BAB Holdings, Inc. (Nasdaq: BAGL) today announced that it has executed a letter of intent to merge with a leading New York based Internet Incubator. Full details of the merger and of the Internet Incubator will be forthcoming within the next two weeks.

Upon completion of the merger, BAB’s current business would be assigned to a subsidiary, which would be operated by current BAB management. The agreement anticipates the subsidiary to be spun off in the future to current BAB shareholders. The existing shareholders would continue to own the same number of shares, which would represent ten percent of the equity in the merged company. Thus, the parent company will become a pure play in the development of internet businesses. In addition, existing shareholders would continue to own 100% of the current assets.

Furthermore, in a related agreement, an affilate of the New York Internet Incubator would provide substitute long term financing for the current bank debt obligation of the Company.

“We are going to be merging with a group of talented individuals who have an excellent 7-year history of successfully incubating small, development-stage companies. This merger represents a transformation of BAB which we believe will be very beneficial to our shareholders,” stated BAB President and CEO Michael W. Evans.

“Our current shareholders will maintain their ownership interest in the existing business, both before and after the merger. Additionally, they will receive a 10% ownership interest in the Internet Incubator and internet related businesses. We believe that this is a significant enhancement to our shareholder value and, coupled with the attractive financing provided by our merger partner, greatly improves BAB’s appeal in the financial marketplace.”

The transaction is subject to completion and execution of the final merger documents and shareholder approval.

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BAB Holdings, Inc. operates, franchises, and licenses Big Apple Bagels®, My Favorite Muffin®, and Brewster’s® Coffee. It currently has units in 28 states, two Canadian provinces, Peru and Egypt and has master franchise agreements for South Korea and the United Arab Emirates. The Company owns Jacobs Bros. Bagels, a Chicago based bagel bakery chain and has licensing agreements with Host Marriott, Mrs. Fields Cookies, Beatrice Group, Inc., a division of ConAgra and Alonti Deli. The Company’s stock is traded on the Nasdaq Small-Cap market under the symbol “BAGL” and its web site can be visited at

Certain statements contained in this press release, including statements regarding the development of the company’s business, the markets for the company’s products, anticipated capital expenditures, and the effects of completed and proposed acquisitions, and other statements contained herein regarding matters that are not historical facts, are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Certain risks and uncertainties are outside the control of the company and its management, including its ability to attract new franchisees; the continued success of current franchisees; the effects of competition on franchisee and company-owned store results; consumer acceptance of the company’s products in new and existing markets; fluctuation in development and operating costs; brand awareness; availability and terms of capital; adverse publicity; acceptance of new product offerings; availability of locations and terms of sites for store development; food, labor and employee benefit costs; changes in government regulation (including increases in the minimum wage law); regional economic and weather conditions; the hiring, training, and retention of skilled corporate and restaurant management; and the integration and assimilation of acquired concepts. Some of these risks and uncertainties are wholly outside of the control of the company. Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. The company undertakes no obligation to publicly release the results of any revision to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.