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NexCen sells brands to Levine Leichtman for $112M

NexCen Brands Inc. said Thursday it is selling all of its franchise businesses, including the Great American Cookie, MaggieMoo's, Marble Slab Creamery, Pretzelmaker and Pretzel Time brands, to an affiliate of private-equity firm Levine Leichtman Capital Partners for $112.5 million.

NexCen, which began exploring strategic alternatives in February amid falling sales and a cash shortfall, said part of the proceeds of the buyout would be paid to its lender, BTMU Capital Corp., to satisfy the company's debt. The deal is subject to approval by NexCen shareholders and is expected to close in the third quarter of 2010.

NexCen's deal with Levine Leichtman represents the latest in a spurt of restaurant company buyouts. So far this year, deals have been announced for Rubio's Restaurants Inc., Dave & Buster's, CKE Restaurants, Papa Murphy's International, Fuddruckers, Wingstop Restaurants and On the Border.

The sale to Levine Leichtman also includes NexCen's retail brands, The Athlete's Foot and Shoebox New York, as well as its franchise management operations in Norcross, Ga., and a manufacturing facility in Atlanta. Chris Dull, president of NexCen Franchise Management, is expected to continue in his role under the new ownership.

All of NexCen's brands will be operated as a single business by Levine Leichtman's subsidiary, Global Franchise Group LLC, the companies said. NexCen franchises more than 1,700 stores across all of its brands.

"We believe that this agreement with an affiliate of LLCP, a firm with a proven track record of success in franchise management and extensive capital resources, represents the most favorable option for all of our stakeholders," Kenneth J. Hall, NexCen's chief executive, said in a statement.

Over the past two years, NexCen has overhauled its management and restructured its debt after facing a liquidity crisis in 2008 related to its $93.7 million purchase of Great American Cookie. The company's turnaround efforts also included the consolidation of its two pretzel brands, reduced product offerings at MaggieMoo's and a remodeling program at Great American Cookie and Marble Slab.

Sales continued to fall, however, as consumers cut spending and franchisees opened fewer stores during last year's recession. In its fourth quarter ended December 2009, NexCen was able to narrow its net loss, but revenue plummeted 17 percent. The company is scheduled to report first quarter results on Monday.

"We firmly believe that being a portfolio company of LLCP will provide our brands and franchisees with a new platform for growth and give our dedicated employees the opportunity to continue to manage and build these businesses," Hall said.

Levine Leichtman's investment portfolio currently includes restaurant brands Beef 'O' Brady's and Wetzel's Pretzels, and past investments include Quiznos and CiCi's Pizza.

"We are extremely pleased to be acquiring this leading franchise management business, which is a perfect fit with our portfolio and industry experience," said Lauren Leichtman, Levine Leichtman's chief executive. "We believe that this franchise business will be able to better capitalize on the many opportunities for continued expansion under our ownership and as a private company."

Earlier this year, Levine Leichtman made a second offer, along with investor Alex Meruelo, to acquire Rubio's Restaurants, but their bid was rejected. That company is now being taken private by another firm, Mill Road Capital LP, for $91 million.

Contact Molly Gise at [email protected]


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