Canada's Cara Operations Ltd, owner of the Swiss Chalet casual dining chain and Harvey's burger outlets, said on Thursday it would buy St-Hubert BBQ, one of Quebec's largest casual dining chains, for C$537 million ($415 million).
Shares of Cara, which went public a year ago, jumped 16 percent to a record intraday percentage gain.
Toronto-based Cara, Canada's largest operator of full-service restaurants, had indicated it was looking to expand through acquisitions.
Analysts had flagged privately held St-Hubert as one of the most likely targets for Cara, which is controlled by dealmaker Prem Watsa's Fairfax Financial Holdings Ltd.
St-Hubert will focus on building Cara's brands in Quebec, rather than growing its own brands outside the province, Cara CEO Bill Gregson said on a conference call with analysts.
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Cara operates a number of Swiss Chalet and Harvey's combo stores outside Quebec, and St-Hubert's team will explore what works in the province, Gregson said.
Both Swiss Chalet and St-Hubert are known for their rotisserie chicken meals, but the two chains share little geographic overlap. More than 90 percent of St-Hubert's 117 restaurants are in Quebec, where Swiss Chalet does not have a presence.
St-Hubert also operates food manufacturing plants and distribution centers in Quebec.
Cara has said it wants to boost revenue to $2.5 billion-$C3 billion in five to seven years, up from C$1.7 billion in 2014.
The acquisition of St-Hubert, which had system sales of C$620 million in 2015, will move Cara much closer to that target.
The deal also gives Cara an opportunity to expand its offerings through grocery chains including Loblaw Cos Ltd , Costco Wholesale Corp and Metro Inc, where St-Hubert sells products such as marinades, pot pies, seasonings and desserts.
Cara said it planned to fund the deal through a credit facility, raised to C$700 million from C$150 million.
The company also said it will consider offering shares to eliminate or reduce the need for a two-year term loan, which is part of the credit facility.
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Cara's shares were up 14 percent at C$30.40 in morning trade, while Fairfax was down marginally at C$716.
