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Arby’s Acquisition of Buffalo Wild Wings


 

On Tuesday, Arby’s Restaurant Group announced a deal to buy Buffalo Wild Wings (Bdubs) for more than $2.4 billion in cash. Arby’s was founded in 1964, and is the second-largest sandwich restaurant brand in the world.

The deal has Arby’s paying $157 each for the 15.51 million shares; a 7 percent premium over its Monday closing price of $146.40. Arby’s will also assume the debt of Buffalo Wild Wings. Both companies’ board of directors have approved the buyout, but Buffalo Wild Wings shareholders will need to approve the deal before it is finalized.

Arby’s, which is controlled by the private equity firm the Roark Capital Group, has said they intend to take Buffalo Wild Wings private whilst continuing to operate it as an independent brand. Roark will run the chain as an independent subsidiary of Arby’s Restaurants Inc.

Roark is providing Arby’s with $783 million and Arby’s is borrowing $2.2 billion to pay for the deal.

“Buffalo Wild Wings is one of the most distinctive and successful entertainment and casual dining restaurant companies in America. We are excited to welcome a brand with such a rich heritage, led by an exceptionally talented team. We look forward to leveraging the combined strengths of both organizations into a truly differentiated and transformative multi-brand restaurant company,” Arby’s CEO Paul Brown said in a statement.

The “wings, sports, and beer” company has reported a decrease in sales as casual restaurants have continued to lose customers to cheaper and faster chains. In Bdubs most recent quarter the company reported a 2.3 percent drop in sales. Currently Buffalo Wild Wings has more than 1250 locations in 10 countries. In comparison, Arby’s has around 3300 in 7 countries.

Buffalo Wild Wings, which had been one of the fastest growing restaurant chains in the United States from 2003 to 2014, recently “lost their value proposition to families with kids,” NPD Group restaurant industry analyst Bonnie Riggs told USA today.

While Bdubs overall sales have been declining for some years, activist investor Mick McGuire has been blamed for their recent troubles. Less than six months after McGuire won strategic control of Buffalo Wild Wings, by touting a plan to at least double its value in the next four years, the company’s stock plunged. Before McGuire was able to obtain control, he had largely criticized the company’s established strategy; pushing for major changes and eventually playing a part in the restaurants longtime CEO Sally Smith to announce her retirement.

Both companies have said they expect the merger to become final in early 2018. Shares of Buffalo Wild Wings Inc. rose 6.3% to $155.60 on Tuesday after the announcement of the deal, and now sits at $155.73.

If another buyer emerges, Buffalo Wild Wings would have to pay Arby’s $74 million to terminate the deal. Should Arby’s fails to conclude the deal, it would have to pay Buffalo Wild Wings $134 million

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