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Subway, the restaurant chain recognized for promoting foot-long sandwiches, has agreed to promote itself to US non-public fairness group Roark Capital for greater than $9bn in one of many yr’s largest non-public fairness buyouts.


Roark Capital can pay $9bn up entrance, in keeping with two individuals with information of the phrases. It has additionally agreed to make as much as $600mn in additional potential funds over three years for the family-owned restaurant group.

The Atlanta-based non-public fairness group would finance its takeover with about $4bn in fairness and $5bn in debt, the individuals stated. The financing was led by Barclays, Morgan Stanley, JPMorgan and 4 different banks. Roark will contemplate choices resembling securitising a few of Subway’s shops after the takeover closes.

Subway declined to touch upon the phrases of the deal, which weren’t disclosed in an announcement confirming the sale. Representatives for Roark didn’t reply to emails searching for remark. The lenders both declined to remark or didn’t instantly reply to requests searching for remark.

The takeover underlines the rising urge for food amongst massive banks to finance takeovers after 18 months once they largely prevented new lending commitments. Establishments have been deterred after dealing with billions of {dollars} in losses on unsold debt commitments made earlier than a pointy rise in rates of interest final yr.

Non-public fairness agency GTCR’s carve-out of funds enterprise Worldpay from monetary expertise group FIS final month was considered signalling a reopening of lending markets. A consortium of banks led an $8.4bn financing bundle for the transaction.

The sale will mark the top of greater than half a century of household possession for Connecticut-based Subway. The corporate was a pioneer of the usage of franchised shops to develop shortly with minimal capital prices.

As way back as 1974, Subway started promoting rights to make use of its model and advertising efforts to unbiased entrepreneurs who would personal and function shops in trade for paying a royalty. The mannequin helped Subway to develop from about 16 sandwich outlets to greater than 37,000 shops globally.

Different bigger restaurant teams resembling McDonald’s have more and more shifted their operations in direction of the identical mannequin.

Over the previous decade, Roark has spent greater than $10bn to purchase restaurant chains together with Arby’s, Buffalo Wild Wings and the mum or dad firm of Dunkin’ Donuts, amongst others. The privately held funding group, which is managed by Neal Aronson, has $37bn in belongings underneath administration. It’s named after Howard Roark, the protagonist of Ayn Rand’s libertarian novel The Fountainhead, and is thought for turnaround efforts that target the usage of franchises for enlargement.

The non-public fairness group additionally owns Pushed Manufacturers, a conglomeration of recognisable auto service manufacturers resembling Maaco, Meineke and 1-800 Radiator. As well as, it has invested in gyms, health centres and petcare clinics that depend on franchises.

Roark emerged the winner from a course of that included a number of different non-public fairness bids after Subway employed JPMorgan earlier this yr to handle a sale course of.

The non-public fairness group will probably be tasked with reviving a model that many consultants say has overexpanded within the US and is being hit by altering shopper habits.

Subway in recent times has closed 1000’s of shops to handle decrease demand stemming from low-carbohydrate diets and the gradual post-coronavirus pandemic return of staff to the central enterprise districts the place a lot of its eating places are positioned. It has just lately earmarked non-US markets as the bottom of its enlargement plans and seen a stabilisation in gross sales development.

“The transaction is a significant milestone in Subway’s multiyear transformation journey, combining Subway’s world presence and model power with Roark’s deep experience in restaurant and franchise enterprise fashions,” Subway stated in a press launch.

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