01 December 2017

Arby's Restaurant Group to acquire Buffalo Wild Wings

Arby’s Restaurant has signed a definitive agreement to purchase Buffalo Wild Wings for about USD 2,900 million, including the assumption of debt. The bid of USD 157 per share represents a 32.1 per cent premium over the target’s close of USD 118.85 on 10th November 2017, the last trading day prior to the deal being announced.

Marcato Capital Management, which owns 6.4 per cent of Buffalo Wild Wings, has agreed to vote in favour of the deal. Completion is expected to occur in the first quarter of 2018, subject to customary closing conditions and regulatory approvals.

Arby’s is largely controlled by an affiliate of private equity investor Roark Capital, which has obtained debt financing to fund part of the acquisition. The Atlanta-based restaurant chain is primarily known for its meat sandwiches and its menu also includes salads, sides, beverages and desserts.

Established in 1982, Buffalo Wild Wings is a restaurant chain which serves fast food items such as New York-style chicken wings, sandwiches, burgers, wraps and corn dogs. As of 24th September 2017, the target operated 638 company-owned and 633 franchised restaurants in the US and Canada under the brands of Buffalo Wild Wings, 8 R Tao and 2 PizzaRev.

The Minnesota-headquartered firm posted revenue of USD 1,531 million in the nine months ended 24th September 2017, up 2.6 per cent on the USD 1,493 million recorded during the same timeframe in the previous year. Net profit for the period totalled USD 49 million, compared to the USD 79 million recorded in the same interval of 2016.

The deal comes as Marcato Capital has won a proxy fight to revamp the board of Buffalo Wild Wings, which has been plagued by declining same store sales. As a result, the activist hedge fund won three board seats and the target’s chief executive Sally Smith, who led the firm for over 20 years, subsequently agreed to step down by the end of this year.

This is far from the first Roark Capital-led investment in the US food and beverages industry this year. Just over a month ago, the private equity group acquired Wisconsin-based restaurant operator Culver Franchising System for an undisclosed amount. It also successfully snapped up Alabama-based barbeque eatery Jim N Nicks Bar-B-Q in July.

Apart from its investments, Roark Capital is making an exit from NCP-ATK Holdings, a New York-headquartered food supplement maker, in collaboration with other sellers via a USD 730 million deal.

In all, there have been 238 deals targeting operators of restaurant and eating places announced in the US since the beginning of this year, according to Zephyr, the M&A database published by Bureau van Dijk. The takeover of Buffalo Wild Wings is the second-largest among these transactions, after the USD 7,500 million takeover of Panera Bread by BDT Capital Partners and JAB Holdings.

© Zephyr