Just two years after its founding, Inspire Brands Inc took a major step toward its goal of building a full-spectrum collection of restaurants with the US$11.3 billion acquisition of Dunkin’ Brands Group Inc.
The deal announced on Friday, whose price includes assumed debt, is the restaurant industry’s second-largest transaction and its most expensive at about 23 times earnings before interest, taxes, depreciation and amortization.
Adding Dunkin’ Brands gives Roark Capital Group-backed Inspire its first chain focused on coffee and breakfast, a market facing turbulence from the COVID-19 pandemic.
Photo: AFP
Since bursting onto the scene in 2018 with the merger of Arby’s and Buffalo Wild Wings, Inspire has acquired Sonic Corp and Jimmy John’s, giving it more domestic locations than industry stalwarts such as Wendy’s.
One analyst said that while the breakfast chain has done well in the shifting environment, the valuation is “aggressive” and unlikely to stir any rival bids.
Inspire would take Dunkin’ private at US$106.50 a share, the companies said in a statement on Friday. That represents a 20 percent premium over the closing price of Oct. 23, before reports of the deal talks sent shares soaring, and 6.8 percent higher than Friday’s close.
With Dunkin’ Brands, Inspire would almost triple its number of restaurants to 31,600 worldwide, ahead of Burger King-owner Restaurant Brands International Inc and trailing only Taco Bell parent Yum! Brands’ 50,000 global locations.
The addition of Dunkin’ would also escalate Inspire’s systemwide sales, a measure that includes sales by franchisees, to US$26 billion from US$14.6 billion.
Inspire was cofounded by former Arby’s CEO Paul Brown and Neal Aronson, who started private-equity firm Roark Capital. Inspire is seen as actively involved in the operation of its portfolio companies, pushing changes such as new menu items to reinvigorate sales.
The company “is best known for its turnaround efforts,” KeyBanc analyst Eric Gonzalez said in an Oct. 25 note.
While Dunkin’ does not need a turnaround, the company has recovered from the impact of COVID better than peers, making it a good target to buy with debt, Gonzalez said in a phone interview on Sunday.
“You are essentially going through a major stress test. It gives you a little bit more confidence to be able to handle a higher level of leverage,” Gonzalez said.
Roark also tends to hold its investments over a longer period of time than other private equity firms.
Brown told the Wall Street Journal in 2018 that he wanted to organize Inspire like the Hilton hotel chain, where he once worked, with “brands that span multiple occasions.”
That is unusual in the restaurant industry, where multibrand companies typically own similarly focused chains.
Roark Capital made another restaurant bet during the pandemic, investing US$200 million in Cheesecake Factory in April.
With US$19 billion of assets under management, the Atlanta-based private equity firm has a portfolio that spans across food, health and wellness.
Roark Capital said it was named after the protagonist in Ayn Rand’s book The Fountainhead for its commitment to contrarian viewpoints.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to