Crumbs: Cupcake Bakery to Go Public in Merger

New York / NY. (ch) Crumbs Holdings LLC, creator of gourmet cupcakes and largest US-based retailer of cupcakes, which operates under the name Crumbs Bake Shop, and 57th Street General Acquisition Corporation, a special purpose acquisition company, announced that they have entered into an agreement through which 57th Street will acquire Crumbs. The proposed transaction is expected to be completed in March 2011. Following the closing of the transaction, 57th Street intends to change its name to Crumbs Bake Shop and list on the Nasdaq Stock Market as soon as reasonably practicable.

The Crumbs management team, led by Jason Bauer, co-Founder and Chief Executive Officer; Mia Bauer, co-Founder and Chief Creative Officer; and John Ireland, Chief Financial Officer; will continue to lead the Crumbs following the consummation of the business transaction with 57th Street. Edwin Lewis, former Chief Executive Officer of both Tommy Hilfiger Inc. and Mossimo Inc. and a former senior executive at Polo Ralph Lauren Corporation, is expected to serve on the Crumbs Board of Directors. Lewis, an early investor in Crumbs, played a crucial role in the growth and success of both the Polo Ralph Lauren and Tommy Hilfiger brands and is credited with the turnaround of Mossimo along with its subsequent sale to Iconix Brands.

Crumbs Bake Shop Highlights
	Creator of gourmet cupcakes and the largest US-based retailer of cupcakes.
	Demonstrated track record of profitable growth with a three-year revenue CAGR of 81,8 percent.
	Attractive unit economics with an average transaction of 18,00 to 20,00 USD and average sales per square foot in excess of 1’000 USD.
	Transaction allows for an initial expansion to a planned 200 locations in the top 15 markets by year-end 2014.
	Business combination valued at approximately 82,1 million USD on a fully diluted basis, implying a multiple of 16,4 times projected 2011 Adjusted Ebitda and 6,7 times projected 2012 Adjusted Ebitda

Crumbs CEO Jason Bauer: «Mia and I never could have envisioned how far Crumbs would come when we started eight years ago. This transaction is a statement for us about how many lives Crumbs has touched and eight years of really hard work and the dedication of our amazing employees. We are very excited about Crumbs´ future and look forward to becoming a public company upon the closing of our transaction with 57th Street. The additional equity capital that may be available should enable us to execute our development strategy more quickly and help us reach our initial expansion to a planned 200 locations in the top 15 markets by year-end 2014».

Edwin Lewis: «My initial investment in Crumbs was predicated on my high personal regard for Jason and Mia, the performance of their initial stores, and the significant potential for the brand. To that point, with their creation of the gourmet cupcake and the subsequent experience they provide, they have defined a new, high-end fast-casual category. Although the concept´s broad day-part acceptance, wide demographic appeal, and numerous growth statistics back up that positioning, what I´m most impressed by is the power of the brand which exhibits fierce customer loyalty in all its markets. Ultimately, it is this relationship with consumers that will serve as the foundation for unit expansion, the development of additional baked goods, and the growth of the Crumbs´ emerging beverage platform. I look forward to working with management and I am excited to see the company so well positioned to create value for shareholders as they execute their plan».

Mark Klein, Chairman, CEO and President of 57th Street: «We are very pleased to be partnering with Crumbs on this transaction. The cupcake category is a unique subsection of the burgeoning fast-casual segment of the restaurant industry, and Crumbs has emerged as the cupcake leader with significant long-term potential. Crumbs benefits from a founder-driven culture and an experienced management team that has proven successful in expanding from a single Manhattan bake shop to 34 locations across the country. After reviewing a significant number of potential opportunities, we determined that given its significant potential for growth and further development of its brand, Crumbs presented the most attractive and compelling private company and was best aligned with our goal of maximizing value for our shareholders».

Crumbs Bake Shop, creator of «the original gourmet cupcake», was co-founded in 2003 in New York City by Mia and Jason Bauer. Crumbs is now the industry standard for cupcakes and the largest US-based retailer of cupcakes. As of January 10, 2011 Crumbs operated 34 company stores in six states and Washington DC, including 14 locations in New York City. The Company also has a rapidly expanding e-commerce division at crumbs.com that ships cupcakes nationwide.

Crumbs Financial Highlights and Multiyear Outlook

Based on preliminary results for the fourth quarter ended December 31, 2010, total sales for 2010 are expected to be 31,1 million USD while net income is expected to be between 1,7 and 1,9 million USD and Adjusted Ebitda is expected to be between 2,4 and 2,6 million USD. These preliminary results above are only estimates and may change. Crumbs is continuing to prepare its financial statements for its fourth quarter and fiscal year ended December 31, 2010 and has not finalized its financial results. Additionally, the financial statements for the fiscal year ended December 31, 2010 will be subject to audit and as a result are subject to adjustment and change. Crumbs opened a total of seven stores in 2010, and ended the year with 34 locations in six states and Washington DC.

Total sales for 2011 are expected to be between 45 to 50 million USD, while net income is expected to be between 3,1 and 3,9 million USD and Adjusted Ebitda is expected to be between 4,6 and 5,4 million USD. Crumbs intends to open another 15 to 21 stores in 2011 (49 to 55 by year-end), with the majority of new locations to open in the second half of 2011.

In terms of longer-term projections, total sales for 2012 are expected to be between 85 and 90 million USD, while net income is expected to be between 8,0 and 9,0 million USD and Adjusted Ebitda is expected to be between 11,8 and 12,8 million USD. Crumbs anticipates opening another 40 to 45 stores in 2012 (89 to 100 by year-end). Lastly, Crumbs plans an initial expansion to 200 locations in the top 15 markets by year-end 2014.

Info: «Crumbs Holdings LLC and 57th Street General Acquisition Corp. Announce Execution of Business Combination Agreement» – press release (PDF; 81 KB).