TAST Carrols Restaurant Group Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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FORM 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): May 6, 2024

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Carrols Restaurant Group, Inc.

(Exact name of registrant as specified in its charter)

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Registrant’s telephone number, including area code: (315) 424-0513

N/A

(Former name or former address, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Emerging growth company ☐

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Demand Letters Relating to the Merger

As previously disclosed, on January 16, 2024, Carrols Restaurant Group, Inc. (“Carrols”, the “Company”, “we”, “our” or “us”) entered into an Agreement and Plan of Merger (such agreement, as it may be amended, modified or supplemented from time to time, the “Merger Agreement”) by and among the Company, Restaurant Brands International Inc., a corporation existing under the laws of Canada (“Parent”) and BK Cheshire Corp., a Delaware corporation and subsidiary of Parent (“Merger Sub”). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions described therein, Merger Sub will merge with and into Carrols, with Carrols continuing as the surviving corporation and a subsidiary of Parent (the “Merger”).

On March 4, 2024, Carrols filed a preliminary proxy statement with the Securities and Exchange Commission (“SEC”), a revised version of which was filed with the SEC on April 9, 2024 (as revised, the “Preliminary Proxy Statement”). On April 12, 2024, Carrols filed a definitive proxy statement (the “Definitive Proxy Statement”) with the SEC in connection with the special meeting of Carrols’ stockholders to be held virtually on May 14, 2024 at 9:00 a.m. Eastern Time (the “Special Meeting”), which can be accessed by visiting www.virtualshareholdermeeting.com/TAST2024SM, for the purpose of voting on, among other things, a proposal to adopt the Merger Agreement.

Following announcement of the Merger, as of the date of this Current Report on Form 8-K, the Company received twelve demand letters from purported stockholders (collectively, the “Demand Letters”) alleging that the disclosures contained in the Preliminary Proxy Statement and/or the Definitive Proxy Statement are deficient and demanding that certain corrective disclosures be made. As of the date of this Current Report on Form 8-K, one of the Demand Letters has been withdrawn.

As of the date of this Current Report on Form 8-K, four lawsuits have been filed in federal and state court by purported stockholders against the Company and members of the Company’s Board of Directors (the “Board”) (collectively, the “Actions”) relating to the Merger. The Actions, in the order by which they were filed, are: (i) Andrew Sasser v. Carrols Restaurant Group, Inc., et al., No. 1:24-cv-01869 (S.D.N.Y.), filed on March 12, 2024, (ii) Robert Lacoff v. Thomas Curtis et al., No. 60999/2024 (N.Y.S.), filed on April 23, 2024, (iii) Kevin Walsh v. Carrols Restaurant Group, Inc. et al., No. 004258/2024 (N.Y.S.), filed on April 23, 2024 and (iv) Mary Philips v. Carrols Restaurant Group, Inc. et al., No. 004336/2024 (N.Y.S.), filed on April 24, 2024. The Sasser Action, alleges, among other things, that Carrols and the Board filed or caused to be filed a materially false and misleading preliminary proxy statement with the SEC in violation of Section 14(a) and Section 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder. The Lacoff, Walsh and Philips Actions generally allege state law claims for breach of fiduciary duty, failure to disclose and aiding and abetting breach of fiduciary duty. Certain of the Actions seek, among other things, an injunction enjoining the stockholder vote at the Special Meeting or consummation of the Merger, rescission of the Merger in the event the Merger is consummated or awarding of rescissory damages, an order for the directors of Carrols to exercise their fiduciary duties to disseminate a preliminary proxy statement that is not materially false or misleading and an award of costs, including reasonable attorneys’ and experts’ fees.

Carrols, the members of the Board and the members of the Special Transaction Committee of the Board believe that the Demand Letters and Actions are without merit, that each of the Preliminary Proxy Statement and the Definitive Proxy Statement fully complies with the Securities Exchange Act of 1934, as amended, and all other applicable law, and that no further disclosure is required. However, solely in order to mitigate any risk of the Demand Letters or Actions delaying or otherwise adversely affecting the consummation of the Merger and to minimize any costs, risks, and uncertainties inherent in any potential litigation related thereto, and without admitting any liability or wrongdoing, Carrols has determined to voluntarily supplement the Definitive Proxy Statement, as described in this Current Report on Form 8-K. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein.

These supplemental disclosures will not change the consideration to be paid to Carrols stockholders in connection with the Merger or the timing of the Special Meeting. The Board continues to recommend that you vote “FOR” each of the proposals to be voted on at the Special Meeting described in the Definitive Proxy Statement, including the proposal to adopt the Merger Agreement.

