NEW YORK — 57th Street General Acquisition Corp. has entered an agreement to acquire Crumbs Holdings L.L.C., owner of one of the largest cupcake chains in the United States. The proposed transaction is valued at approximately $66 million and would include $27 million in cash and $39 million in 57th Street common stock. Crumbs owners also would have the potential to receive an additional $44 million in stock depending on the company’s future stock performance and earnings. The transaction is expected to be completed in March 2011.
Mia and Jason Bauer co-founded Crumbs in 2003 in New York City. The company operates 34 company-owned stores in six states and the District of Columbia featuring Crumbs Signature-size cupcakes. The company offers more than 75 cupcake varieties baked fresh daily, as well as more than 150 different sweet goods, including cakes, pies, cookies, Danishes, scones, croissants, brownies and muffins.

The company also has an e-commerce division at that ships cupcakes nationwide.

Once the transaction is finalized, Mr. Bauer and Ms. Bauer will continue in their roles as chief executive officer and chief creative officer, respectively. John Ireland will remain as chief financial officer. Meanwhile, Edwin Lewis, former c.e.o. of both Tommy Hilfiger, Inc. and Mossimo, Inc., and a former senior executive at Polo Ralph Lauren Corp., is expected to join the board of directors at Crumbs. Mr. Lewis was an early investor in Crumbs.

“Mia and I never could have envisioned how far Crumbs would come when we started eight years ago,” Mr. Bauer said. “This transaction is a statement for us about how many lives Crumbs has touched and eight years of really hard work and the dedication of our amazing employees. We are very excited about Crumbs’ future and look forward to becoming a public company upon the closing of our transaction with 57th Street.

“The additional equity capital that may be available should enable us to execute our development strategy more quickly and help us reach our initial expansion to a planned 200 locations in the top 15 markets by year-end 2014.”

Mark Klein, chairman, c.e.o. and president of 57th Street, called the cupcake category “a unique subsection of the burgeoning fast-casual segment of the restaurant industry,” adding that Crumbs has emerged as the cupcake leader with “significant long-term potential.”

“Crumbs benefits from a founder-driven culture and an experienced management team that has proven successful in expanding from a single Manhattan bake shop to 34 locations across the country,” Mr. Klein said. “After reviewing a significant number of potential opportunities, we determined that given its significant potential for growth and further development of its brand, Crumbs presented the most attractive and compelling private company and was best aligned with our goal of maximizing value for our shareholders.”

During 2010, Crumbs said it generated net income of $1.7 million to $1.9 million on sales of $31.1 million, while EBITDA was between $2.4 million and $2.6 million. For 2011, Crumbs expects income of between $3.1 million and $3.9 million and sales of $45 million to $50 million, and by 2012, income is expected to reach $8 million to $9 million on sales of $85 million to $90 million.

The company opened seven new stores during 2010 and plans to open another 15 to 21 stores in 2011, with the majority of new locations to open in the second half of 2011. By 2014, the company plans to have 200 locations in operation.

57th Street was formed in October 2009 for the purpose of acquiring an operating business or assets, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, exchangeable share transaction or other similar business transaction.