Cava Group Inc. has agreed to acquire Zoe’s Kitchen Inc. in a Mediterranean-segment deal valued at about $300 million, the companies announced Friday.
Washington, D.C.-based Cava, a privately held company with 66 restaurants, agreed to acquire the Plano, Texas-based Zoe’s, a public company with about 260 units, for $12.75 a share, a 33 percent premium over Zoe’s Thursday close of $9.56 in a share.
The Zoe’s Kitchen deal will be financed with a significant equity investment in Cava led by Boston-based Act III Holdings, an investment company created by Ron Shaich, founder and former CEO of Panera Bread Co., as well was The Invus Group and participation from existing investors SWaN & Legend Venture Partners and Revolution Growth.
The deal calls for Brett Schulman, Cava CEO, to serve as CEO of the combined company. Shaich will serve as chairman of the combined company. Existing Act III investments include Cava, Clover Food Lab, Open World, Tatte Bakery and Life Alive Organic Cafe.
“With the addition of Zoës Kitchen, we will be able to broaden our geographic footprint and meet the needs of even more guests — whether in Bethesda or Birmingham, Plano or Pasadena — who crave delicious, healthy food without compromise,” Schulman said in a statement. “As part of the Cava family, Zoës Kitchen will benefit from Cava’s track record of bold culinary innovation and leveraging data and technology to drive growth and convenience.”
Shaich of Act III Holdings added: “As a close observer of the fast-casual restaurant industry, I am thrilled at the prospect of what Cava and Zoës Kitchen can accomplish together. Together these businesses will create the leading company in one of the most important categories in fast casual today — Mediterranean — with the capabilities to drive extraordinary customer satisfaction and powerful growth.”
The deal is subject to closing conditions and shareholder approval. The companies expect the transaction to close in the fourth quarter. Cava has agreed to pay a $17 million termination fee if the merger agreement is called off. Zoe’s reserves the right to seek superior offers for 35 days and agreed to an $8.5 million termination fee.
In May, Kevin Miles, Zoe’s Kitchen CEO, had said the company was weighing closures and strategic alternatives as it faced headwinds amid the segment’s delivery and discounting.
In the first quarter ended April 16, the company saw a 2.3 percent decline in same-store sales. Zoe’s swung to a net loss of $3.6 million, or 19 cents a share, from a profit of $19,000, or zero cents a share, in the same period last year. Revenues increased 12.7 percent to $102.1 million from $90.6 million in the prior-year period.
The Zoës Kitchen concept, founded in 1995, has locations in 20 states.
Cava has units in 10 states and a line of retail dips and spread sold in more than 250 Whole Foods Markets and other specialty groceries.
The combined companies would have 327 restaurants in 24 states.
Contact Ron Ruggless at [email protected]
Follow him on Twitter: @RonRuggless
