On November 28, Buffalo Wild Wings announced that Arby’s Restaurant Group (ARG) entered into a merger agreement to buy the casual-dining chain. However, several law offices are investigating the sale. Kahn Swick & Foti, LLC, the office of former Attorney General of Louisiana, Charles C. Foti, Jr., Esq., the Law Offices of Vincent Wong, Robbins Arroyo LLP, and several more, are reviewing whether the Buffalo Wild Wings board of directors upheld their duties to shareholders to find the best sale price.
Under the agreement, ARG and Buffalo Wild Wings decided on a sale price of $157 per share, and the deal has been valued at $2.9 billion, including the casual-dining chain’s debt. Legal teams, however, argue that the board may have failed to adequately shop the company before agreeing to the sale to Arby’s. The $157 per share is lower than the $170 per share price evaluated by Guggenheim Securities in July or the $160 evaluated by Maxim Group LLC in October.
Additionally, Buffalo Wild Wings stock traded at $205.73 in September 2015 and traded at $158.85 this past May, signaling that stocks might be worth more than investors would be offered in this deal. As a result, these legal offices are questioning whether directors maximized value for shareholders by negotiating for the best price, whether shareholders were harmed as a result of failing to show for the best deal possible, and whether Arby’s is underpaying for the shares.
The $157 price represents a 38-percent premium on the brand’s 30-day volume-weighted average stock price as of November 13, which was the last day of trading before news of the takeover was broken by the Wall Street Journal. It also marks a 65 percent increase over the brand’s 52-week low at $95 per share.
The Franchisee Association of Buffalo Wild Wings expressed support for the deal, citing the leadership change as a positive. If shareholders vote in favor of the deal, it would close in early 2018, and Paul Brown, CEO of Arby’s, would be CEO of the parent company that would manage both brands. The acquisition would also make Buffalo Wild Wings a privately held subsidiary of Arby’s Restaurant Group, rather than a publicly traded restaurant, though it will be operated as an independent brand. This could take some pressure off the brand’s performance, as it would no longer be required to report earnings to the public.
ARG is majority owned by Roark Capital Group, a private equity firm that specializes in restaurants. In 2011, the group purchased Arby’s from Wendy’s, which retained 18.5 percent ownership of Arby’s. As a result, Wendy’s would also gain a stake in Buffalo Wild Wings if the deal is approved.
After a troubled fiscal year, an acquisition could bail Buffalo Wild Wings out of financial trouble, but it remains to be seen how stockholders will vote on the sale or whether these investigations will affect the deal’s closure.