THE HABIT RESTAURANTS, INC. Item 8.01 Other Events.
OnJanuary 5, 2020 ,The Habit Restaurants, Inc. , aDelaware corporation ("Habit" or the "Company"), YUM! Brands, Inc., aNorth Carolina corporation ("Parent"), andYEB Newco Inc. , aDelaware corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), entered into an Agreement and Plan of Merger (the "Merger Agreement"), providing for the merger of Merger Sub with and into the Company, with the Company surviving the Merger as a wholly-owned subsidiary of Parent (collectively, the "Merger"). The parties publicly announced the Merger onJanuary 6, 2020 . In connection with the Merger, onFebruary 4, 2020 , Habit filed with theSecurities and Exchange Commission ("SEC") a Preliminary Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934 (the "Preliminary Proxy Statement"). OnFebruary 19, 2020 , Habit filed with theSEC a Definitive Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934 ("the Definitive Proxy Statement" and, together with the Preliminary Proxy Statement, the "Proxy Statement"). Habit commenced mailing the Definitive Proxy Statement to the Company's stockholders on or aboutFebruary 19, 2020 . Following the Proxy Statement, as of the date of this Current Report on Form 8-K, purported Company stockholders have filed eleven actions in connection with the Merger and the associated disclosures made in the Proxy Statement. OnFebruary 5, 2020 , a purported stockholder filed a complaint in theUnited States District Court for the Southern District of New York , captioned Gottlieb v.The Habit Restaurants, Inc. , et al., Civil Action No. 1:20-cv-00966, against the Company and the members of the Company's Board of Directors. OnFebruary 11, 2020 , a purported stockholder filed a complaint in theUnited States District Court for the Southern District of New York , captioned Morris v.The Habit Restaurants, Inc. , et al., Civil Action No. 1:20-cv-01182, against the Company and the members of the Company's Board of Directors. OnFebruary 11, 2020 , a purported stockholder filed a putative class action complaint in theUnited States District Court for the District of Delaware , captioned Smith v.The Habit Restaurants, Inc. , et al., Civil Action No. 1:20-cv-00203, against the Company and the members of the Company's Board of Directors. OnFebruary 12, 2020 , a purported stockholder filed a complaint in theUnited States District Court for the Southern District of New York , captionedAvila v.The Habit Restaurants, Inc. , et al., Civil Action No. 1:20-cv-01248, against the Company and the members of the Company's Board of Directors. OnFebruary 12, 2020 , a purported stockholder filed a complaint in theUnited States District Court for the Southern District of New York , captioned Sterner v.The Habit Restaurants, Inc. , et al., Civil Action No. 1:20-cv-01251,against the Company and the members of the Company's Board of Directors. OnFebruary 13, 2020 , a purported stockholder filed a putative class action complaint in theUnited States District Court for the Central District of California , captioned Shudic v.The Habit Restaurants, Inc. , et al., Civil Action No. 8:20-cv-00294, against the Company and the members of the Company's Board of Directors. OnFebruary 20, 2020 , a purported stockholder filed a complaint in theUnited States District Court for the Central District of California , captioned Grijalva v.The Habit Restaurants, Inc. , et al., Civil Action No. 2:20-cv-01661, against the Company and the members of the Company's Board of Directors. OnFebruary 21, 2020 , a purported stockholder filed a complaint in theUnited States District Court for the District of New Jersey , captioned Restivo v.The Habit Restaurants, Inc. , et al., Civil Action No. 2:20-cv-01927, against the Company and the members of the Company's Board of Directors. OnFebruary 24, 2020 , a purported stockholder filed a putative class action complaint in theDelaware Court of Chancery , captionedBounds & Co. v.The Habit Restaurants, Inc. , et al., C.A. No. 2020-0124 (Del. Ch.), against the Company and the members of the Company's Board of Directors. OnFebruary 24, 2020 , a purported stockholder filed a putative class action complaint in theUnited States District Court for the Central District of California , captioned Stein v.The Habit Restaurants, Inc. , et al., Civil Action No. 2:20-cv-01763,against the Company and the members of the Company's Board of Directors. OnFebruary 26, 2020 , a purported stockholder filed a complaint in theUnited States District Court for the Central District of California , captioned Antalan v.The Habit Restaurants, Inc. , et al., Civil Action No. 2:20-cv-01850, against the Company and the members of the Company's Board of Directors. The complaints in these eleven actions (collectively, the "Merger Litigation") allege, among other things, that the Company and the members of the Company's Board of Directors violated Sections 14(a) and 20(a) of the Exchange Act, and Rule 14a-9 promulgated under the Exchange Act, and breached their fiduciary duties, by misstating or omitting certain allegedly material information in the Proxy Statement filed with theSEC regarding the Merger. The complaints seek, among other things, injunctive relief preventing the consummation of the Merger, rescissory damages or rescission in the event of consummation of the Merger, declaratory relief related to the disclosures in the Proxy Statement, and certain fees and expenses. -------------------------------------------------------------------------------- The parties to