Dunkin’ Brands to Sell Itself to Inspire Brands in $11.3 Billion Deal

Dunkin’ Brands Group, the world’s leading baked goods and coffee chain that serves more than three million customers daily, and the parent of Dunkin’ and Dunkin’ Doughnuts, recently confirmed that it struck a deal to sell itself to Inspire Brands.

The Dunkin’ deal comes only two years after its founding. Inspire Brands took a significant step toward its objective of developing a full-spectrum collection of restaurants.

Included in the deal is Dunkin’ Brands Group’s Baskin-Robbins brands. The Company operates through four segments: Dunkin’ Donuts-U.S., Dunkin’ Donuts International, Baskin-Robbins International, and Baskin-Robbins-U.S.

Inspire Brands is a conglomerate backed by affiliates of Atlanta-based private-equity investment firm Roark Capital. The firm has acquired a number of chains, including Arby’s, Buffalo Wild Wings, Sonic Drive-In, Rusty Taco, and Jimmy John’s.

Since barreling onto the scene in 2018 with the merger of Arby’s and Buffalo Wild Wings, Inspire has acquired Sonic Corp. and Jimmy John’s. This has given the firm more domestic locations than industry mainstays like Wendy’s.

The merger makes Inspire Brands an international force, earning $26 billion in systemwide sales and including over 31,600 restaurants in more than 60 countries. The deal makes Inspire one of the largest restaurant companies in the world.

Dunkin’ Deal Details

Yahoo Finance reports that the deal is worth $11.3 billion, at a price of $106.50 per share.

The deal price includes assumed debt and is the restaurant industry’s second-largest transaction, as well as its most expensive, based at about 23 times EBITDA. It’s the biggest transaction since Tim Hortons was acquired by Restaurant Brands International, Inc. in 2014 for roughly $14.6 billion. As far as valuation, the acquisition is the largest of its kind in at least 10 years.

The deal represents a 20% premium to the stock’s pre-pandemic valuation rage of around 17 times NTM EV/EBITDA. This compares favorably with other highly franchised peers, according to analysts.

The transaction is expected to be concluded by year’s end, and the plan is to take the new combined company private.

More Restaurant M&A to Come?

Analysts suspect that this may be a sign of more M&A activity to come in the restaurant space.

With the coronavirus, restaurant operators seeking to expand through acquisition can look for struggling brands at a discount. For Inspire, Papa John’s Int’l, Inc. was a likely target. However, the deal with Dunkin’ indicates that an acquisition of the pizza chain is now not as likely.

“Dunkin’ and Baskin-Robbins are category leaders with more than 70 years of rich heritage, and together they are two of the most iconic restaurant brands in the world,” Inspire Brands CEO Paul Brown said in a release announcing the merger. “By joining Inspire, these brands will add complementary guest experiences and occasions to our current portfolio. Further, they will strengthen Inspire through their scaled international platform and robust consumer packaged goods licensing infrastructure. They will also add more than 15 million loyalty members. We are excited to welcome Dunkin’ and Baskin-Robbins’ employees, franchisees, and suppliers to the Inspire family.”

Broad Restaurant Capability

Dave Hoffmann, Dunkin’ Brands CEO, said the deal showed the capability of Dunkin’ and Baskin-Robbins’ operations.

“Today’s announcement is a testament to our world-class group of franchisees, licensees, employees, and suppliers who have worked together to transform Dunkin’ and Baskin-Robbins into modern, relevant brands,” he said in the release. “This team’s grit and determination has enabled us to deliver outsized performance and made our brands among the most elite in the quick service industry. I am particularly proud of our actions since March of this year. During the global pandemic, we have stood tall,” he said.

“We’ve had each other’s backs and are now stronger than ever. We are excited to bring meaningful value to shareholders who have been with us on this journey and believe that Inspire Brands, a preeminent operator of franchised restaurant concepts, will continue to drive growth for our franchisees while remaining true to all that is unique and special about the Dunkin’ and Baskin-Robbins brands.”

Under Hoffman’s command, Dunkin’ and Baskin-Robbins’ same-store sales returned to positive territory in the most recent quarter. Dunkin’ Brands’ two concepts adapted to the realities of the COVID-19 pandemic with new takeout and delivery platforms, along with menu items that worked for the changing needs of their customers.

Dunkin’ Brands recently announced that its third quarter sales increased nearly 2% to $361.5 million—exceeding Wall Street expectations.

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