Acquisition. Yesterday, FAT Brands announced the acquisition of Global Franchise Group for $442.5 million in cash and stock. With the acquisition, FAT Brands will have more than 2,000 franchised and company-owned restaurants around the world, with combined annual system-wide sales of approximately $1.4 billion. On a normalized basis, FAT Brands should generate about $100 million of annual revenue and $60 million of EBITDA.Who Is Global Franchise Group? Previously owned by Serruya Private Equity and Lion Capital, GFG is a strategic brand management company operating more than 1,400 locations across five quick service restaurant concepts in 16 countries. The concepts are Round Table Pizza, Great American Cookies, Hot Dog on a Stick, Marble Slab Creamery, and Pretzelmaker.Deal Terms. FAT Brands is paying $442.5 million consisting of $25 million of common stock to Serruya Private Equity, $67 million in Series B cumulative preferred stock, and $350.5 million in cash, which will consist of a combination of cash on hand and expansion of FAT Brands' whole business securitization.Room for Growth. The deal presents significant cross selling opportunities across FAT Brands existing franchisee base and the GFG franchisee base. In addition, we expect increased co-branding, noting that GFG's Great American Cookies and Marble Slab Creamery already co-brand. In addition, FAT is acquiring a manufacturing facility that currently produces dough for Great American Cookies but has substantial potential to expand, which could generate additional incremental EBITDA. Raising PT to $25. The GFG acquisition represents a new paradigm for FAT Brands and vaults the Company into the "big leagues," in our view. We are maintaining our Outperform rating but raising our 12-month price target to $25, which equates to 16.5 times normalized 2022 EBITDA, still a discount to its peer group. Read More >>