Diversified Royalty Increases Acquisition Facility, Acquires Cheba Hut Trademarks, Boosts Dividends

Deal News | Jun 17, 2025 | Globenewswire

Diversified Royalty Increases Acquisition Facility, Acquires Cheba Hut Trademarks, Boosts Dividends

Diversified Royalty Corp. (DIV) has announced the acquisition of the trademarks and other intellectual property of Cheba Hut Franchising, Inc., a U.S.-based fast casual toasted sub sandwich chain, for USD 36 million. This acquisition adds a ninth royalty stream to DIV's portfolio, signifying a strategic entry into their second U.S.-based royalty. The transaction was financed through a mixture of DIV's cash, amended acquisition facility, a new senior credit facility, and an additional credit term facility. In connection with this, DIV has also announced a 10% increase in its dividend on common shares. The acquisition is expected to enhance DIV's tax pools by approximately CAD 51 million, allowing for reduced cash taxes in the future. Cheba Hut operates with a successful franchising model, boasting 77 locations across the U.S. and forecasting sales growth in the coming years. The announcement reaffirms DIV’s objective to acquire predictable and expanding royalty streams, while bolstering its presence in the U.S. franchisor market.

Sectors

  • Royalty and Licensing
  • Franchising
  • Casual Dining

Geography

  • United States – This is where Cheba Hut is based and operates 77 locations, making it central to the acquisition by Diversified Royalty Corp.
  • Canada – Home to Diversified Royalty Corp., which is a Canadian company listed on the Toronto Stock Exchange.

Industry

  • Royalty and Licensing – Involves acquiring and managing royalties from franchises and intellectual properties, as evidenced by DIV acquiring Cheba Hut's trademarks.
  • Franchising – Cheba Hut operates as a franchise business, with DIV acquiring its trademark rights to gain royalty income from the franchise operations.
  • Casual Dining – Cheba Hut is a fast casual restaurant chain, a significant part of the casual dining industry.

Financials

  • 36,000,000 USD – Purchase price for Cheba Hut's worldwide trademarks and intellectual property rights.
  • 4,000,000 USD – Initial annual royalty revenue from Cheba Hut.
  • 51,000,000 CAD – Projected increase in DIV's tax pools due to the acquisition.

Participants

NameRoleTypeDescription
Diversified Royalty Corp.Acquiring CompanyCompanyA Canadian corporation engaged in acquiring royalties from multi-location businesses.
Cheba Hut Franchising, Inc.Target CompanyCompanyA U.S.-based fast casual restaurant franchise known for toasted sub sandwiches.
Cheeb Royalties Limited PartnershipSubsidiaryCompanyA wholly-owned subsidiary of Diversified Royalty Corp., used for the acquisition of Cheba Hut's trademarks.