Prime Restaurants (TSE:EAT) said Monday it received a superior acquisition offer from Fairfax Financial Holdings, trumping the previous takeover bid from Cara Operations.
The news sent Prime shares up 10.25 percent in Toronto, to $7.64 as of 2:37 pm EDT.
The new deal, which Prime received during its permitted 'go-shop' period under the Cara agreement, will see Fairfax pay Prime stockholders $7.50 in cash per share.
Fairfax will also pay about $2.2 million to Prime to cover certain expenses, with the remaining amount distributed as a special dividend that will not exceed $0.25 per share.
In mid-October, Cara had offered $6.75 in cash per Prime share, plus a $0.25 per share special dividend.
Prime said its board of directors has unanimously agreed that this offer represents a superior proposal.
"After carefully weighing the alternatives, in consultation with our legal and financial advisors, the board of directors has concluded that the Fairfax Offer provides greater shareholder value than Cara's existing offer," said Prime chairman, Steven Shape.
As a result, Prime has notified Cara, indicating its intention to accept the Fairfax deal.
Cara now has five business days to either make a better offer, or decide to terminate the agreement. Should Cara end the deal, Prime will pay Cara an undisclosed break fee.
Prime said the Fairfax proposal entitles it to consider and accept a superior offer, subject to Fairfax's right to match that offer, or the payment of a $3.5 million break fee to Fairfax.
If accepted, the Fairfax offer remains subject to customary regulatory approvals.
Prime franchises, owns, and operates several casual dining restaurants and pubs, including East Side Mario's, Casey's, Fionn MacCool's, D'Arcy McGee's, Paddy Flaherty's, Tir nan Og, and Bier Markt.