Cara Operations Ltd. Acquires Groupe St-Hubert

Cara Operations Ltd. (TSX:CAO), owner of the Swiss Chalet chain, has announced the acquisition of Quebec-based Groupe St-Hubert.

Cara Operations Ltd. (TSX:CAO) is currently the oldest full-service restaurant company in the Canada. The company has over 1,000 locations and a small but growing presence internationally. Of those domestic locations, the vast majority are located in Ontario.

While you may not have heard of Cara before, you will no doubt be familiar with the assortment of brands that Cara owns, including Harvey’s, Swiss Chalet, Milestone’s Montana’s, Kelsey’s and Casey’s.

Cara now has another brand to add to its portfolio: Montreal-based Groupe St-Hubert in a reported deal worth $537 million.

Let’s take a look at some of details of the acquisition, and what this means for investors.

Location, location, location

The iconic St-Hubert chicken restaurant has been around since the 50s and has over 100 locations–nearly all of them in Quebec. Cara, on the other hand, has limited exposure to the province.

The purchase of St-Hubert effectively allows Cara to increase the number of locations it has by over 10%; it’ll gain an expanded, mature footprint in Quebec. This sentiment was echoed by Cara CEO Bill Gregson: “For Cara, this is also an opportunity to solidify a more significant presence in Quebec.”

That would be an understatement. Quebec is a notoriously hard market to puncture for nearly any business. The fact that Cara is able to acquire a well-known business like St-Hubert, which already has a sizeable presence and following, is sure to be great for investors.

Food manufacturing

One other strong point in the transaction is St-Hubert’s food manufacturing business; it accounts for significant sales through external grocery chains. The company already has an assortment of soups, broths, sauces, and entrees available for purchase. With the added weight and financial muscle of Cara, those products could make their way onto even more shelves or, even better, additional Cara brands could make it into stores.

Strategically, this is a great fit for Cara, which could see much higher revenue streams in the form of Cara brands in Quebec and St-Hubert brands outside the province. The market has reacted well to the announcement so far, and for good reason. At the time of writing, Cara is up an incredible 16% for the day, having pushed past $30 per share.

In my opinion, Cara represents a great option for investors looking to diversify by adding a stock in the restaurant sector that has a significant long-term growth opportunity.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Demetris Afxentiou has no position in any stocks mentioned.

More on Investing

thinking
Dividend Stocks

Should You Buy BCE Stock for its 8.6% Dividend Yield?

Down over 20% from all-time highs, BCE stock offers you a tasty dividend yield in 2024. But is the TSX…

Read more »

grow dividends
Tech Stocks

Why Nuvei Stock Jumped 26% on Monday

Nuvei (TSX:NVEI) stock saw shares surge today as the company confirmed it's in talks to go private through a buyout.

Read more »

consider the options
Investing

Better Buy for the Dividend: Enbridge or Nutrien?

Enbridge (TSX:ENB) and Nutrien (TSX:ENB) are great dividend plays for new investors going into April.

Read more »

Gold bars
Stocks for Beginners

TSX Materials in March 2024: The Best Stock to Buy Right Now

Materials have been quite volatile, though the price of gold has surged to all-time highs. That makes this stock a…

Read more »

grow dividends
Dividend Stocks

How Long Would It Take to Turn $20,000 Into $100,000 With TSX Dividend Stocks?

Here's how high-quality TSX dividend stocks and the power of compound interest can help grow your investments by 400% or…

Read more »

Happy diverse people together in the park
Tech Stocks

A Once-in-a-Generation Investment Opportunity: Artificial Intelligence (AI) Growth Stocks

Canadian tech companies like Kinaxis (TSX:KXS) are doing big things in AI.

Read more »

Paper airplanes flying on blue sky with form of growing graph
Dividend Stocks

2 Soaring Stocks I’d Buy Now With No Hesitation

These two stocks may be the most expensive on the market, but they're high for a reason! And I'm still…

Read more »

Arrowings ascending on a chalkboard
Investing

This Canadian Blue Chip Is Trouncing TSX Returns, and It Still Has Room to Run

Alimentation Couche-Tard (TSX:ATD) stock looks quite frothy heading into earnings, but there may still be upside.

Read more »