Swiss Chalet owner buys St-Hubert for $537-million

They're on the spit together now.

The owner of Swiss Chalet is buying St-Hubert for $537 million, giving it a major presence in Quebec including a chain of franchised restaurants, a food manufacturing and distribution business and about 10,000 employees.

Cara Operations says Groupe St-Hubert will fit well with its business, which in addition to Swiss Chalet includes numerous restaurant brands such as Harvey's and Milestones.

Cara sees St-Hubert's food manufacturing business—which makes two-thirds of its sales through corporate customers such as Sobeys, Loblaw, Costco and Metro—as a major growth opportunity.

Cara has 1,010 franchised and corporate restaurants, including 37 located outside Canada. Under the deal, it will add St-Hubert's 117 restaurants , all but nine in Quebec, which operate in several formats including traditional full-service rotisseries.

For a time, St-Hubert competed directly in some markets with Swiss Chalet—which also features rotisserie chicken and a secret sauce—but in recent years the two companies have focused on different geographic areas.

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The Toronto-area company, based in Vaughan, says it will use St-Hubert's head office in Laval as its base in Quebec, where Cara has relatively little presence.

"The acquisition of St-Hubert is an excellent strategic fit for both companies,'' Cara chairman and CEO Bill Gregson said in a joint statement Thursday.

Jean-Pierre Leger, St-Hubert's chairman and CEO and a member of the company's founding family, said the deal opens up future prospects for its employees.

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"It also provides them with more career opportunities by creating jobs in Quebec, since it will enable us to carry out major expansions of our food manufacturing programs and sales throughout Canada,'' he said.

Part of the price that Cara will pay is $50 million of its subordinate voting shares. The bulk of the transaction will be borrowed by Cara from Scotiabank and a syndicate of lenders. Cara said it also believes it will issue more stock, if market conditions are right.

Cara's largest shareholder, Fairfax Financial Holdings, has committed to spend about $200 million in purchasing any of the additional Cara stock that's sold.