Its First Merger Deal Off, Unity Rd Tries Again
Unity Rd's COO Mike Weinberger in the franchise's grow facility in Aurora, Colorado.
The planned merger between Unity Rd (formerly called One Cannabis), the Denver-based franchisor of marijuana dispensaries, and Cannabis One Holdings Inc. is off after regulatory hurdles proved too difficult to overcome, said Mike Wienberger, COO of Unity Rd.
Instead, he was working in early April to close a deal with Item 9 Labs, although travel restrictions due to COVID-19 were slowing progress.
Item 9 Labs is a publicly traded Phoenix-based company (OTC:INLB) that produces marijuana products in Arizona and will begin operations soon in Nevada. It has about $7 million in annual revenue compared with Unity Rd's $15 million. Its stock was trading at about 88 cents in early April, down from about $1 the week before.
Unity Rd CFO Frank Knuettel told Franchise Times in December he believes cannabis is a sector in which “being public is better. I come from the tech world, where the VC pool is so big,” but most venture capital and private equity firms have institutional investors that cannot invest in cannabis because it’s illegal at the federal level.
Item 9 Labs was founded after Proposition 203 became law in Arizona in 2012, allowing legal cultivation of medical marijuana. The firm went public in 2018.
If the deal closes, management changes may take place but it's too early to specify what those might be, Weinberger said.
Executives had touted the earlier deal with Cannabis One Holdings as a "merger of equals" that would position Unity Rd among a so-called house of brands in the marijuana space, and give it the leading position as a franchised brand.
Cannabis One Holdings has its own marijuana franchise called The Joint and was planning to put its development on hold; it is unclear what will happen now that the merger is off.
iCryo lands celebrity investor amid M&A slowdown
TGI Fridays' deal with Allegro was the highest-profile franchise victim of global economic uncertainty caused by COVID-19. The value of announced mergers in the first quarter was down 33 percent from a year ago, to $572 billion, according to Dealogic. But some deals crossed the finish line.
Paige Hathaway, a top fitness icon and entrepreneur on social media, will be joining leading cryotherapy franchise iCryo as its equity partner and brand ambassador. Hathaway will be heavily involved in franchise development and marketing as equity partner at the Houston-based wellness company. “We strategically align ourselves with certain people, and Paige checked all the boxes for us,” said Kyle Jones, co-founder and COO of iCryo. “Everything iCryo stands for—the fitness aspect, and now that she’s a new mom she’s transitioning to general wellness, and now that she’s getting into her 30s, she’s looking into anti-aging benefits—she embodies all three target markets we search for.” As part of the agreement, Hathaway purchased equity and has plans to open up her own iCryo location in Dallas, expected to open sometime this summer.
Quality Restaurant Group acquired 67 Moe’s Southwest Grill restaurants in Florida, South Carolina, Virginia, Washington, D.C., and Maryland. Unbridled Capital provided advisory to sellers Brad Chasteen, Michael Silverman, Guy Campbell and Rob Atkisson. Quality Fresca, a new division of Quality Restaurant Group, is now the largest franchisee in the Moe’s system. “This transaction was truly unique. In all my years doing M&A work, I have never been part of a sale where four franchisee businesses were sold simultaneously to one buyer,” said Rick Ormsby, managing director at Unbridled Capital in a statement. “This process took expertise, patience and endurance…I am really proud of the outcome for all constituents.”
Blaming “extraordinary market conditions,” the TGI Fridays deal with Allegro is off. According to an SEC filing, leaders at Allegro Merger Corp. and TGIF Holdings “mutually determined” that because of COVID-19-related issues and “failure to meet necessary closing conditions” the deal could not proceed. The SPAC merger, where a public holding company merges with an acquisition target, was announced in November 2019 and would have cleaned up Fridays' $350 million in debt and cashed out private equity owner Sentinel Capital Partners to the tune of $30 million in cash along with some shares of the future company.
American Securities, a private equity firm based in New York, acquired United PF Holdings, the largest Planet Fitness franchisee in the U.S. with 168 gyms in 14 states. American Securities acquired the Texas-based company from JLM Financial and Eagle Merchant Partners. The deal closed in late December. Planet Fitness has more than 14 million members and nearly 2,000 clubs in 50 states.
Yum Brands, parent company of KFC, Pizza Hut and Taco Bell, completed its purchase of The Habit Restaurants, parent of The Habit Burger Grill. This is the first fast-casual concept Yum Brands had added to its portfolio of global restaurant brands. The Habit Burger Grill has grown its company-operated restaurant average unit volumes from $1.2 million in 2009 to $1.9 million in 2019, while also growing from 26 locations in California to 271 locations in 13 states and in China. The Habit Burger Grill will continue to operate as an independent brand as a subsidiary of Yum.
ICV Partners, a leading investment firm, completed a $130-million acquisition of Diversified Restaurant Holdings, one of the largest franchisees for Buffalo Wild Wings with 64 sports bars across five states. ICV will combine its earlier investment in JK&T Wings sports bars with DRH, making the combined company the largest franchisee of Buffalo Wild Wings. JK&T also inked a 15-store area development agreement to build new stores and sold the BWW sports bars in Florida and Massachusetts to Inspire Brands.
—Dealmakers briefs by Callie Evergreen; send details of franchise M&A transactions to email@example.com.