the Merger Litigation subsequently engaged in arm's-length negotiations to attempt to resolve the claims asserted in the Merger Litigation, and reached an agreement whereby the Company would file on this Current Report on Form 8-K certain supplemental disclosures regarding the Merger.The Company and Company's Board of Directors believe that the allegations and claims asserted in the Merger Litigation lack merit, and that the supplemental disclosures set forth herein are not required or necessary under applicable laws. However, solely in order to avoid the risk of the Merger Litigation delaying or otherwise adversely affecting the Merger and to minimize the costs, risks, and uncertainties inherent in defending the Merger Litigation, the Company hereby voluntarily amends and supplements the Proxy Statement, as set forth in this Current Report on Form 8-K. The Company and the Company's Board of Directors deny any liability or wrongdoing in connection with the Proxy Statement, and nothing in this Current Report on Form 8-K should be construed as an admission of the legal necessity or materiality under applicable laws of any of the supplemental disclosures. These supplemental disclosures will not affect the consideration to be paid to Company stockholders in connection with the Merger or the timing of the special meeting of the Company's stockholders (the "Special Meeting") scheduled forMarch 18, 2020 , at9:00 a.m. Pacific Time , at18700 MacArthur Blvd. Irvine, CA 92612. The Company's Board of Directors continues to recommend that Habit's stockholders vote "FOR" the proposal to adopt the Merger Agreement; "FOR" the proposal to approve, by advisory (non-binding) vote, certain compensation arrangements that may be paid or become payable to Habit's named executive officers that is based on or otherwise related to the Merger Agreement and the transactions contemplated by the Merger Agreement; and "FOR" the proposal to approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the adoption of the Merger Agreement at the time of the Special Meeting.
Supplemental Disclosures to Proxy Statement in Connection with the Merger Litigation
The additional disclosures (the "Supplemental Disclosures") in this Current Report on Form 8-K supplement the disclosures contained in the Proxy Statement and should be read in conjunction with the disclosures contained in the Proxy Statement, which in turn should be read in its entirety. To the extent that information set forth in the Supplemental Disclosures differs from or updates information contained in the Proxy Statement, the information in this Current Report on 8-K shall supersede or supplement the information contained in the Proxy Statement. All page references are to the Definitive Proxy Statement and capitalized terms used, but not otherwise defined herein, shall have the meanings ascribed to them in the Definitive Proxy Statement.
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1. The first full paragraph on page 27 of the Definitive Proxy Statement shall
hereby be amended and supplemented as follows:
"OnJune 20, 2019 , the Board of Directors held a special meeting with representatives ofRopes & Gray LLP ("Ropes & Gray") in attendance. During the The Board of Directors called that meeting, in order forRussell W. Bendel , the Company's chief executive officer, briefedto brief the Board of Directors on recent feedback that he had received from various unaffiliated, long-term stockholders with whom the Company had a generally positive relationship.Mr. Bendel noted that, in light of challenges in the market and the Company's performance, among other considerations, these The unaffiliatedstockholders had expressed a desire for the Company to consider potential strategic alternative transactions.no affiliation with Company management orKarpReilly and were passive investors with the same interests in any proposed transaction as all Class A common stockholders.Mr. Bendel noted that, in light of challenges in the market and the Company's performance, among other considerations, these stockholders had expressed a desire for the Company to consider potential strategic alternative transactions. The Board of Directors discussed, among other topics, the importance of maximizing stockholder value and the in-depth experience of several members of the Board of Directors with different types of strategic transactions. Representatives of Ropes & Gray then made a presentation to the Board of Directors regarding the directors' fiduciary duties with respect to a potential strategic transaction, and the Board of Directors and Ropes & Gray discussed related considerations. After discussion regarding those issues, the Board of Directors agreed to consider potential strategic alternative transactions and proceeded to discuss next steps, including the potential engagement of a financial advisor. In light of confidentiality concerns, the Board of Directors also expressed interest in initially approaching only one advisor. After discussion, members of the Board of Directors agreed thatPiper Sandler would be a strong candidate to advise the Company on potential strategic alternative transactions, given its industry expertise, historical knowledge of the Company, and experience advising public companies. The Board of Directors directed Messrs. Bendel and Reilly to contactPiper Sandler to request a proposal and presentation regarding potential strategic alternative transactions to be given to the Board of Directors during its regularly scheduledJuly 2019 meeting."
