Roark Capital Group agreed to buy restaurant chain Buffalo Wild Wings Inc. for about $2.4 billion, adding to the private equity firm’s stable of eateries that includes Arby’s and Cinnabon.
Roark will pay $157 a share in cash for the Minneapolis-based restaurant operator, a 34 percent premium to the stock’s Nov. 13 closing price, the day before Roark’s opening bid of about $150 was reported. Roark will also take on Buffalo Wild Wings net debt, and the deal is expected to close in the first quarter, the companies said Tuesday.
The acquisition caps a tumultuous year for Buffalo Wild Wings, which lost a proxy fight with activist Marcato Capital Management in June. The battle caused longtime Chief Executive Officer Sally Smith to announce her resignation. The chain came under fire after a sales slump was exacerbated by higher prices for chicken wings.
Roark has mounted a turnaround at Arby’s since buying a majority stake in that chain from Wendy’s Co. in 2011, targeting core fast-food customers with a focus on protein-heavy sandwiches. The rebound at Arby’s has come as diners turn away from so-called casual dining chains like Buffalo Wild Wings, where customers typically sit down and are served by waiters.
Roark is likely to focus first on improving Buffalo Wild Wings’s food and operations, which should be easy fixes for a firm that’s experienced in the restaurant industry, according to Michael Halen, an analyst at Bloomberg Intelligence.
“The last three years there have been a disaster — there’s a lot of low-hanging fruit,” he said.
Wendy’s owns roughly 18 percent of Arby’s, and could stand to make about $450 million on the stake if the deal with Buffalo Wild Wings goes through, according to a research note from Stifel Nicolaus & Co.
Under the terms of the deal, Buffalo Wild Wings will become a closely held subsidiary of Arby’s and will continue to operate as an independent brand, the companies said. Paul Brown, chief executive officer of Arby’s Restaurant Group, will serve in that role of the expanded company.
Funds advised by Marcato, which owns about 6.4 percent of Buffalo Wild Wings, have agreed to vote in favor of the acquisition, according to a statement.
Barclays served as financial adviser and White & Case LLP as legal counsel to Arby’s. Goldman Sachs Group Inc. provided financial advice to Buffalo Wild Wings, while Faegre Baker Daniels LLP was its legal counsel.
Roark Capital is a prominent player in the food industry, with investments in chains such as Carl’s Jr., Carvel and Auntie Anne’s. The private equity firm earlier this year backed an unsuccessful attempt to buy fried-chicken chain Popeyes Louisiana Kitchen Inc., which instead was sold to Restaurant Brands International Inc. for about $1.8 billion.
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