chairman of the Cara Board of Directors.

Cara intends to change its corporate name to reflect this new business composition following the closing of the transaction.

Cara and KRL have confirmed to the Fund that, notwithstanding the merger, The Keg will continue to operate as it has previously under Mr. Aisenstat’s leadership, without any change in management’s focus on the Fund’s unitholders as key stakeholders in the business or the factors that have established The Keg brand’s leadership position and supported the consistent payment and growth of the royalty.

The Fund will remain in its current form and will continue to receive royalties from Keg restaurants operated by KRL following the merger. The trustees of the Fund have considered the effect of the transaction on the interests of the Fund’s unitholders and the rights of The Keg Rights Limited Partnership under its agreements with KRL, which will be preserved without modification.

Transaction Highlights

Under the transaction, Cara will pay to KRL’s shareholders, Fairfax Financial Holdings Limited (“Fairfax”) and Mr. Aisenstat, an aggregate purchase price of $200 million comprised of $105 million in cash and 3,801,123 Cara subordinate voting shares (based on Cara’s closing price of $24.93 per subordinate voting shares on the Toronto Stock Exchange on January 22, 2018).  In addition, Cara may be required to pay up to an additional $30 million of cash consideration upon the achievement of certain financial milestones within the first three fiscal years following closing.

Cara will fund the cash portion of the purchase price payable at closing by drawing on its existing credit facility.

Cara’s management believes that the transaction will provide several compelling strategic benefits, including:

  • Cara merging with an iconic brand and the leading full service restaurant chain in Canada. The addition of 106 The Keg restaurants will provide Cara with a network of 1,365 restaurants.
  • The Keg restaurants generate approximately $612.1 million in annual System Sales and approximately $23.5 million in Normalized EBITDA. When the transaction closes, Cara’s Pro Forma System Sales (for the 12 months ended September 24, 2017) will increase to $3.4 billion and its Pro Forma Operating EBITDA (for the same period) will increase to $207.9 million, putting Cara on track to achieve the top end of its long-term (2020-2022) System Sales target and well within the Operating EBITDA target range.
  • The transaction is expected to be immediately accretive to Cara’s Adjusted Diluted EPS.
  • The combination of The Keg with the 2016 St-Hubert and Original Joe’s transactions gives Cara best in class in full service, preeminence in the Quebec market with a strong retail capability and a strong Western presence along with its historical strength in Ontario.

About CARA

Founded in 1883, Cara is Canada’s oldest and largest full‐service restaurant company. Cara franchises and/or operates some of the most recognized brands in the country including Swiss Chalet, Harvey’s, St‐Hubert, Milestones, Montana’s, Kelsey’s, East Side Mario’s, New York Fries, Burger’s Priest, Prime Pubs, Original Joe’s, State & Main, Elephant & Castle, Bier Markt, Landing restaurants and Pickle Barrel. As at November 30, 2017, Cara had 1,259 restaurants, 1,204 of which were located in Canada and the remaining 55 locations were located internationally. 82% of Cara’s total restaurants are operated by franchisees, 4% are operated as a joint venture and the remaining 14% are owned and operated corporately. Cara’s shares trade on the Toronto Stock Exchange under the ticker symbol CARA.TO. More information about Cara is available at

About Keg Restaurants Ltd.

Vancouver-based KRL is the leading operator and franchisor of the Keg steakhouse restaurants in Canada and has a substantial presence in select regional markets in the United States. KRL continues to operate The Keg restaurant system and expand that system through the addition of both corporate and franchised Keg steakhouses. KRL has been named one of the “50 Best Employers in Canada” for the past fifteen years by Aon Hewitt. For more information, visit

About The Keg Royalties Income Fund

The Fund is a limited purpose, open-ended trust established under the laws of the Province of Ontario that, through The Keg Rights Limited Partnership (the “Partnership”), a subsidiary of the Fund, owns certain trademarks and other related intellectual property used by KRL. In exchange for use of those trademarks and other related intellectual property, KRL pays the Fund a royalty of 4% of gross sales of Keg restaurants included in the royalty pool. For more information, visit

SOURCE Cara Operations Limited