2. The second full paragraph on page 28 of the Definitive Proxy Statement shall
hereby be amended and supplemented as follows:
"Following execution of the engagement agreement,Piper Sandler approached eighty-five potential buyers, comprised of a mix of strategic and financial buyers. After that initial outreach, the Company executed confidentiality agreements, which included a standstill provision, with forty-eight potential buyers. Under the terms of the confidentiality agreements executed with all potential buyers, the standstill provision automatically terminated and became of no further force or effect if the Company entered into a definitive agreement with respect to, or recommended that the Company's stockholders accept or approve, a transaction involving the acquisition of all or a majority of the Company's outstanding equity securities or all or substantially all of the Company's assets (whether by merger, consolidation, business combination, tender or exchange offer, recapitalization, restructuring, sale, equity issuance or otherwise)."
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3. The disclosures under the heading "Selected Public Companies Analysis" on
page 54 of the Definitive Proxy Statement shall hereby be amended and
supplemented by inserting the following table immediately prior to theparagraph that begins "Financial data of the selected companies were based on
publicly available . . . .":
Market EV/LTM EV/CY2019 EV/CY2020
Company Capitalization EBITDA EBITDA EBITDA
Chipotle Mexican Grill, Inc. $ 25,080M 38.1 x 35.6 x 27.4 x
Shake Shack Inc. $ 2,333M 32.2 x 30.4 x 25.3 x
El Pollo Loco Holdings, Inc. $ 549M 10.6 x 10.5 x 10.3 x
Del Taco Restaurants, Inc. $ 304M 7.7 x 7.0 x 7.0 x
Fiesta Restaurant Group, Inc. $ 287M 5.8 x 5.7 x 5.6 x
Noodles & Company $ 248M 8.6 x 8.1 x 7.1 x
Potbelly Corporation $ 104M 3.8 x 3.9 x 4.0 x
Minimum 3.8 x 3.9 x 4.0 x
Mean 15.3 x 14.5 x 12.4 x
Median 8.6 x 8.1 x 7.1 x
Maximum 38.1 x 35.6 x 27.4 x
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4. The disclosures under the heading "Selected Precedent Transactions Analysis"
on page 55 of the Definitive Proxy Statement shall hereby be amended and
supplemented by inserting the following additional information into the
existing table (after the sentence that begins "Based on these criteria,
Piper Sandler identified and analyzed the following selected precedent transactions:"): Enterprise Enterprise Value / LTM Announcement Date Target Acquiror Value EBITDA
April 201904/11/19
Holdings MTY Food Group $ 186 8.4x
November 201811/20/18 Lion Capital,
Global Franchise Serruya Private
Group Equity $ 400 8.6x
November 201811/06/18 Durational
Capital, The
Bojangles' Jordan Company $ 754 11.1x
August 201808/16/18 Zoe's Kitchen CAVA Group $ 298 16.3x
August 201808/02/18 Jamba FOCUS Brands $ 203 15.1x
December 201712/19/17
Corporation Management $ 305 5.3x
September 201709/07/17
Grill Co. $ 280 13.2x
March 201703/23/17 Checkers & Rally's Oak Hill Capital
Restaurants Partners $ 525 11.0x
February 201702/21/17 Popeyes Louisiana Restaurant Brands $
Kitchen International 1,814 20.9x
May 201605/25/16 Kahala Brands MTY Food Group $ 327 10.5x
May 201605/09/16 Krispy Kreme JAB Holding $
Doughnuts Company 1,306 16.9x
March 201503/12/15 Levy Acquisition
Del Taco Holdings Corp. $ 500 8.2x
September 201409/29/14 Einstein Noah JAB Holding
Restaurant Group Company $ 471 10.1x
August 201408/01/14 Portillo
Restaurant Group Berkshire Partners $ 875 13.3x
December 201212/17/12 Caribou Coffee JAB Holding
Company Company $ 307 11.4x
March 201203/21/12 The Krystal Argonne Capital
Company Group $ 120 5.7x
June 201106/13/11 Arby's Restaurant Roark Capital
Group Group $ 339 6.4x
December 201012/28/10 Noodles & Company
265 10.4x
April 201004/24/10 Apollo Global
CKE Restaurants Management $ 1,020 6.5x
Minimum 5.3x
Mean 11.0x
Median 10.5x
Maximum 20.9x
5. The disclosures under the heading "Discounted Cash Flow Analysis" on page 56
of the Definitive Proxy Statement shall hereby be amended and supplemented by
inserting the following table immediately after the second sentence in the
first paragraph that begins "The unlevered free cash flows for each year . .
