FAT Brands Provides Update to Warrant Holders in connection with Twin Hospitality Spin-Off

Rhea-AI Summary

FAT Brands has announced important updates regarding its previously disclosed partial spin-off of Twin Hospitality Group. The company will distribute a special stock dividend of 0.1520207 shares of Twin Hospitality Class A Common Stock for each share of FAT Brands Class A and B Common Stock held as of January 27, 2025.

Holders of FAT Brands' Warrants (FATBW) must exercise their warrants before the record date to receive the Twin Common Stock distribution. The current warrant exercise price of $2.2142 will be adjusted downward post-record date based on Twin Common Stock's fair market value. Based on an external valuation setting Twin Common Stock at $20.00 per share, the warrant exercise price is expected to be adjusted to zero following the record date.

Positive

• Warrant holders have opportunity to receive Twin Hospitality shares through exercise
• Expected warrant exercise price reduction to zero increases warrant value

Negative

• Dilution of existing shareholders through warrant exercises
• Complex corporate restructuring may create uncertainty

Insights

Financial Analyst

This corporate action represents a pivotal moment for FAT Brands warrant holders, presenting a complex decision point with significant financial implications. The mechanics of this transaction deserve careful analysis:

The distribution ratio of 0.1520207 Twin Hospitality shares per FAT Brands share, combined with Twin's $20.00 per share valuation, effectively creates a distribution value of approximately $3.04 per FAT Brands share. This value exceeds the current warrant exercise price of $2.2142, leading to an anticipated reduction of the warrant exercise price to zero.

This creates two distinct scenarios for warrant holders:

• Exercise warrants before the record date: Receive both FAT Brands shares and the corresponding Twin Hospitality shares in the spin-off
• Hold warrants through the record date: Benefit from a reduced (likely zero) exercise price, but miss the Twin Hospitality distribution

The zero exercise price scenario post-record date essentially transforms the warrants into a free option to acquire FAT Brands shares, significantly enhancing their value proposition. However, this must be weighed against the immediate value of the Twin Hospitality shares that would be received through pre-record date exercise.

From a strategic perspective, this spin-off appears designed to unlock value by separating distinct business units, potentially creating more focused, efficient operations. The structure of the transaction, including the warrant adjustments, suggests careful consideration of all security holders while maintaining alignment with corporate objectives.

LOS ANGELES, Jan. 23, 2025 (GLOBE NEWSWIRE) -- FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT), a leading global franchising company, previously announced a partial spin-off of its subsidiary, Twin Hospitality Group Inc. (“Twin Hospitality”), in the form of a special stock dividend to FAT Brands’ common stockholders. As announced, the dividend will consist of 0.1520207 shares of Class A Common Stock of Twin Hospitality (“Twin Common Stock”) for each one share of FAT Brands Class A Common Stock and Class B Common Stock outstanding as of the close of trading on January 27, 2025 (the “record date”).

Holders of FAT Brands’ outstanding Warrants (NASDAQ: FATBW) who wish to receive the distribution of Twin Common Stock must exercise their Warrants for FAT Brands Class A Common Stock in advance of the record date. Warrants that are not exercised prior to the record date will not receive the distribution of Twin Common Stock, but instead will have their exercise price adjusted downward. The current exercise price of the Warrants is $2.2142, which will be adjusted downward immediately following the record date by an amount equal to the fair market value of the Twin Common Stock distributed to holders of FAT Brands Class A Common Stock, divided by the sum of all shares of FAT Brands Class A Common Stock outstanding on the record date plus the number of unexercised Warrants on the record date, but not below zero.

Based on an external valuation of Twin Hospitality received by FAT Brands, we expect that the fair market value of Twin Common Stock will be set at $20.00 per share for purposes of the Warrant adjustment, resulting in a downward adjustment of the Warrant exercise price in excess of $2.2142. As a result, we expect that the Warrant exercise price will be adjusted to zero immediately following the record date.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to significant business, economic and competitive risks, uncertainties and contingencies, many of which are difficult to predict and beyond our control, which could cause our actual results, including the anticipated value of the spin-off shares discussed in this press release, to differ materially from the results expressed or implied in such forward-looking statements. We refer you to the Information Statement furnished in a Form 8-K by Twin Hospitality Group Inc. and the documents filed by FAT Brands Inc. from time to time with the Securities and Exchange Commission for a discussion of these risks, uncertainties and contingencies. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this press release.

Investor Relations:
ICR
Michelle Michalski
IR-FATBrands@icrinc.com
646-277-1224

Media Relations:
FAT Brands Inc.
Erin Mandzik
emandzik@fatbrands.com
860-212-6509

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FAQ

What is the distribution ratio for FAT Brands' Twin Hospitality spin-off in January 2025?

FAT Brands will distribute 0.1520207 shares of Twin Hospitality Class A Common Stock for each share of FAT Brands Class A and B Common Stock held as of January 27, 2025.

What happens to FAT Brands warrants (FATBW) after the Twin Hospitality spin-off?

Warrants not exercised before the record date will have their exercise price adjusted downward, expected to reach zero based on Twin Hospitality's $20.00 per share valuation.

What is the current exercise price of FAT Brands warrants before the Twin Hospitality spin-off?

The current exercise price of FAT Brands warrants (FATBW) is $2.2142 before the adjustment.

When is the record date for FAT Brands' Twin Hospitality stock dividend?

The record date for the Twin Hospitality stock dividend is January 27, 2025.