The information contained in this Current Report on Form 8-K is incorporated by reference into the Definitive Proxy Statement. To the extent that information in this Current Report on Form 8-K differs from or updates information contained in the Definitive Proxy Statement, the information in this Current Report on Form 8-K shall supersede or supplement such information in the Definitive Proxy Statement.

Supplement to Definitive Proxy Statement

Carrols has determined to make these supplemental disclosures to the Definitive Proxy Statement. This supplemental information should be read in conjunction with the disclosures contained in the Definitive Proxy Statement, which in turn should be read in its entirety. All page references are to the Definitive Proxy Statement and terms used below, unless otherwise defined, shall have the meanings ascribed to such terms in the Definitive Proxy Statement. New text within restated language from the Definitive Proxy Statement is indicated in bold, underlined text (e.g., bold, underlined text) and removed language within the restated language from the Definitive Proxy Statement is indicated in strikethrough text (e.g., strikethrough text), as applicable. The information contained herein speaks only as of May 6, 2024 unless the information indicates another date applies.

The below supplemental disclosure replaces the first paragraph on page 27 of the Definitive Proxy Statement under the heading “Special Factors — Background of the Merger”:

The below supplemental disclosure replaces the second paragraph on page 27 of the Definitive Proxy Statement under the heading “Special Factors — Background of the Merger”:

The below supplemental disclosure replaces the fifth paragraph on page 28 of the Definitive Proxy Statement under the heading “Special Factors — Background of the Merger”:

The below supplemental disclosure replaces the final paragraph on page 31 of the Definitive Proxy Statement under the heading “Special Factors — Background of the Merger”:

Later on January 14, 2024, the Special Committee received a revised offer letter (the “January 14 Letter”) from Parent proposing a price of $9.55 in cash per share which represented a premium of approximately 13% over the $8.42 closing stock price of Carrols Common Stock on January 12, 2024 and a premium of approximately 23% over the thirty (30) trading-day VWAP as of January 12, 2024 of $7.80. The January 14 Letter also noted that the proposed price represented a 34% premium to the ninety (90) trading-day VWAP, as of January 12, 2024 of $7.13. The Special Committee then held a meeting that same day to discuss the latest offer, with representatives of Milbank and Jefferies in attendance. Representatives of Jefferies updated the Special Committee on their January 13 conversation with representatives of Parent. Representatives of Milbank then provided an overview of the revised draft of the merger agreement that was planned to be shared with Paul Weiss, noting in particular that the draft would include a 45-day go-shop period, a 3% termination fee, a waiver of Parent’s Series D Consent Right and consent rights under other agreements in connection with an alternative acquisition agreement for a Superior Proposal and restrictions on Parent’s right to make additional acquisitions during the pendency of this proposed transaction that could adversely affect obtaining antitrust approval. The Special Committee also discussed Carrols’ alternatives and other relevant factors previously discussed in light of Parent’s latest offer of $9.55 in cash per share as well as the implied 13% premium on the latest closing stock price of Carrols Common Stock. Following discussion, the Special Committee directed representatives of Jefferies to propose to Parent a price of $9.65 per share. Mr. Sloane and Mr. Perelman then exited the meeting, and the remaining members of the Special Committee and representatives of Milbank discussed the draft voting agreement received from Parent, as revised by Kirkland & Ellis LLP, counsel to Mr. Perelman and Mr. Sloane, that would require Mr. Perelman, Mr. Sloane and Cambridge Holdings, as shareholders of Carrols, to vote for the adoption of the merger agreement with Parent (see Summary Term Sheet — The Voting Agreement). After discussion, the Special Committee instructed Milbank to request an additional change to make the voting agreement terminate upon a change of recommendation with respect to the transaction by the Carrols Board or the Special Committee.

The below supplemental disclosure replaces the third full paragraph on page 33 of the Definitive Proxy Statement under the heading “Special Factors — Background of the Merger”:

On January 19, 2024, in accordance with the directions of the Special Committee, representatives of Jefferies and members of the Special Committee began outreach to persons potentially interested in exploring a transaction involving Carrols during the Go-Shop Period, contacting forty (40) potential parties, comprised of thirty-five (35) financial sponsors and five (5) strategic parties. Of the forty (40) parties contacted, three (3) entered into NDAsAcceptable Confidentiality Agreements with Carrols, each of which did not include a standstill provision, and were provided with due diligence materials previously shared with Parent in the VDR. All three (3) of the parties that entered into NDAsAcceptable Confidentiality Agreements with Carrols declined to submit an alternative Acquisition Proposal (as defined in the section entitled “The Merger Agreement — Solicitation of Other Offers”). The Go-Shop Period expired at 11:59 p.m., Eastern time, on February 15, 2024. On February 16, 2024, representatives of Milbank sent requests to each of the three parties that entered into NDAsAcceptable Confidentiality Agreements with Carrols to return or destroy any confidential materials in their possession.

