FAT Brands Inc. announced that it has entered into an agreement to combine with Fog Cutter Capital Group Inc., the company’s controlling stockholder. The merger is intended to provide FAT Brands with increased financial flexibility and simplified corporate structure, at a time in the restaurant industry when committed capital and first mover advantage are critical to strategic acquisitions.
Andy Wiederhorn, president and CEO of FAT Brands, says, “We have taken a number of steps in 2020 to bolster our balance sheet and ensure that FAT Brands is as nimble and opportunistic as possible, especially in this environment. As we have disclosed in the past, FAT Brands has considered a combination with Fog Cutter as another step in our efforts to simplify our corporate structure and eliminate limitations that restrict our ability to use common stock for accretive acquisitions and capital raising. FCCG holds more than $100 million of net operating loss carryforwards (NOLs), which could only be made available to FAT Brands as long as FCCG owned at least 80% of FAT Brands. With this combination, the NOLs will be internalized at FAT Brands, and we will now have much greater flexibility and optionality in our capital structure.”
Wiederhorn continues, “We believe that the steps we have taken in 2020 will position us to capitalize on organic and acquisition-led growth in the future. We look forward to 2021, when we hope to experience some normalization as the pandemic subsides. With the acquisition of Johnny Rockets, in a post-COVID environment, we continue to anticipate that the company can generate 2x our 2019 EBITDA of $7.7 million.”
In connection with the Fog Cutter combination, FAT Brands has declared a special stock dividend payable only to holders of its common stock other than Fog Cutter, consisting of 0.2319998077 shares of FAT Brands’ 8.25% Series B Cumulative Preferred Stock (NASDAQ: FATBP) for each outstanding share of common stock held by such stockholders, with the value of any fractional shares to be paid in cash.
Fog Cutter will not receive any portion of the special dividend, which will have a record date of December 21, 2020 and expected payment date of December 23, 2020.