Fiesta Restaurant Group Inc. — parent company of Pollo Tropical and Taco Cabana — said it will sell Taco Cabana to YTC Enterprises LLC, an affiliate of Yadav Enterprises Inc., which operates nearly 400 restaurant outlets in 18 states. The definitive stock purchase agreement with Yadav provides for the sale of all of the outstanding capital stock of Taco Cabana's parent company, Taco Cabana Inc., for $85 million.

That sale is subject to reduction for certain working capital and other closing adjustments which are estimated in the aggregate amount of approximately $7 million to $9 million, excluding Winter Storm Uri insurance proceeds to be received by Fiesta. The transaction is expected to close in the third quarter of 2021, with proceeds going to fully repay Fiesta's approximately $74.6 million of outstanding term loan borrowings under Fiesta's senior credit facility and to pay divestiture transaction fees and a loan prepayment premium totaling approximately $4.6 million.

As of June 27, 2021, the Company cash balance was $67.6 million. Subsequent to the transaction close, a portion of those funds will be used for investments to accelerate the growth of Taco Cabana's current sister brand, Pollo Tropical. The company's board will also research other strategies to increase shareholder value, including potential future stock repurchases.

"We made the strategic decision to sell the Taco Cabana business to allow our leadership team to focus completely on accelerating Pollo growth, and we are very excited about the tremendous growth opportunities we have for the Pollo Tropical business," Fiesta President and CEO Richard Stockinger said in the release. …

"We believe the Taco Cabana sale will provide great value to our shareholders, allowing us to create a more effective, efficient and focused organization, applying appropriate resources to accelerate delivery of the exciting growth potential we have in our Pollo Tropical brand. This will include our continued efforts to drive an upgraded customer experience across all service channels, continuing to invest in expanding our growing digital platform and finalizing our new unit expansion plans targeted for 2022."

For the year that ended Jan. 3, 2021, Taco Cabana generated total revenues of $239.4 million and adjusted EBITDA of $8.5 million. As of July 1, 2021, there were 142 company-owned and operated Taco Cabana restaurants in Texas and six franchised Taco Cabana restaurants in New Mexico.

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