The below supplemental disclosure replaces the second bullet point on page 37 of the Definitive Proxy Statement under the heading “Special Factors — Reasons for the Merger; Recommendation of the Special Committee and the Carrols Board — Recommendation of the Special Committee”:

The below supplemental disclosure replaces the disclosure beginning on page 43 of the Definitive Proxy Statement under the heading “Special Factors — Opinion of the Special Committee’s Financial Advisor — Selected Public Companies Analysis”:

Jefferies reviewed publicly available financial, stock market and operating information of Carrols and the following eight selected publicly traded U.S. listed restaurant franchisee, small-cap limited-service and small-cap full-service restaurant companies that Jefferies considered generally relevant for purposes of its analysis and, for informational purposes only, three non-U.S. listed restaurants and Restaurant Brands International Inc., which are collectively referred to as the “selected companies.”

Jefferies reviewed, among other information and to the extent publicly available, enterprise values (“EVs”) of the selected companies, calculated as fully diluted equity values based on closing stock prices on January 12, 2024, plus total debt, preferred equity and non-controlling interests, minus cash and cash equivalents, as a multiple of each such company’s estimated adjusted earnings before interest, taxes, depreciation and amortization, burdened by stock based compensation expense and pre-opening expenses (“Adjusted EBITDA”), for the calendar years 2023 and 2024, which we refer to as FY 2023E and FY 2024E, respectively.  Financial data of the selected companies were based on publicly available research analysts’ estimates, public filings and other publicly available information.

The selected companies and the financial data reviewed included the following:

Selected Public Companies Analysis

Jefferies applied a selected range of enterprise value to estimated Adjusted EBITDA multiples of 6.25x to 7.25x and 6.0x to 7.0x to corresponding data of Carrols based on the Company Projections for estimated Adjusted EBITDA for FY 2023E and FY 2024E, respectively, to determine ranges of implied enterprise values for Carrols. Jefferies then subtracted Carrols’ net debt as of December 31, 2023, as provided by Company management, to calculate a range of implied equity values, and divided the result by the number of fully diluted shares of Carrols Common Stock outstanding to calculate a range of implied per share equity values for Carrols. This analysis indicated reference ranges of implied per share equity values of $7.80 to $10.00 and $8.35 to $10.70 (each rounded to the nearest $0.05) based on estimated Adjusted EBITDA for FY 2023E and FY 2024E, respectively, as compared to the Per Share Price of $9.55 per share.

No company utilized in the selected public companies analysis is identical to Carrols. In evaluating the selected public companies, Jefferies made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond Carrols’ and Jefferies’ control.

The below supplemental disclosure replaces the final paragraph on page 44 of the Definitive Proxy Statement under the heading “Special Factors — Opinion of the Special Committee’s Financial Advisor — Discounted Cash Flow Analysis”:

The below supplemental disclosure replaces the first paragraph on page 53 of the Definitive Proxy Statement under the heading “Special Factors — Benefits and Detriments of the Merger for Carrols’ Directors and Executive Officers”:

In connection with the Merger, certain members of Carrols’ management will receive benefits and be subject to obligations that are different from, or in addition to, the benefits and obligations of Carrols Stockholders generally, as described in more detail under “— Interests of Carrols’ Directors and Executive Officers in the Merger.” The primary benefits of the Merger to Carrols’ directors and executive officers include the continued indemnification rights, rights to advancement of fees and directors and officers liability insurance. Members of the Special Committee, other than the Chairperson of the Special Committee, are entitled to compensation of $5,000 per month until the consummation of the transactions contemplated by the Merger Agreement in exchange for their services on the Special Committee. The Chairperson of the Special Committee is entitled to compensation of $10,000 per month until the consummation of the transactions contemplated by the Merger Agreement in exchange for his service on the Special Committee. The members of the Special Committee will continue to receive compensation until the consummation of the transactions contemplated by the Merger Agreement given their ongoing obligations including, among other things, attending meetings and reviewing SEC filings and other documentation and correspondence in connection with the Special Meeting and the closing of the transactions.

