Wendy’s/Arby’s Group, Inc. announced a definitive agreement for the sale of Arby’s Restaurant Group, Inc. to a buyer formed by Roark Capital Group.
Wendy’s/Arby’s Group will retain an 18.5 percent ownership interest in the Arby’s business. Atlanta-based Arby’s is the second largest quick-service sandwich chain in the
The aggregate transaction value is estimated to be $430 million. The terms of the agreement provide for Wendy’s/Arby’s Group to receive at closing approximately $130 million of cash, subject to customary adjustments, and retain an 18.5 percent common stock interest in the Arby’s business expected to be valued at approximately $30 million.
The buyer will assume approximately $190 million of Arby’s-related debt, consisting primarily of capital lease and sale-leaseback obligations. The terms of the transaction will trigger an income tax benefit to Wendy’s/Arby’s Group valued at an estimated $80 million, which Wendy’s/Arby’s Group currently expects to realize over the next few years.
“This transaction provides substantial value to our stockholders, as it is expected to be accretive to earnings, deleverage the balance sheet, and allow us to devote our full attention and resources on the exciting growth opportunities we have at Wendy’s," says Roland Smith, president and CEO of Wendy's/Arby's Group.
"These opportunities include revitalization of our core menu, expanding breakfast, modernizing our facilities, building new restaurants in the United States, and pursuing global expansion.
“As we move through this transition year, we are laying the groundwork for Wendy’s to deliver 10 percent to 15 percent average annual EBITDA growth in 2012 and beyond. We view Wendy’s as one of the most attractive growth stories in the quick-service restaurant industry,” Smith says.
“Roark Capital Group has a proven history of success as an investor and value-added partner to its portfolio companies with significant expertise in franchise and restaurant sectors. We are very pleased to be partnering with Roark on this transaction, which we believe will benefit all of Arby’s stakeholders.”
“This is an exciting day for Roark as well as Arby’s," says Neal Aronson, managing partner of Roark Capital Group. "Arby’s has more than 47 years of offering unique, high quality, and better-tasting alternatives to traditional fast food. We look forward to working with Arby’s President Hala Moddelmog and the dedicated employees and franchisees to help this great brand achieve its full potential.”
Wendy’s/Arby’s Group expects that Arby’s will be reported as a discontinued operation in Wendy’s/Arby’s Group’s second quarter 2011 financial results. The transaction is expected to close early in the third quarter and is subject to regulatory approvals and customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The agreement provides for post-closing adjustments to the purchase price, based primarily on net working capital. There can be no assurance that the transaction will be completed.
At closing, Roark will invest $180 million and own a $180 million non-dividend paying preferred stock interest and an 81.5 percent common stock interest. Roark’s investment will be used to pay the cash portion of the purchase price, buyer transaction expenses, and to provide liquidity and growth capital for the Arby’s business.
In addition, Roark will commit to invest into Arby’s, under certain circumstances, an additional $50 million through 2013, as needed, to provide liquidity and growth capital and would receive preferred stock in return for that additional investment.