A potential deal for Qdoba is progressing, according to a report from Mergermarket. It said the fast casual was in the second round of its sale process, per four sources familiar with the matter.
Two added that Qdoba recently held management presentations for suitors. The process has been predominantly sponsor driven, they noted.
Reports of Apollo Global Management, the firm that acquired Qdoba in March 2018 from Jack in the Box for $305 million in cash, moving the chain first surfaced in November. Qdoba’s chief executive officer, Keith Guillbault, sent an emailed statement to Bloomberg at the time saying, “We’re extremely grateful for the guidance, strategy and resources Apollo has provided. Now, as Apollo explores a potential sale, it shows the health and strength of the Qdoba brand as we continue to focus on what we do best—creating flavor that our customers love and cultivating a culture that our team members enjoy every day.”
Mergermarket said Qdoba should be able to fetch a healthy eight- to nine-times EBITDA multiple in a sale “as the company performed well under Apollo,” according to a source. Qdoba is projecting $59 million in EBITDA for fiscal 2020, another source said. A November report on the auction said Qdoba’s EBITDA was $52 million for fiscal 2019, which ended September 30 of last year.
That aligns closely with Bloomberg’s initial forecast, which said New York-based Apollo was working with advisers on a potential sale that could earn as much as $550 million, including debt, according to a “person familiar with the matter.” A source in that article said Qdoba generated about $50 million in annual EBITDA—a 25 percent year-over-year increase. They added Qdoba’s same-store sales are up 4 percent over the same period. That sales price would present a valuation of roughly 11 times trailing EBITDA, or an 80 percent appreciation in value.
Mergermarket added Qdoba was set to collect first-round bids in late December. BofA and Deutsche Bank have advised the process.
When Jack in the Box acquired Qdoba in 2003, it had just 85 locations in 16 states, with $65 million in system-wide sales. It reported more than $820 million in sales in fiscal 2017 at 700-plus stores in 47 states.
Apollo is the same firm that made billions off CKE Restaurants, the parent company of Carl’s Jr. and Hardee’s, before dealing the brands to Roark Capital in 2013. It took Chuck E. Cheese private for $1.3 billion in 2014. The company attempted to bring the latter’s parent company, CEC Entertainment Inc., public via a reverse merger in July. But the move fell apart.
In Jack in the Box’s 14-year run over Qdoba, the fast casual’s net unit grew at a compound annual rate of 16 percent.
Since being moved, Apollo has opened a new headquarters in San Diego and started offering plant-based meat on its menu with Impossible fajita bowls and burritos.
Guillbault took the reins as CEO last May following the brand’s sale and transition into an independent company. He previously served as brand president and chief operating officer—a title Guillbault held for about two years. Susan Daggett, ex-interim CFO with Noodles & Company, was also appointed along with Guilbault in March. Earlier that month, the chain said it planned to add about 100 full-time positions to its corporate team, including roles ranging from specialists to executive management in a variety of departments, such as: Finance & Accounting, Human Resources, Information Technology, Marketing, Supply Chain and Restaurant Development.