Inspire Brands, part of the private equity company Roark Capital Group, is a global multi-brand restaurant holding company founded in 2018. They have recently proposed a tender offer to acquire all outstanding shares of Dunkin’ Brands for more than $11 billion in an all cash deal. This deal would value the Dunkin brand at $106.50 a share, an almost 20% premium over Dunkin’s last closing share price on October 23. This would also be Inspire Brands most expensive purchase, with a deal value at over 22 times the estimated EV to EBITDA multiple for 2021. This is the biggest deal in the restaurant industry in over 6 years, since Tim Hortons was acquired by Burger King.
Dunkin’ Brands consists of Dunkin’ and Baskin-Robbins, two of the most iconic restaurant brands in the world. Currently, there are 8,000 Baskin-Robbins stores and 12,500 Dunkin’ stores. Inspire Brands portfolio will now represent over 31,600 restaurants, bringing in annual revenues of $26 billion. They are one of the largest restaurant groups globally and have 600,000 total employees, more than 3,200 franchises, and over 25 million loyalty members worldwide.
This acquisition came at the perfect time for Dunkin’ Brands. According to Forbes, 8 out of 10 businesses do not sell, and it is even harder to sell a business when it is not thriving. The coronavirus pandemic was causing downward pressure on Dunkin’ Brands’ sales during 2020 and, as of August, they were set to close as many as 800 U.S. locations. Despite this downward trend, however, the company was sold for a premium. Fortunately, Dunkin’ Brands did not become part of this startling statistic.
So why does Inspire Brands want to acquire Dunkin?
For one, the brand will help strengthen Inspire Brands through their scalable international platform and licensing infrastructure for their consumer-packaged goods. The acquisition will add 15 million loyalty members to the companies already large following. Paul Brown, co-founder and CEO of Inspire Brands, stated, “By joining Inspire, these brands will add complementary guest experiences and occasions to our current portfolio.” Also, the deal will give the company a spot in the breakfast segment. This has been a goal for the company over the past couple years as this was the fastest-growing segment in the restaurant industry before the pandemic hit.
On October 30, the two brands announced that they entered “into a definitive merger agreement.” This was unanimously approved by the Boards of Directors of both companies. The transaction is expected to close before the end of 2020.