EMERYVILLE Calif. Jamba Inc., parent to the 732-unit Jamba Juice smoothie chain, has agreed to a sale of $35 million in convertible preferred stock to two investors, Mistral Equity Partners and the family that owns the Ontario, Canada-based Yogen Früz frozen yogurt and smoothie franchise brand.
The agreement, announced Monday and set to close in about two weeks, will provide funds to repay Jamba’s senior term note, due in 2010, and to provide capital for the company’s turnaround plan to reverse flagging sales and mounting corporate losses. Jamba’s plans include increased franchising, particularly at non-traditional locations, the building of licensing opportunities for the Jamba Juice brand, and new in-store food options.
The stock sale includes a $19.55 million investment from New York-based private-equity firm Mistral Equity, which also holds shares in the Costa Mesa, Calif.-based El Pollo Loco chain, the Mountainside, N.J.-based Charlie Brown’s Steakhouse chain, and such retail food companies as The Hain Celestial Group, Shearer’s snack foods, and Otis Spunkmeyer muffins and cookies.
Another $15.45 million investment will come from Michael Serruya, who with his brother Aaron Serruya founded the 1,100-unit Yogen Früz chain, which operates in 20 countries and just entered the United States last year.
The preferred stock, convertible into common shares at $1.15 per share, matures in June 2016, unless converted earlier, and includes an 8 percent annual dividend, officials said. Jamba’s common stock has traded between 35 cents and $2.53 per share for the past 52 weeks. It closed at $1.09 a share on Monday, up 9 percent from last week’s close.
Under the agreement, Mistral Equity and the Serruya family also have the right to appoint a total of three members to Jamba’s board of directors.
“We are very excited about Jamba and the potential growth opportunities available to the company as it extends the brand through licensing and franchising opportunities,” Andrew Heyer, managing partner of Mistral Equity, said in a statement. “We believe that Jamba’s management team can develop the brand into a significant lifestyle brand within a number of consumer categories.”
Michael Serruya, who is president and chief executive of CoolBrands International, a holding company affiliated with Yogen Früz, said his company would provide Jamba with insight into global franchise operations. The frozen yogurt chain includes about 21 locations in the United States and has said it plans to open between 50 and 100 U.S.-based franchised stores annually over the next five years.
The Serruya family also owns the Swensen’s, Golden Swirl, Bresler’s, Ice Cream Churn and I Can’t Believe It’s Yogurt franchise brands.
To help shore up sales at Jamba Juice, just as cash-strapped consumers forgo treats such as daily smoothies, Jamba most recently said it is developing a new line of ready-to-drink beverages with Nestle, and last month announced that its name will be on a soon-to-be-developed line of frozen novelties, as well as a toy blender for kids to make smoothies at home.
More plans include the adding of food options to Jamba Juice’s menu, following the successful addition of oatmeal last year. In a conference call with investors last week, James White, Jamba’s president and chief executive, said the company planned to expand the testing of food items such as wraps, sandwiches, salads and cold teas from six stores to 200 in California during the current second quarter.
The company also announced plans to refranchise 150 corporate locations to help pay down debt and finance growth.
For the April 21-ended first quarter, Jamba reported a net loss of $10.2 million, or 19 cents per share, compared with a loss of $6.4 million, or 12 cents per share. Revenue for the quarter fell 12.5 percent to $88.9 million and same store sales at the chain’s 499 corporate units declined 13.8 percent.