Apollo to Acquire Slumping Qdoba Chain in $305 Million DealBy
Jack in the Box to use proceeds to retire outstanding debt
Sale gives restaurant company ‘less capital-intensive’ model
Apollo Global Management LLC is getting into the Mexican food business.
The private equity firm, run by co-founder Leon Black, agreed to buy the struggling Qdoba chain from Jack in the Box Inc. for about $305 million in cash, Jack in the Box said Tuesday.
Apollo, which controls Chuck E. Cheese and previously owned Carl’s Jr., is taking over a business that has posted declining same-store sales in three of the past four quarters. Jack in the Box has been weighing a sale of the chain, which has about 725 locations in the U.S., since May, when the company said that having two different business models -- a Mexican chain and its burger-focused flagship business -- could be weighing down its valuation.
“Our Board of Directors has determined that the sale of Qdoba is the best alternative for enhancing shareholder value and is consistent with the company’s desire to transition to a less capital-intensive business model,” Jack in the Box Chief Executive Officer Lenny Comma said in a statement.
Jack in the Box gained as much as 4.4 percent to $104.75 in New York Tuesday. The stock had dropped 10 percent this year through Monday’s close.
The company said it plans to use the net cash proceeds after tax and transaction costs to retire outstanding debt under its term loan. The deal is expected to close by April, the company said.
Battle for Customers
Jack in the Box, with more than 2,200 restaurants, has struggled amid intense competition from a resurgent McDonald’s and its chief burger rivals, Burger King and Wendy’s. With visits to fast-food restaurants roughly flat, the battle for customers has featured discounted food and heavy promotions. That’s made it tough for the smaller Jack in the Box chain to compete.
Morgan Stanley served as the restaurant company’s financial adviser, while Gibson, Dunn & Crutcher LLP was legal counsel. Apollo’s advisers were Deutsche Bank Securities, PJ Solomon. Morgan, Lewis & Bockius LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP.