Chicken chain Bojangles’, which has 766 restaurants, has entered into a definitive agreement to be acquired by Durational Capital Management LP and The Jordan Company, L.P. for $593.7 million, the company announced Tuesday morning. Under the terms of the agreement, the companies will acquire Bojangles’, Inc. in an all-cash transaction valued at $16.10 per share, which represents a 39 percent premium to the closing share price of February 12—a day prior to initial speculation regarding a potential transaction. It’s also a premium of about 30 percent to Bojangles’ 90-day volume weighted average price ending on February 12.
The offer represents a 15 percent premium to the closing share price of September 27—the day before it surfaced that Bojangles’ was exploring strategic alternatives.
Upon closing of the transaction, expected in the first quarter of fiscal 2019, Bojangles’ will transition to a privately held company. It will continue to be operated as an independent brand based in Charlotte, North Carolina. The Jordan Company, founded in 1982, is a middle-market private equity firm that has managed funds with original capital commitments in excess of $11 billion since 1987. Durational Capital Management LP, founded in 2017, is an investment firm that said it invests in high-quality consumer companies.
“For the Bojangles’ family of employees, franchisees, and our customers, today’s announcement represents an exciting next phase for this great brand. The new ownership group is committed to maintaining the qualities of this brand that have sustained it for over four decades,” said Randy Kibler, Bojangles’ interim president and CEO, in a statement.
“In consultation with our outside advisors, the Board of Directors has been evaluating several strategic alternatives over the last several months. We are confident that this agreement offers a promising opportunity to realize the highest value for our stockholders while providing a strong path forward for the Bojangles’ brand, its employees, franchisees, and loyal customers,” added William A. Kussell, director and non-executive chairman of Bojangles’.
Back in September, Reuters reported that Bojangles’ was “exploring strategic alternatives, including a potential sale,” according to people familiar with the matter.
Some recent internal moves seemed to hint at the possibility. On March 5, a day before the chain was scheduled to report fiscal 2017 and fourth-quarter earnings, it announced that chief executive officer Clifton Rutledge was resigning due to “personal reasons.” Rutledge joined Bojangles’ from Texas-based Whataburger in January 2014. He succeeded CEO James “Randy” Kibler, who led Bojangles’ Restaurants Inc., the company’s subsidiary, from September 2007 to January 2014. Kibler moved into the interim role.
Bojangles’ has been a public company since 2015, when private-equity firm Advent International Corp took it to the stock market.
This past quarter, Bojangles’ unveiled a “restaurant portfolio optimization program” designed around two areas in the short-term, closing underperforming stores and refranchising, as it looks to strengthen corporate dynamics. Bojangles’ announced in its second-quarter review that it planned to close about 10 corporate restaurants in Q3 and refranchise another 30 restaurants, primarily in Tennessee, to one of its largest franchisees.
The 12-month revenues, as of Q2, at those closing restaurants were about $5.8 million, and the restaurants were losing in the $2.9 million range in company-operated restaurant contributions.
Bojangles’ reported total Q2 revenues of $140.5 million, up 2.7 percent from $136.8 million in the prior-year period. Same-store sales declined 0.2 percent systemwide, with company-run comps dropping 0.8 percent and franchised units 0.1 percent. The system was comprised, as of July 1, of 325 company-run units and 441 franchised.
During the process, BofA Merrill Lynch acted as financial adviser and Shearman & Sterling LLP acted as legal counsel to Bojangles’ and its Board of Directors. Houlihan Lokey also acted as financial advisor to Bojangles’ and its Board of Directors. Citigroup Global Markets Inc. served as financial advisor to the consortium and, together with KKR Capital Markets LLC, provided fully committed financing in support of the transaction. Akin, Gump, Strauss & Feld LLP, Kirkland & Ellis LLP, and Seyfarth Shaw LLP acted as legal counsel in connection with the transaction. From Shearman & Sterling, partners George Casey, Scott Petepiece, and Richard Fischetti, Doreen Lilienfeld, and associates Grace Jamgochian and Matthew Behrens led the team that advised Bojangles’.
“Bojangles’ is an iconic brand with an authentic Southern heritage and a deeply loyal following,” said Eric Sobotka, managing partner at Durational Capital Management, in a statement. “We have admired the brand and its high quality and craveable food for years, and we look forward to partnering closely with the employees and franchisees to drive its future growth and continued success.”
"Bojangles’ has a differentiated offering, a talented team of employees and dedicated franchisees that are committed to their businesses and their communities,” added Ian Arons, partner at The Jordan Company. “We are excited to invest in a company with such great growth potential, and we believe that with our and our partners’ support, Bojangles’ will be well-positioned for long-term success.”
Bojangles’ has made menu and portfolio changes in recent months.
It cut very slow moving, operationally complex and non-core menu items,” at all company-operated restaurants. These include: Jambalaya Bowl; Smoked Sausage Biscuit; Barbecue Pork Sandwich; and Cheddar Bo Biscuit. Some franchisees may elect to keep them on the menu. The chain hopes to speed up service, cut waste, and bolster quality with the moves.
A significant slowdown in growth was also part of the plan. From 2016–2017, Bojangles’ added 48 units. It was 54 the year earlier, and 40 the year before that. For fiscal 2018, the company expects to open just 18–22 systemwide restaurants, down from its previous expectation of 30–40 units. And of those, only six to eight will be company-run. Kibler said Bojangles’ would start relocating restaurants to better real estate and start remodeling stores at a fast clip as well.
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