Einstein Noah to explore merger or sale possibilities
Einstein Noah Restaurant Group Inc, parent to the Einstein Bros. Bagels, Noah’s New York Bagels and Manhattan Bagel brands, said Thursday it will explore strategic alternatives, including a possible merger or sale.
After reporting a near doubling of net income for the April 3-ended first quarter, Lakewood, Colo.-based Einstein Noah officials said revitalization efforts for the company’s three bagel brands were taking hold.
“Over the past several years, we have been working diligently to build a stronger foundation and enhance value for our stockholders by shifting to an asset-light expansion strategy, de-leveraging our balance sheet, inaugurating a dividend and embarking on a comprehensive cost-savings program,” said Jeff O’Neill, Einstein Noah’s president and chief executive.
“After careful consideration,” he continued, “our board of directors believes that it is now an opportune time to review strategic alternatives available to the company, including a possible business combination or sale of the company, as the next step in its efforts to maximize value for all stockholders and positively position Einstein Noah for the future.”
As of March 31, about 64 percent of Einstein Noah’s common stock was owned by Greenlight Capital LLC and affiliates. The company noted that Greenlight has sufficient voting power, without the vote of other stockholders, to determine a change in control of the company.
For the first quarter, Einstein Noah reported net income of $3.2 million, or 19 cents per diluted share, a 174-percent increase compared with $1.2 million, or 7 cents per diluted share, a year ago.
The per-share income for the first quarter included 2 cents in restructuring expenses related to the closure of four commissaries. Last year’s per-share income also included 1 cent in restructuring expenses related to recruitment and relocation of a senior development executive, the company said.
Systemwide same-store sales increased 1.1 percent, reflecting a 5-percent increase in average check, primarily driven by growing catering sales. It was the fourth consecutive quarter of positive same-store sales for Einstein Noah.
The same-store sales results, however, were offset by lower transactions as the company lapped discounting activity from the year-ago quarter.
Total revenue grew 3.6 percent to $104.9 million.
O’Neill credited the positive results to the new Smart Choices menu at Einstein Bros. and Noah's, as well as the chains’ new specialty beverage platform that includes espresso-based coffees and fruit smoothies.
Catering sales also grew by 19 percent during the quarter, O’Neill said, “and will remain an important contributor to raising our average check on a go-forward basis.”
Einstein Noah ended the quarter with 777 locations under the three brands, of which 447 are company owned. Five units opened during the first quarter.
For the year, the company expects 60 to 80 openings, including eight to 12 company locations, 12 to 14 franchised and 40 to 54 licensed units.
For its strategic review, Einstein Noah has hired Piper Jaffray to serve as financial advisor and Bryan Cave HRO as legal advisor.