. .":
($ in millions) Fiscal Year Ending December
2020E 2021E 2022E 2023E
Adjusted EBITDA 40.5 48.5 56.5 66.5
Less: Depreciation & Amortization and Loss on
Disposal of Assets (31.1 ) (34.9 ) (39.7 ) (43.0 )
Operating Income 9.4 13.7 16.8 23.5
Less: Income Taxes - - - -
After-Tax Operating Income 9.4 13.7 16.8 23.5
Less: Non-Cash Rent Expense (2.0 ) (2.7 ) (3.1 ) (3.7 )
Less: TRA Payments (3.2 ) (3.2 ) (4.3 ) (5.5 )
Plus: Depreciation & Amortization and Loss on
Disposal of Assets 31.1 34.9 39.7 43.0
Less: Net Capital Expenditures (30.3 ) (38.5 ) (45.9 ) (50.4 )
Less: Change in Net Working Capital 1.6 3.3 3.5 2.8
Unlevered Free Cash Flow 6.5 7.4 6.7 9.6
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6. The disclosures under the heading "Premiums Paid Analysis" on page 56 of the
Definitive Proxy Statement shall hereby be amended and supplemented by
inserting the following table immediately after the sentence in the second
paragraph that begins "The overall low to high acquisition premia observed
for these transactions were . . . .":
Offer Price Premium to
Announcement Offer 1
Day 30 Day 90 Day
Date Acquirer Target Price Spot VWAP VWAP
11/11/19 Anheuser-Busch Craft Brew
Cos Inc. Alliance Inc. $ 16.50 126.3 % 110.2 % 74.1 %
11/06/19 Diversified
Restaurant
ICV Partners Holding Inc. $ 1.05 123.4 % 6.1 % 20.7 %
10/28/19 LVMH Moet
Hennessy LV SE Tiffany & Co. $ 135.00 37.0 % 25.9 % 42.6 %
08/28/19 Castle Brands
Pernod Ricard SA Inc. $ 1.27 92.2 % 108.2 % 135.2 %
08/08/19 Vitamin Shoppe
Liberty Tax Inc. $ 6.50 43.2 % 15.0 % 36.0 %
06/24/19 Del Frisco's
L Catterton Restaurant Group $ 8.00 18.9 % 7.1 % 15.8 %
06/05/19 Elliott Advisors Barnes & Noble
Ltd. Inc. $ 6.50 39.8 % 35.4 % 26.7 %
04/16/19 Apollo Global Smart & Final
Management LLC Stores Inc. $ 6.50 18.6 % 25.7 % 10.5 %
04/11/19 MTY Food Group Papa Murphy's
Inc. Holdings Inc. $ 6.45 31.9 % 1.6 % 3.5 %
02/05/19 Apollo Global
Management LLC Shutterfly Inc. $ 51.00 13.4 % 13.3 % 12.5 %
12/10/18 Tivity Health
Inc. NutriSystem Inc. $ 47.00 37.4 % 14.5 % 25.2 %
09/25/18 ARG Holding
Corp. Sonic Corp. $ 43.50 18.8 % 8.8 % 15.0 %
08/17/18 Cava Group Zoe's Kitchen $ 12.75 33.4 % 13.8 % 24.4 %
08/02/18 FOCUS Brands
Inc. Jamba, Inc. $ 13.00 16.3 % 2.4 % 9.2 %
07/26/18 United Natural
Foods, Inc. Supervalu Inc. $ 32.50 67.1 % 15.5 % 41.6 %
06/21/18 Conagra Brands, Pinnacle Foods
Inc. Inc. $ 68.00 5.3 % 5.7 % 12.9 %
02/23/18 General Mills, Blue Buffalo Pet
Inc. Products $ 40.00 17.2 % 7.8 % 14.7 %
02/20/18 Rhone Capital, Fogo de Chão,
LLC Inc. $ 15.75 25.5 % 8.6 % 18.4 %
02/13/18 Durational
Capital / The
Jordan Company Bojangles $ 16.10 38.8 % 33.6 % 29.7 %
02/06/18 Perry Ellis
Feldenkreis International,
Holdings LLC Inc. $ 27.50 21.6 % 10.9 % 11.4 %
01/29/18 Bravo Brio
Spice Private Restaurant
Equity AG Group, Inc. $ 4.05 37.3 % 50.0 % 64.6 %
12/17/17 Amplify Snack
Hershey Co Brands Inc. $ 12.00 71.4 % 89.9 % 87.5 %
12/14/17 Campbell Soup Snyder's-Lance,
Company Inc. $ 50.00 26.9 % 23.3 % 29.5 %
11/13/17 Arby's
Restaurant Group Buffalo Wild
Inc. Wings Inc. $ 157.00 32.1 % 36.5 % 43.4 %
10/26/17 Utz Quality Inventure Foods
Foods Inc. Inc. $ 4.00 (10.3 %) (4.8 %) (1.5 %)
09/19/17 Post Holdings Bob Evans Farms
