RB 20/2007 Agreement and Plan of Merger
20-05-2007

The Management Board of AmRest informs about signing of the Agreement and Plan of Merger  between AmRest Holdings N.V., AmRest Acquisition Subsidiary, Inc. (the “AA Subsidiary”), a Delaware corporation and a wholly-owned subsidiary of AmRest, US Strategies, Inc. (“USSI”), a New Jersey corporation, and MICHAEL TSEYTIN (the “Controlling Shareholder”).
 
AA Subsidiary, upon agreement and successful execution and subsequent merger with USSI will own 100% stake in OOO Pizza Nord, a franchisee and operator of  41 restaurants in Russia (22 Rostic-KFCs and 19 Pizza Huts), located primarily in St. Petersburg and including restaurants in Moscow and Kazan. AA Subsidiary will be the surviving corporation in the Merger and will continue to be governed by the laws of the State of Delaware.
 
Preliminary Merger Consideration will be USD 48.0 million. Additionally the merged company will assume USD 21.5m of long term debt and USD 1.5 million of net current assets.
 
Final Merger Consideration (Adjustment Period Value) will be established after “Adjustment Period”. “Adjustment Period” means the period from the Closing Date to June 30, 2008, inclusive.
 
Preliminary merger consideration will be made up of two portions:
 
(i)                  cash in the amount USD 26.4 million – Cash Portion
 
(ii)                such number of AmRest Shares equal to the sum of USD 21.6 million divided by the AmRest Shares Average Price for Closing Purposes – Stock Portion
 
Of the USD 21.5 m long term debt USD 12.0 m will become payable in cash, within five (5) business days after the Closing Date. 
 
The Cash and Stock portions of the initial merger consideration will be payable at Closing. The Closing of the transactions as contemplated by this Agreement shall take place on the fifth (5th) business day immediately following the date on which the last of the conditions set forth is fulfilled or waived (Closing Date). The parties anticipate Closing on or about July 1, 2007.
 
The AmRest shares, constituting the stock portion of the initial merger consideration, will be blocked and held in an Escrow account until after the Adjustment Period and the final consideration is determined. Therefore, prior to or at the Closing, AmRest and Controlling Shareholder shall execute a Share Pledge Agreement (“Pledge Agreement”). All of the AmRest Shares which Controlling Shareholder is entitled to receive pursuant to the Agreement (the “Pledged Shares”) shall be delivered on behalf of Controlling Shareholder to the “Broker” pursuant to the Pledge Agreement.
 
“Adjustment Period Value” means the amount determined under the following formula:
 
A  –  B
 
where,
 
A = the lesser of (i) the Adjustment Period Gross Sales multiplied by the Applicable Gross Sales Multiple, or (ii) the Adjustment Period EBITDA multiplied by the Applicable EBITDA Multiple; and
 
B =  the Long Term Debt of USSI and its Subsidiaries as shown on the Closing Balance Sheet
 
“Applicable Gross Sales Multiple” means one and three-tenths (1.3) if Adjustment Period EBITDA is less than seventeen percent (17%) of Adjustment Period Gross Sales, and one and five-tenths (1.5) if Adjustment Period EBITDA is equal to or greater than seventeen percent (17%) of Adjustment Period Gross Sales.
 
“Applicable EBITDA Multiple” means six and seven-tenths (6.7) if Adjustment Period EBITDA is less than seventeen percent (17%) of Adjustment Period Gross Sales, and seven (7) if Adjustment Period EBITDA is equal to or greater than seventeen percent (17%) of Adjustment Period Gross Sales.
 
The deal terms of the Agreement envisage EBITDA for the Adjustment Period to be USD 9.9 million which multiplied by 7 has determined the Preliminary Merger Consideration.  This amount will be adjusted up or down based on actual results during the adjustment period as described herein.
 
For purposes of computing Adjustment Period Gross Sales, Adjustment Period EBITDA and Adjustment Period Value certain potential exclusions and inclusions related to extraordinary items, costs and results of new development projects and results of business to be discontinued will be reflected in the calculation.
 
In the event the Net Book Value is less than USD 1.5 million, then Controlling Shareholder shall pay AmRest the amount by which USD 1.5 million exceeds the net asset value.  In the event the Controlling Shareholder shall fail to timely pay the full amount of the net asset shortfall to AmRest, AmRest shall be entitled to instruct the Broker, in accordance with those terms of the Pledge Agreement to sell on the open market the minimum number of Pledged Shares to cover (net of any fees and expenses associated with such sale) the Net Book Value Shortfall not so paid by the Controlling Shareholder.
 
In the event the Adjustment Period Value is less than USD 48.0 million, then Controlling Shareholder shall pay AmRest the amount by which USD 48.0 million exceeds the Adjustment Period Value (the “Adjustment Period Value Shortfall”).  In the event the Controlling Shareholder shall fail to timely pay the full amount of the Adjustment Period Value Shortfall to AmRest, AmRest shall be entitled, in addition to any other remedies available to AmRest, to instruct the Broker, in accordance with those terms of the Pledge Agreement to sell on the open market the minimum number of Pledged Shares  to cover (net of any fees and expenses associated with such sale) the Adjustment Period Value Shortfall not so paid by the Controlling Shareholder.
 
In the event the Adjustment Period Value is more than USD 48.0 million then AmRest shall pay Controlling Shareholder the amount by which the Adjustment Period Value exceeds USD 48.0 million (the “Adjustment Period Value Premium”) by delivery to Controlling Shareholder of such number of AmRest Shares as are the value equivalent to the Adjustment Period Value Premium at the AmRest Shares Average Price for Adjustment Period Purposes.  
 
The final conclusion of the Agreement is subject to conditions precedent including, among others, successful completion of Due Diligence of USSI and its subsidiaries by AmRest. and AmRest  shareholders’ approval 
 
 
Legal act:
Ustawa o ofercie z dnia 29 lipca 2005 art. 56. ust. 1 punkt 2.

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