in search of Value

CIC Advantage Holdings LLC, an affiliate of Dallas-based CIC Partners, has acquired a 5.6% stake in Jamba, Inc. (JMBA) according to a recent 13D filing. CIC Advantage paid an average price of $0.86 per share for its 3,077,900 shares.

This is CIC Advantage’s second investment to date. The first was a $12 million growth capital investment in Red Mango, Inc., a 30-unit frozen yogurt chain (see press release).

CIC Advantage is run by John Antioco, former Chairman and CEO of Blockbuster, Inc. and an Operating Partner at CIC Partners. His prior restaurant experience includes Taco Bell and Main Street Restaurant Group (the largest TGI Friday’s franchisee and a former CIC portfolio company).

The other directors of CIC Advantage include Michael Rawlings, former President of Pizza Hut; Fouad Bashour, a former associate at The Boston Consulting Group; Chuck Rawley, former Chief Development Officer of Yum! Brands and former President and COO of KFC; and Roger Enrico, former Chairman and CEO of PepsiCo.

The 13D filing states as the Purpose of the Transaction:

The Reporting Persons purchased the shares of the Common Shares based on the Reporting Persons’ belief that the Common Shares at current market prices are undervalued and represent an attractive investment opportunity. Depending upon overall market and general economic conditions, other investment opportunities available to the Reporting Persons, the market prices of the Common Shares and/or other equity, debt or other securities, notes or instruments of the Issuer (collectively, the “Securities”), the business affairs and financial condition of the Issuer and other factors deemed relevant to the Reporting Persons, the Reporting Persons may endeavor to increase or decrease their position in the Issuer through, among other things, the purchase or sale of Securities in the open market or in private transactions, including the purchase of Securities through a tender offer or otherwise, on such terms and at such times as the Reporting Persons may deem advisable.

This appears to be a toehold purchase, made in anticipation of a proposal to invest in or acquire the company. According to the CIC Partners website, CIC Partners and John Antioco, through CIC Advantage, “seek to provide equity to companies and management teams in support of unit growth, acquisitions, recapitalizations, and turnarounds of multi-unit retail and restaurant concepts and are open to both majority and minority investments.”

CIC Advantage could find JMBA attractive as a stand-alone company, but another potential strategy would be for CIC to recapitalize JMBA through an equity infusion, or acquire it outright, and use the company as a platform to roll up other healthy lifestyle concepts such as Red Mango.

Whether their strategy involves other brands or is focused on JMBA alone, CIC Advantage seems like a terrific partner for JMBA. I hope that this investment leads to a larger transaction. In the meantime, I maintain my $1.30 per share price target, as noted in my December 18th article, “Jamba Juice Should Bear Fruit by Mid-2009.”

(Disclosure: The author is long JMBA)