The owner of some of the biggest restaurant chains in Canada is about to get a bit bigger after Cara Operations struck a deal to buy steakhouse chain Keg Restaurants Ltd. for $200 million.
The two companies announced a deal on Tuesday that will see Vaughan, Ont.-based Cara take over The Keg chain of 106 steakhouses and add it to its stable of 1,259 restaurants in North America.
Cara already owns some of the most well-known restaurant chains in Canada, including:
- Swiss Chalet.
- East Side Mario's.
- New York Fries.
- Burger's Priest.
- Prime Pubs.
- Original Joe's.
- State & Main.
- Elephant & Castle
- Bier Markt.
- Landing restaurants.
- The Pickle Barrel.
Across its network, Cara restaurants racked up more than $2 billion in sales last year. The Keg, meanwhile, booked just over $600 million from 106 locations.
With 72,000 restaurants across the country, Canada's restaurant industry is much different from those in some other places, analyst Robert Carter, the executive director of food service at NPD group, said in an interview with CBC News. More than 60 per cent of Canadian restaurants are either independent, or small regional chains — and those are the ones he expects a company like Cara to target now that sales are slowing.
Restaurant sales are fairly flat, Carter said.
"There's lots of consolidation of late but still lots of room for more, especially at the regional level."
Vancouver-based Keg's CEO, David Aisenstat, will remain with the company and take over control of Cara's other higher-end restaurant brands as part of the deal.
Cara is offering $105 million in cash plus almost four million shares in Cara to the Keg's two shareholders — Aisenstat, and Fairfax Financial Holdings Limited, which bought 51 per cent of The Keg in 2013.
The deal won't alter the taken over company's relationship with TSX-listed Keg Royalties Income Fund, which pays distributions to investors by collecting four per cent of sales from corporate and franchise-owned Keg restaurants and owns intellectual property related to The Keg name.
Shares in the Keg income fund dropped by almost four per cent on the TSX on Tuesday. The shares are down by 26 per cent since last summer.
The two companies say they expect the deal to become official by the end of March, and Cara plans to change the name of the company to reflect the transaction.