Inc. Inc. $ 77.00 5.6 % 7.9 % 9.7 %
07/06/17 Liberty
Interactive
Corp. HSN Inc. $ 40.36 28.9 % 10.7 % 12.0 %
06/29/17 Monomoy Capital
Partners LLC West Marine Inc. $ 12.97 33.7 % 31.5 % 27.9 %
06/16/17 Whole Foods
Amazon.Com Inc. Market Inc. $ 42.00 27.0 % 5.1 % 15.4 %
05/22/17 Nutraceutical
International
HGGC, LLC Corporation $ 41.80 49.3 % 12.8 % 31.5 %
04/06/17 AdvancePierre
Tyson Foods Inc. Foods Hldg Inc. $ 40.25 31.8 % 32.8 % 41.4 %
04/04/17 Sycamore
Partners LLC Staples Inc. $ 10.25 18.4 % 16.1 % 13.5 %
04/03/17 JAB Holdings Panera Bread Co. $ 315.00 20.3 % 22.4 % 33.5 %
03/13/17 NRD Capital Ruby Tuesday,
Management Inc. $ 2.40 37.1 % 28.3 % 4.8 %
02/21/17 Restaurant Popeyes
Brands Int'l Louisiana
Inc. Kitchen Inc. $ 79.00 19.5 % 7.5 % 12.5 %
02/01/17 Reckitt
Benckiser Group Mead Johnson
PLC Nutrition Co. $ 90.00 27.7 % 24.1 % 24.3 %
Minimum (10.3 %) (4.8 %) (1.5 %)
Mean 35.6 % 24.0 % 28.6 %
Median 30.3 % 14.8 % 22.5 %
Maximum 126.3 % 110.2 % 135.2 %
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7. The disclosures under the heading "Employment Agreements Following the
Merger" on page 68 of the Definitive Proxy Statement shall hereby be amended
and supplemented as follows:
"As of the date of this proxy statement, Parent has informed the Company that none of the Company's executive officers have entered into any agreement, arrangement or understanding with Parent, theSurviving Corporation or their affiliates regarding employment following the Effective Time. It is possible that Parent may enter into employment or consultancy, compensation, severance or other employee or consultant benefits arrangements with the Company's executive officers and certain other key employees in the future, but there can be no assurance that any parties will reach any such agreement. The final bid Parent submitted onDecember 18, 2019 stated Parent's expectation that the Company's executive officers would continue in their roles with the Company after the Effective Time, as well as Parent's expectation that it would finalize retention agreements with the Company's executive officers prior to completion of any transaction. However, prior to execution of the Merger Agreement onJanuary 5, 2020 , the Company's executive officers did not have any discussions with Parent regarding employment offers or any terms of their potential employment following the Effective Time."
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Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this communication contain "forward-looking statements" within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. In some cases, words such as "anticipates," "expects," "intends," "plans," "projects," "believes," "may," "will," "would," "could," "should," "seeks," "estimates" and variations on these words and similar expressions may identify such forward-looking statements, although not all forward-looking statements contain these words. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements are based on current expectations, estimates, assumptions, or projections concerning future results . . .
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