Dive Brief:

• Panera Brands, which owns Panera Bread, Caribou Coffee and Einstein Bros. Bagels, delivered a written notice of termination of its initial agreement with USHG Acquisition Corp. on Friday since a merger with Danny Meyer’s special purpose acquisition corporation had not been completed on or prior to June 30, 2022, according to an SEC filing.
• Both companies have collaborated since the announcement of the transaction last year, but have agreed not to extend the agreement due to “unfavorable capital market conditions, including the deterioration of the market for initial public offerings over the past several months,” Panera said in a press release.
• At least five restaurant chains went public last year, and a number of others, including Panera, filed initial paperwork or were rumored to go public. But inflationary conditions, which have included rising food and gas prices, have eroded profitability across the industry.

Dive Insight:

While Panera said it will continue to prepare and evaluate a public listing if market conditions improve, talk of a recession could slow down that process. 

“It is unlikely that an initial public offering for Panera will happen in the near-term,” Danny Meyer, chairman of HUGS and founder of Union Square Hospitality Group, said in a press release. “We are disappointed that market timing was not on our side, especially as we have such tremendous admiration and respect for Panera, its entire management team and their partners at JAB." 

Panera has been adapting to meet changing consumer needs within the last year. It opened its first double drive-thru restaurant in November. In February, it added a dine-in mobile order option to its app so dine-in customers wouldn’t have to wait in line to place their orders. Panera also began testing a Miso Robotics coffee monitoring system in April, and in June opened its first digital-only restaurant in Chicago.

Despite these innovations, economic conditions have made IPO launches difficult. Following a record year for initial public offerings in 2021, IPOs fell 46% worldwide during the first half of 2022.

Meyer originally planned to invest directly in Panera Brands and become a lead independent director of that company’s board following the IPO. Meyer said HUGS will look for a new partner. The company has until March 1, 2023 to find a company for an initial business combination before the SPAC expires, according to an SEC filing. It could receive an extension if it gets shareholder approval. 

“We are open to exploring a variety of creative structures that maximize long-term value for all stakeholders,” Adam Sokoloff, CEO of HUGS, said in a statement.