Comac Food Group announced yesterday (5 October) that it has entered into an agreement to sell its Grabbajabba operations to Timothy's Coffees of the World. Timothy's is a privately held company headquartered in Toronto, operating a chain of gourmet coffee establishments. The transaction is expected to close by mid-November and is subject to the satisfaction of customary conditions. Sale proceeds are approximately $1.35 million and will be reinvested by Comac primarily in its Domino's Pizza division.

Grabbajabba is a chain of 56 franchised and corporately operated gourmet coffee stores, located primarily in western Canada, with core markets including Calgary, Edmonton and Ottawa. Timothy's is a specialty coffee retailer with over 25 years of history, currently operating 100 gourmet coffee stores throughout Ontario, Quebec and New York City. Timothy's is vertically integrated, operating its own roasting facility which provides product directly to its retail outlets and for a wholesale program.

The sale of Grabbajabba is consistent with Comac's plan to maximize its return on investment. The Comac Board of Directors views the Domino's pizza business as presently offering the greatest potential for growth. Management's analysis of the current operations concludes that the realized value from the sale of Grabbajabba and any additional capital investment will yield higher returns to Comac if invested in Domino's. Domino's, a leading international brand in pizza, has a proven track record in Canada with current Canadian annual sales exceeding $100 million, representing growth of more than 39% over the last 3 years. Management has identified store growth of approximately 150 new locations in Ontario and Quebec. These markets will provide a tremendous growth opportunity for Comac.

"Selling Grabbajabba is just the first step in the repositioning of Comac. It's the beginning of the execution of a plan to take Domino's from its position of the leading national delivery chain to the number one pizza company in Canada" said Brad Holt, chairman of Comac. "Domino's corporate store growth is expected to provide a higher return on investment. Anticipated marketing and operating efficiencies will drive system-wide same store sales results for our chain. Ultimately, we expect this repositioning to yield value to Comac shareholders. I believe this will greatly enhance the long term value of Comac," concluded Holt.

The purchase of Grabbajabba is a significant step for Timothy's, as it will provide an immediate presence in western Canada and clearly solidifies its position as Canada's third largest specialty coffee retailer. Grabbajabba provides an established brand name within its markets and a concept that compliments Timothy's existing business. The combination of both businesses is expected to provide significant synergies for both concepts in many areas including marketing, purchasing, development and operations.

"Today's specialty coffee market has strong national competitors gaining market share throughout Canada through aggressive growth and marketing programs," said John Beauparlant, president of Comac. "In order to successfully compete and build brand recognition, Grabbajabba required investment of additional capital and corporate resources to grow the concept. The alternative was to enter a strategic relationship in order to provide greater operating synergies that come from a larger organization," continued Beauparlant. "We strongly believe the combination with Timothy's is a win-win situation and will provide many of these benefits to the Grabbajabba system."