FRG - Buy Franchise Group Ahead Of Major Acquisition

• Franchise Group has strong organic growth prospects, is only 2.4x levered, and trades below 8x 2022 fully taxed FCF/share. The stock is down ~25% due in part to macro concerns.
• The company may miss its robust 2022 EBITDA guidance, given in December. 2022 EBITDA/share will still be 15-20% above 2021 levels, however.
• Franchise Group has a stellar M&A track record, acquiring at disciplined prices and then radically improving financial performance. EBITDA/share is up 3.5x since mid-2019, when current management took over.
• Past M&A performance has earned the company access to third party financing. They shocked the market by entering into exclusive negotiations to buy Kohl's, which is 5x their size.
• The deal would be funded with no equity, only debt and real estate sale-leasebacks. If it closes, both FCF/share, and the $2.50 dividend, should more than double.

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