Subway confirms sale process and investment bank
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.