Crumbs Goes Public Through Reverse Merger

Gourmet cupcake retailer goes public with help from the SPAC 57th Street General Acquisition.

By TAMIKA CODY

January 10, 2011

The New York City-based cupcake chain, Crumbs Bake Shop, is set to be acquired by the special purpose acquisition company, 57th Street General Acquisition Corp. The merger is valued at $66 million.

The blank check company was created in October 2009 and by May 2010 it brought in roughly $54 million in proceeds when it listed on the OTC. 57th Street was not the only SPAC that made moves in 2010. Last month RLJ Companies organized a $125 million SPAC and Hicks Acquisition Co. II raised $150 million in proceeds when it priced at $10 per share back in October.

57th Street will change its name to Crumbs Bake Shop once the deal is complete, which should occur by March 2011. The company will then take steps to move up from the OTC to the NASDAQ.  

Crumbs was founded in 2003 by Mia Bauer, the chief creative officer, and Jason Bauer, who is the CEO. The company has grown into a 34 unit chain and also sells its cupcakes through its e-commerce segment nationwide.

Proceeds from the IPO will be used to expand its presence within the top 15 markets. It plans to increase the number of its stores to 200 by the end of 2014. The cupcake chain currently has stores located within six states as well as Washington, DC.

The company expects 2010 sales to top more than $30 million with an adjusted EBITDA ranging between $2.4 million and $2.6 million. It anticipates its sweet treats will generate close to $50 million in sales for 2011 and $90 million by the following year.

The Bauer’s and CFO, John Ireland, will continue to lead the company once the merger is complete. Former retail apparel executive, Edwin Lewis, is expected to sit on the Crumbs’ board. Lewis, who is one of the company’s early investors, held the role of CEO for Tommy Hilfiger, Mossimo and was a senior executive for Polo Ralph Lauren.

Morgan Joseph acted as financial advisors to 57th Street on the deal. Its legal advisor was Ellenoff Grossman & Schole. Akin Gump Strauss Hauer & Feld provided legal counsel to Crumbs.


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