Arby’s Restaurant Group Buys Buffalo Wild Wings for $2.9B

Arby’s Restaurant Group and Buffalo Wild Wings have entered into a definitive merger agreement under which Arby’s, a unit of private equity firm Roark Capital Group, will acquire the Minneapolis, Minnesota, USA-headquartered restaurant chain for $157 per share in cash.

The transaction, which is expected to close during the first quarter of 2018, is valued at approximately $2.9 billion, including debt. The offer amounts to a 38% premium over the quoted stock price on November 13, 2017, the last trading day prior to news reports speculating about a potential sale.

Buffalo Wild WingsThe deal, announced on November 28, came five months after activity hedge fund Marcato Capital Management gained three seats on the Buffalo Wild Wings board following a sustained period of criticism of the company’s management and performance.

"Buffalo Wild Wings is one of the most distinctive and successful entertainment and casual dining restaurant companies in America,” said Paul Brown, chief executive officer of Arby’s Restaurant Group. “We are excited to welcome a brand with such a rich heritage, led by an exceptionally talented team. We look forward to leveraging the combined strengths of both organizations into a truly differentiated and transformative multi-brand restaurant company.”

Buffalo Wings01Sally Smith, chief executive officer of Buffalo Wild Wings, added: “We are excited about this merger and confident Arby’s represents an excellent partner for Buffalo Wild Wings. This transaction provides compelling value to our shareholders...We are confident that the strength of our two industry-leading brands, under the sponsorship of Roark Capital – an experienced restaurant and foodservice investor – will enable us to capitalize on significant growth opportunities in the years ahead.”

Roark Capital Group

Capitalized at over $7 billion, Atlanta, Georgia-headquartered Roark Capital Group focuses on investing in franchised and multi-unit businesses in the restaurant, retail, consumer and business services sectors. Since its inception, affiliates of Roark have invested in 62 franchise/multi-unit brands, which collectively generate $27 billion in annual system revenues from 29,000 locations in 50 states and 78 countries. Its largest sector is food and restaurants, accounting for 21 investments that in addition to Arby’s include CKE Restaurants (the owner of Carl’s Jr and Hardee’s), Carvel Ice Cream, Cinnabon, Moe’s Southwest Grill and the Atkin’s weight control and nutrition brand.

Arby’s and Buffalo Wild Wings

Arbys logoFounded in 1964, the Atlanta-headquartered Arby’s Restaurant Group is the second-largest sandwich restaurant brand in the world with more than 3,300 restaurants in seven countries.

Buffalo Wild Wings, founded in 1982 is a growing owner, operator and franchisor of restaurants featuring items including its namesake Buffalo, New York-style chicken wings. The Buffalo Wild Wings menu specializes in 21 signature sauces and seasonings ranging from sweet to spicy. There are currently more than 1,250 Buffalo Wild Wings locations in 10 countries.

In November of 2016, following criticism from Marcato Capital Management, CEO Smith sent a letter to shareholders spelling out the business environment at the time as follows:

“Casual dining restaurants face a uniquely challenging market today. Millennial consumers are more attracted than their elders to cooking at home, ordering delivery from restaurants and eating quickly, in fast casual or quick-serve restaurants. Mall traffic has slowed. And, surprisingly, television viewership of sporting events (important for us, especially) is down. Despite these headwinds, Buffalo Wild Wings continues to perform well, achieving positive same-store sales growth in the first quarter of 2017 and generating substantial free cash flow.”

The company’s shares were trading at $155.65, up +6.3% as this story was being filed on the afternoon of November 25. The price has risen by 24% since October, but still remains below the 52-week high of $175.05 reached last December.