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Aegis Brands announces sale of Second Cup Coffee to Quebec-based Foodtastic

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MISSISSAUGA, ON, Canada — Aegis Brands Inc. announced on February 8, 2021, that it has entered into a definitive agreement (the “Purchase Agreement”) to sell substantially all of the assets comprising its specialty coffee brand Second Cup Coffee Co. (“Second Cup”) to Quebec-based Foodtastic Inc. (“Foodtastic”), an emerging leader in the restaurant franchising industry (the “Transaction”).

“Second Cup has been a Canadian staple for almost 45 years and we’re excited to welcome them into the Foodtastic family” said Peter Mammas, President and CEO of Foodtastic. “We look forward to working with all our new franchisees and emerging through this pandemic with a revitalized Canadian leader in the premium coffee segment. This acquisition is consistent with our strategy of acquiring quality Canadian brands with growth potential.”

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“We are pleased that the Second Cup brand and franchisees have the opportunity to evolve with a new Canadian partner,” said Steven Pelton, President and CEO of Aegis. “At Aegis we will now focus on further development of Bridgehead Coffee and Hemisphere Cannabis, while seeking out exciting new growth and acquisition opportunities.”

The purchase price under the Transaction consists of $14 million in cash payable on closing (subject to customary closing adjustments), as well as a post-closing earn-out based on royalties earned from certain Second Cup cafés opened following closing. The Transaction will significantly strengthen Aegis’ balance sheet and permit the Company to accelerate its previously announced growth strategy through accretive acquisitions.

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Aegis inherently believes in the power of the entrepreneur. Future acquisition targets will ideally have a strong vision for their brand and the founder at the helm.

“This is a pivotal moment for Aegis Brands. We see many potential opportunities to help talented entrepreneurs and strong brands as they emerge from the challenges of the pandemic,” said Pelton. “We are excited about the opportunity to uncover new opportunities for growth. Aegis was created with the vision of building a portfolio of amazing brands that can grow and flourish with access to our resources and expertise. We are committed to letting each company operate as an independent brand, while supporting, promoting, and protecting the Company through its many stages of growth.”

Shareholder Approval and Recommendation of the Board

The Transaction is subject to approval by at least two-thirds of the votes cast by common shareholders of Aegis at a special meeting of common shareholders currently expected to be held in March 2021. The directors and executive officers of the Company and certain other major shareholders, collectively holding approximately 43% of the Company’s issued and outstanding common shares, have entered into support agreements agreeing to vote their common shares in favour of the Transaction.

The board of directors of Aegis, after consultation with management and its legal advisors, and for reasons to be more fully described in the management information circular to be filed and mailed to common shareholders in connection with the Transaction, has unanimously approved the Transaction and determined that the Transaction is in the best interests of the Company and recommends that common shareholders vote in favour of the Transaction.

The Purchase Agreement

Under the terms of the Purchase Agreement, an affiliate of Foodtastic (the “Purchaser”) will acquire substantially all of the assets of the Second Cup business and will assume the post-closing liabilities of the business and pre-closing contractual lease liabilities of Aegis associated with franchised cafés (subject to certain limited exceptions).

The closing of the Transaction is subject to the receipt of certain third-party consents, as well as a number of other customary conditions, including with respect to the truth and accuracy of the parties’ representations and warranties and material compliance with their respective covenants.

The Purchase Agreement includes customary non-solicitation provisions, including Aegis’ right to consider and accept unsolicited superior proposals in certain circumstances, subject to a right to match in favor of the Purchaser. A termination fee of $336,000 will be payable by Aegis to the Purchaser should the Transaction not close under certain circumstances, including if the Transaction is not completed as a result of Aegis accepting an unsolicited superior proposal. A reverse termination fee of $336,000 will be payable by the Purchaser to Aegis should the Transaction not close as a result of an uncured breach by the Purchaser of the Purchase Agreement (provided Aegis is not then in breach of the Purchase Agreement).

Copies of the Purchase Agreement and the management information circular to be mailed to common shareholders in connection with the Transaction will be filed with Canadian securities regulators and will be available on the SEDAR profile of Aegis at Shareholders are urged to read the management information circular and the other relevant materials when they become available, as such materials will contain important information regarding the Transaction.

About Foodtastic

Foodtastic is the franchisor of multiple restaurant concepts including, Au Coq, La Belle et La Boeuf, Monza, Carlos & Pepe’s, Souvlaki Bar, Nickels, Rotisseries Benny, Chocolato, Big Rig and Bacaro. Foodtastic is a leader in the restaurant franchising business with over 130 restaurants and $240 million in annualized sales.

About Aegis Brands Inc.

Founded in 1975, Aegis Brands Inc., formerly The Second Cup Ltd., is a Canadian specialty coffee retailer operating franchised and company-owned cafés across Canada. In November 2019, the Company announced its intention to implement a new operating structure in support of its new strategy. The Company now owns and operates the existing Second Cup Coffee Co. specialty coffee business as part of a portfolio of brands that also includes Bridgehead and Hemisphere Cannabis Co. For more information, please visit or find the Company on Facebook and Twitter.

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