Roark Capital Group has 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 agreed to pay $157 a share in cash for the Minneapolis-based restaurant operator, representing 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, the companies said Tuesday.
Buffalo Wild Wings, founded in 1982 in Columbus, Ohio, has more than 1,200 locations nationally, including 18 in the Indianapolis area. About half of the restaurants are franchises.
The deal caps a tumultuous year for Buffalo Wild Wings, which lost a proxy fight with activist Marcato Capital Management in June. The battle caused longtime CEO 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 that chain from Wendy’s 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 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.
Buffalo Wild Wings shares climbed as much as 6.6 percent to $156 in New York trading Tuesday, its highest intraday price in almost six months. The stock had dropped 5.2 percent this year through Monday’s close.
Under the terms, 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, CEO 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.