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Subway confirms sale process and investment bank

Richard Collings
A Subway sandwich restaurant location.

Photo: Miguel Candela/SOPA Images/LightRocket via Getty Images

Expect a wide field of buyers in the wake of Subway's announcement that it's for sale.

Why it matters: Potential bidders are already doing due diligence as Axios has reported.

Driving the news: Subway confirmed Tuesday that it is "exploring a possible sale" and that investment bank JPMorgan is its financial adviser.

Context: It's the first time the global restaurant brand has publicly discussed the potential sale following multiple reports.

  • "The company does not intend to make any further public comment regarding the process until it has been completed," Subway stated.

Details: The sale process is taking place during a challenging time for M&A generally, particularly due to the lack of debt financing.

  • The Peter and Carmen Lucia Buck Foundation, formed by the late Subway co-founder and his wife, announced Jan. 30 that Buck's will included instructions to give his 50% stake in the company to the foundation.

💭 Our thought bubble: The list of possible buyers could include PE firm Roark Capital Group, the parent of Inspire Brands that in turn acquired Dunkin' Brands for $11.3 billion in 2020.

  • PE firm 3G Capital, which bought Burger King in 2010 and took it public in 2012, is another logical suitor.
  • Burger King's owner Restaurant Brands could also take a look at the chain.

What they're saying: "The management team remains committed to the future and will continue to execute against its multi-year transformation journey, which includes a focus on menu innovation, modernization of restaurants and improvements to its overall guest experience," Subway said in a statement.

  • It pointed out that it recently announced another record-setting year, achieving eight consecutive quarters of positive same-store sales growth.

The big picture: Food prices were up 10% year over year as of December, Axios recently reported.

  • While Subway reported same-store sales growth of 7.8% and overall record sales in 2022, the figure hasn't kept up with inflation.
  • With food cost increases outstripping sales growth, many restaurant chains are selling fewer products or operating at lower volumes.
  • In addition, restaurant profit margins are also taking a hit from increased labor costs.
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