Industry News | January 24, 2003

Krispy Kreme enters the Fast-Casual Business

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Montana Mills Bread Co., Inc. announced on Friday the signing of a definitive merger agreement with Krispy Kreme Doughnuts, Inc. The merger, which was approved by a majority of the Stockholders of Montana Mills, is expected to be completed by early in the second quarter and provides for the exchange of each share of Montana Mills for 0.1501 of a share of Common Stock of Krispy Kreme. Based upon Krispy Kreme's average closing price for the five days ending January 17, this values Montana Mills Common Stock at $5.11 per share. Montana Mills' Common Stock Purchase Warrants will, based upon their terms, become exercisable for Krispy Kreme Common Stock and are expected to continue to trade on the American Stock Exchange.

Krispy Kreme has also today announced plans to develop a bakery-cafe concept with Montana Mills' product and brand as a foundation for this new concept.

Scott Livengood, Krispy Kreme's Chairman, President and Chief Executive Officer, said, "This acquisition is a natural outgrowth of the development of Krispy Kreme over the past five years. As I have indicated previously, we view Krispy Kreme Doughnuts, Inc., first and foremost as a set of unique capabilities which include the abilities to explore and nurture our customers' passion for and connection to a brand, create an effective franchise network, vertically integrate to provide a complete range of products and services to a system-wide store network serving flour-based, short shelf life products, and deliver these products daily across multiple channels. Applying these core organizational competencies to the development of a second concept has the potential to create significant leverage."

Gene O'Donovan, President of Montana Mills said, "For Montana Mills this is a unique opportunity to join forces with a nationally recognized leader in food retailing. We strongly believe the ability to leverage Krispy Kreme's unique capabilities in areas such as branding, franchising and retail operations will allow Montana Mills to expand faster and will result in enhanced value for all of our Stockholders. Further, the added liquidity associated with ownership of Krispy Kreme stock will be very beneficial to all of our Stockholders."

Montana Mills intends to file an information statement with the Securities and Exchange Commission by mid-February.

Montana Mills, which was formed in 1996 by Gene and Suzy O'Donovan, owns and operates upscale village bread stores in the Northeastern and Midwestern United States that produce and sell a variety of baked goods and satellite cafes that sell the items baked at the company's village bread stores. The company's stores are located primarily in suburban areas in New York, Ohio, Pennsylvania and Connecticut. Montana Mills went public in June 2002 and trades on the American Stock Exchange under the symbol MMX.