Private-equity firm Roark Capital Group has made a takeover bid valued at more than $2.3 billion for Buffalo Wild Wings, The Wall Street Journal is reporting.
People familiar with the matter told The WSJ that Roark offered more than $150 a share in recent weeks. That’s above the chain’s market value of $117.30 per share or $1.84 billion.
The deal is already in the works, the source said. Investment bankers at Barclays PLC are working with Roark, while Goldman Sachs Group Inc. is advising Buffalo Wild Wings.
Roark Capital Group is no stranger to the restaurant industry. In July, the firm announced it was acquiring Alabama-based Jim ‘N Nick’s Bar-B-Q for an undisclosed amount.
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Roark’s portfolio includes Arby’s, CKE Restaurants (parent company of Carl’s Jr. and Hardee’s), Corner Bakery, FOCUS Brands (Auntie Anne’s Pretzels, Carvel Ice Cream, Cinnabon, McAlister’s Deli, Moe’s Southwest Grill, and Schlotzsky’s), Il Fornaio, Jimmy John’s, Miller’s Ale House, and Naf Naf Grille. Massage Envy and Pet Retail Brands (owner of Pet Supermarket and Pet Valu) are among Roark’s other brands.
Overall, Roark has invested in 60 multi-unit companies and 20 restaurant brands. Before Jim ‘N Nick’s Bar-B-Q, Roark’s most recent acquisition took place in September when it purchased a majority stake in sandwich chain Jimmy John’s.
Monday’s news sent Buffalo Wild Wings’ shares soaring more than 26 percent in late trading. The stock closed at $117.25 before jumping to $150 in after-hours action.
Buffalo Wild Wings, founded in 1982 and public since 2003, has more than 1,200 locations around the globe. In the third quarter, the company reported a net earnings decrease of nearly 20 percent as its cost of sales rose to 30.8 percent of restaurant sales from 28.9 percent during the same quarter last year. Buffalo Wild Wings posted adjusted earnings per share of $1.36. Same-store sales decreased 2.3 percent at company-owned restaurants and fell by 3.2 percent at franchise locations. Overall sales rose by 0.5 percent to $473 million while revenue also increased 0.5 percent to $496.7 million.
Chicken wing prices have clipped the brand in recent quarters. Buffalo Wild Wings said traditional wings prices rose by 25.6 percent since last year, and cost the brand $2.16 per pound during the third quarter. Restaurant level profit fell from 17.6 percent of restaurant sales during Q3 2016 to 16.6 percent of restaurant sales this year.
At the same time, Buffalo Wild Wings has dealt with a board battle throughout the year. CEO Sally Smith is set to retire after 21 years by the end of 2017. Meanwhile, Mercato Capital Management LP nominees Scott Bergren, the CEO of Pizza Hut, CIT Foods CEO Sam Rovit, and Mick McGuire were added to the board. McGuire, Marcato’s founder and managing partner, has long called for a plan for more than 500 company-owned units to be sold by 2020.
The brand had 611 franchised locations as of June 25, and 626 company-owned stores.