Del Taco Holdings Inc., the second largest Mexican-American quick-service chain by units in the United States, operating restaurants under the name Del Taco, and Levy Acquisition Corp. (LAC) have entered into a definitive merger agreement whereby Del Taco will become the sole direct subsidiary of LAC. Immediately following the Merger, LAC intends to change its name to Del Taco Restaurants Inc., and will continue to trade on the NASDAQ stock exchange.

Prior to the merger, Restaurateur Larry Levy’s family and other new investors (“LLI”) will make a private investment of $120 million in the equity of Del Taco. Upon the closing of LLI’s equity investment and prior to Del Taco’s merger with LAC, Levy will become chairman of the Del Taco board of directors and partner with management to oversee the company’s growth and brand building. The LLI purchase price is based on a $500 million enterprise value for Del Taco, excluding transaction costs.

At the merger, a subsidiary of LAC will merge into Del Taco so that Del Taco becomes a wholly-owned subsidiary of LAC. LAC will acquire Del Taco at the same implied enterprise value as that reflected in LLI’s purchase price. The completion of the proposed business combination is subject to LAC stockholder approval and a limited number of other closing conditions. LAC expects the Merger will be completed in June 2015.

Larry Levy, chairman and CEO of LAC, says “We have been searching to acquire a growing restaurant brand for over a year and when we focused on the iconic Del Taco, we knew it was perfect. The Del Taco brand is well-known in Southern California, where it originated in 1964. Del Taco and its franchisees now operate approximately 550 Mexican-American restaurants in 16 states, with the largest concentration of stores in the Pacific Southwest. Del Taco owns just over 300 of the stores with the balance of its system owned and operated by franchisees. I loved the food immediately and quickly understood why Del Taco is considered one of the classic cult brands and has such a loyal following. Del Taco’s menu has fresh, high quality items consisting of classic Mexican-inspired dishes such as tacos, burritos, quesadillas, and nachos alongside traditional American favorites including hamburgers and crinkle-cut fries at a great value. To me, it offers the quality and freshness found at fast-casual concepts but with an average check price that is more typical of a [quick serve].”

Paul Murphy, president and CEO of Del Taco, says, “We are very excited to be partnering with Larry Levy and LAC. We have always offered the food people crave at a great value but in the last few years we changed the conversation to showcase our working kitchen, our fresh ingredients, and the amount of food preparation that takes place in every store every day: From grilling fresh-marinated chicken and chopping vegetables to grating cheese from 40-pound blocks of cheddar and slow-cooking whole pinto beans from scratch. The results to date have surpassed our expectations with growing average unit volumes and substantial margin improvement. In Del Taco’s Company-owned stores, we have posted 10 consecutive quarters of positive same store sales driven by balanced traffic and check growth.”