Roark Capital Subway Takeover: In a stunning change of events, private equity behemoth Roark Capital is in the running to buy Subway. Subway has been around a long time, so this happened. The $9 billion acquisition has conditions. People familiar with the negotiations believe Roark Capital’s bid includes a profit opportunity. A “earn-out provision” delays part of the payout until Subway’s cash flow meets specific criteria following the acquisition.
This innovative idea might bridge the price difference between Subway’s two owners, the DeLucas and Bucks, and potential takeover firms. The Bucks and DeLucas own the firm. The families first sought a price above $10 billion. They bet on brand strength and reach. Potential purchasers lowered their wagers, believing the U.S. market is too competitive. When you add the instability in leveraged buyout funding due to rising interest rates, tough conversations were inevitable. This is directly caused by rising interest rates.
Roark wasn’t the only partner offering an earn-out to the candidate. This deal was also taken by TDR Capital, Sycamore Partners, and Goldman Sachs consortium Inc.’s private equity department, but the details remain unknown. This group has been propagating suspicions that Roark, who owns multiple restaurants like Jimmy John’s, may violate antitrust rules if he completes the purchase.
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These concepts have long circulated. However, the DeLuca and Buck families seem unconcerned with antitrust. They appear to expect that the food industry’s great variety will solve such issues. First-hand sources believe an agreement could be made next week.
Earn-outs aren’t prevalent in consumer retail, but they can smooth out pricing variances in this age of mergers and acquisitions, which change tides. Victoria’s Secret & Co.’s recent purchase of earn-out digital start-up Adore Me is a perfect example of this approach.
Fred DeLuca and buddy Peter Buck launched Pete’s Super Submarines in Bridgeport, Connecticut, in 1965. This project was the first step toward Subway. The company stuck to its family roots despite modern issues like a reduction in franchisee sales due to aging décor and hefty $5 foot-long discounts. The restaurant was remodeled in 2021, including menu changes and marketing. How did it affect? A sales-friendly pattern.
Subway had to adapt its approach because its aims expanded beyond micro-franchisees owning a few outlets. Recent data shows that comparable store sales for the first half of 2023 increased 9.85%, which is outstanding. Financial industry insiders estimate the chain made $800 million last year.
Roark has become a food industry opponent by buying Inspire Brands, which owns Jimmy John’s, Arby’s, and Dunkin’. Dunkin’, Arby’s, and Dunkin’ are among Inspire’s names. To illustrate, Jimmy John’s has over 2,600 outlets in 43 states and Subway has 37,000 in 100 countries.
Our Reader’s Queries
Did Roark Capital Group buy Subway?
Roark has reportedly offered $9.6 billion for the sale of Subway, which was originally listed for $10 billion in February. The Wall Street Journal reported that Subway must meet cash flow milestones within two years of the deal being finalized to pay the full $8.95 billion deal price.
Who bought Subway in 2023?
Roark Capital is a private equity firm based in Atlanta that manages $37 billion in assets. Their primary focus is on investing in consumer and business service companies, with a particular emphasis on franchise and multi-location businesses in the retail, restaurant, consumer, and business services sectors.
Did Subway get sold to a private equity firm?
Subway’s more than five decades of family ownership is coming to an end as Roark Capital acquires the sandwich chain. This marks a new era for the struggling company, as the announcement on Thursday concludes the chain’s lengthy sale process that began in February.
Who bought out Subway franchise?
Subway, a family-owned business for almost 60 years, has been acquired by Roark Capital, a private equity firm, in a historic transaction. However, Roark Capital’s portfolio includes other sandwich shops as well.