The below supplemental disclosure replaces the final paragraph on page 62 of the Definitive Proxy Statement under the heading “Special Factors — Interests of Carrols’ Directors and Executive Officers in the Merger — Employment Arrangements Following the Merger”:

Important Additional Information and Where to Find It

Participants in the Solicitation

Parent, the Company and their directors, and certain of their executive officers and employees may be deemed to be participants in the solicitation of proxies from the Company’s stockholders in respect of the proposed transaction. Information regarding the directors and executive officers of the Company who may, under the rules of the SEC, be deemed participants in the solicitation of the Company’s stockholders in connection with the proposed transaction, including a description of their direct or indirect interests, by security holdings or otherwise, is set forth in the Proxy Statement, a definitive version of which was filed with the SEC on April 12, 2024. Information about these persons is included in each company’s annual proxy statement and in other documents subsequently filed with the SEC, and was included in the definitive version of the Proxy Statement filed with the SEC. Free copies of the Proxy Statement and such other materials may be obtained as described in the preceding paragraph.

Cautionary Statement Regarding Forward-Looking Statements

This communication includes certain “forward-looking statements” within the meaning of, and subject to the safe harbor created by, the federal securities laws, including statements related to the proposed merger of the Company, including financial estimates and statements as to the expected timing, completion and effects of the proposed transaction. These forward-looking statements are based on the Company’s current expectations, estimates and projections regarding, among other things, the expected date of closing of the proposed transaction and the potential benefits thereof, its business and industry, management’s beliefs and certain assumptions made by the Company, all of which are subject to change. Forward-looking statements often contain words such as “expect,” “anticipate,” “intend,” “aims,” “plan,” “believe,” “could,” “seek,” “see,” “will,” “may,” “would,” “might,” “considered,” “potential,” “estimate,” “continue,” “likely,” “expect,” “target” or similar expressions or the negatives of these words or other comparable terminology that convey uncertainty of future events or outcomes. By their nature, forward-looking statements address matters that involve risks and uncertainties because they relate to events and depend upon future circumstances that may or may not occur, such as the consummation of the proposed transaction and the anticipated benefits thereof. These and other forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Important risk factors that may cause such a difference include, but are not limited to: (i) the completion of the proposed transaction on anticipated terms and timing, including obtaining required stockholder and regulatory approvals, and the satisfaction of other conditions to the completion of the proposed transaction; (ii) the ability of affiliates of Parent to obtain the necessary financing arrangements set forth in the commitment letters received in connection with the proposed transaction; (iii) potential litigation relating to the proposed transaction that could be instituted against Parent, the Company or their respective directors, managers or officers, including the effects of any outcomes related thereto; (iv) the risk that disruptions from the proposed transaction will harm the Company’s business, including current plans and operations; (v) the ability of the Company to retain and hire key personnel; (vi) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the proposed transaction; (vii) continued availability of capital and financing and rating agency actions; (viii) legislative, regulatory and economic developments affecting the Company’s business; (ix) general economic and market developments and conditions; (x) potential business uncertainty, including changes to existing business relationships, during the pendency of the proposed transaction that could affect the Company’s financial performance; (xi) certain restrictions during the pendency of the proposed transaction that may impact the Company’s ability to pursue certain business opportunities or strategic transactions; (xii) unpredictability and severity of catastrophic events, including but not limited to acts of terrorism, pandemics, outbreaks of war or hostilities, as well as the Company’s response to any of the aforementioned factors; (xiii) significant transaction costs associated with the proposed transaction; (xiv) the possibility that the proposed transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; (xv) the occurrence of any event, change or other circumstance that could give rise to the termination of the proposed transaction, including in circumstances requiring the Company to pay a termination fee or other expenses; (xvi) competitive responses to the proposed transaction; (xvii) the risks and uncertainties pertaining to the Company’s business, including those set forth in Part I, Item 1A of the Company’s most recent Annual Report on Form 10-K, as such risk factors may be amended, supplemented or superseded from time to time by other reports filed by the Company with the SEC; and (xviii) the risks and uncertainties that have been described in the Proxy Statement available from the sources indicated below. These risks, as well as other risks associated with the proposed transaction, have been more fully discussed in the Proxy Statement. While the list of factors presented here is, and the list of factors presented in the Proxy Statement are, considered representative, no such list should be considered a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material impact on the Company’s financial condition, results of operations, credit rating or liquidity. These forward-looking statements speak only as of the date they are made, and the Company does not undertake to and specifically disclaims any obligation to publicly release the results of any updates or revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

CARROLS RESTAURANT GROUP, INC.

Dated: May 6, 2024

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