Letter to Shareholders
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Letter to Shareholders

January 12, 2018

Dear fellow shareholders,

You Have a Value Creation Opportunity
Participate in the upside of a stronger, more diversified restaurant franchisor

On December 12, 2017, we announced an exciting next step for our company – an amalgamation with MTY to create a leading North American restaurant franchisor with a strong balance sheet and significant growth potential. The transaction offers our shareholders:

  • Immediate value and future upside – with the offer to be paid approximately 20% in cash and approximately 80% in MTY shares, shareholders will receive immediate value and liquidity, and the opportunity to participate in the future upside of the new amalgamated company: a leading restaurant franchisor in a good position to generate future growth and face industry pressures;
  • Enhanced liquidity – upon the completion of the amalgamation, the combined company will have a broader shareholder base with increased market liquidity and a larger public float;
  • Fair value – as determined by an independent fairness opinion.


The amalgamation is already more valuable to shareholders today than when it was first announced on December 12, 2017.

  • Based on the five-day volume-weighted average trading price of MTY Shares as of January 11, 2018, the last trading day prior to the date of the circular, the total consideration represents $252 million to existing shareholders, or an enterprise value of $267 million, offering shareholders an equivalent of $4.16 per IRG share.
  • This represents a premium of 15.6% based on the five-day volume-weighted average trading price of MTY Shares as of January 11, 2018, the last trading day prior to the date of the circular, and the unaffected IRG share price on October 26, 2017, compared to an initial premium of 13.3% on the announcement day.
  • The EBITDA multiple applied to this transaction reflects one of the highest business valuation EBITDA multiples identified in comparable transactions of businesses operating in the quick service restaurant and casual dining segments of the restaurant industry in recent years: 15.0x Fiscal 2017 EBITDA of $17.5 million or 15.2x based on the five-day volume-weighted average trading price of MTY Shares as of January 11, 2018, the last trading day prior to the date of the circular.

Through the share exchange offered, IRG shareholders gain exposure to the future growth potential of the amalgamated company – a multi-brand industry leader with a portfolio of over 5,700 stores under 75 brands, $2.9 billion in System Sales and anticipated annual EBITDA in the range of approximately $125 – $130 million. Note that MTY shares have increased in value 152% over the last five-year period ending December 31, 2017 and 11% over the last one-year period ending December 31, 2017. Over the same periods the business has generated total returns of 161% and 12% respectively.

The Amalgamation is the right move for IRG and its shareholders

This value-creating transaction is the culmination of over three years of hard work, commitment and dedication by IRG’s management, employees and franchisees. Many of you will remember that Frank Hennessey was named CEO in September of 2014. At that time, we had just concluded a strategic review process that found no interested buyers for a company with negative growth, declining key performance metrics, and a share price hovering at $1.73. This is in sharp contrast to the value offered to shareholders today with the MTY offer. The value offered to shareholders of IRG is a result of the successful execution of our ongoing turnaround strategy.

Synergy + Size + Scale = Accelerated Growth Potential

While we believe that more growth could be possible for IRG, we need to be realistic about the amount and rate at which further organic growth can occur within our key business areas. Competition is coming from the highly-consolidated grocery sector that is aggressively competing for consumers’ “share of mouth”. Further, the changes to the minimum wage in Ontario effective at the beginning of this year could have a negative financial impact on franchisees and limit the company’s ability to grow in the Ontario market.

Given these headwinds, as well as the limited opportunities for meaningful growth that can come from synergistic and complementary acquisitions, our pace of growth as a stand-alone company may decelerate.

In contrast, a combined IRG and MTY will have the enhanced ability to face the challenges noted above and the requisite size, scale, geographic reach and balance sheet needed to succeed in an increasingly challenging operating environment, where purchasing power, synergies and acquisition capabilities matter even more.

Join the IRG Board and Major Shareholders in Supporting the Amalgamation with MTY

For all the reasons set out in the management information circular, the Board is unanimous in its support of this transaction. As set out in the section entitled “The Amalgamation – Background to the Amalgamation” of the circular, we did not reach this conclusion lightly. Over the past three plus years, as part of the Board’s mandate to strengthen the business and enhance value for the company’s shareholders, the Board has regularly reviewed IRG’s corporate strategy and considered various strategic options and other opportunities that may be in the best interests of the company. This included extensive strategic review processes in 2014 and 2016 considering potential opportunities with strategic partners and selected private equity firms in Canada and in the United States.

Based on this in-depth work canvassing the market in recent years, the extensive negotiations with MTY to surface the greatest possible value for shareholders, and the other reasons outlined in the circular, the proposed amalgamation with MTY is the best strategic alternative available to IRG shareholders.

We encourage you to carefully read the circular, including the sections entitled “The Amalgamation – Background to the Amalgamation” and The Amalgamation – Reasons for the determinations and recommendations“, which contain a summary of the main events that led to the execution of the combination agreement and certain meetings, negotiations, discussions, suspensions, pauses and other similar actions of the parties that preceded the public announcement of the amalgamation on December 12, 2017.

In order to receive the value from the transaction with MTY, I urge you to vote FOR the Amalgamation Resolution well in advance of the voting deadline of 5:00 p.m. (Montréal Time) on February 15, 2018. Together with MTY, IRG will be best positioned to grow and create value for all shareholders.

You can vote your proxy on the dedicated voting page on our website http://www.imvescor.ca. If you require any assistance in voting your proxy please contact Kingsdale Advisors, our strategic shareholder advisor and proxy solicitation agent, at 1-855-682-2023 toll-free in North America, or 416-867-2272 outside of North America, or by email at contactus@kingsdaleadvisors.com.

On behalf of the entire Board, I thank you for your support over the last few years as we worked hard to turnaround our company and surface the value of our portfolio. It is because of the outstanding efforts of our franchisees, employees and management team that we are in a position to take this next step. Today, as a shareholder, your patience is being rewarded.



(Signed) François-Xavier Seigneur
François-Xavier Seigneur
Chairman of the Board of Directors