A few weeks ago, Buffalo Wild Wings’ stocks saw a huge surge as news broke that Roark Capital, the owner of Arby’s Restaurant Group, had made an offer to buy out the beer and chicken wings chain of restaurants. The offer was made for $2.3 billion at $150 per share.
Well, the deal is final and the sale has now been made. On Tuesday, Arby’s announced that it had closed the deal to buy out Buffalo Wild Wings for $2.4 billion in cash at about $157 per share. Arby’s will also take over all of Buffalo Wild Wings’ debts.
According to Arby’s CEO, Paul Brown, Buffalo Wild Wings has a strong brand name in casual dining and that they are looking forward to combining the two teams to create a multi-brand restaurant.
Marcato Capital Management, Buffalo Wild Wings’ activist investor had been putting a lot of pressure on the restaurant chain to change its strategy from wholly owning all its restaurants to a franchise. This pressure also led to the long-time CEO of Buffalo Wild Wings to announce her early retirement. However, now, Marcato is willing to support the buy-out.
Buffalo Wild Wings will become a part of Roark’s Arby’s unit but will operate as an independent brand.
While the chicken wings restaurant chain is being acquired by Roark Capital Group (Arby’s private equity owner), analysts say that Wendy’s is also going to benefit from this deal. Wendy’s currently owns about 18.5% of Arby’s. This stake has a current value of about $325.9 million. However, how much that stake changes will be dependent on how much equity is given out for the Buffalo Wild Wings deal and also whether Wendy’s participates in the deal.
According to Chris O’Cull from Stifel, Wendy’s hasn’t yet given a decision on whether it will participate in this deal or not. The burger chain issued a statement with regard to the Arby’s-Buffalo Wild Wings deal that they supported the deal and that updates on the value of their stake would be provided via regular financial reports.
Overall, financial analysts say that Wendy’s stands to benefit from this deal. This deal will probably increase the value of the burger chain’s stake in Arby’s. However, how they plan to deal with the extra value is up to Wendy’s to decide.
According to O’Cull, Wendy’s has currently got three options with regard to this deal. It can opt to not contribute to the deal, which would mean that its stake in Arby’s shrinks. It can completely opt out of the deal; this would have tax implications for Wendy’s though. Or it can actively participate in the deal and increase its stake and its value in Arby’s.
Wendy’s has been struggling this year with very ordinary year-to-date gains. Wendy’s has also been hit by the changing market, with lower sales due to more competition, lower prices at grocery stores and the impact of hurricanes Harvey and Irma.
The company had to cut its full-year profit forecast from $0.45 – $0.47 per share to $0.43 – $0.45 per share. Wendy’s also dropped its forecast for same-store sales for the year from 2% – 3% to 2% to 2.5%.
The news of the deal between Arby’s and Buffalo Wild Wings gave Wendy’s stocks a 2.5% boost on Tuesday. This takes the burger chain’s total gains for the year so far to 3.7%.