❗ Roark Capital expand Fast Food portfolio and acquire Subway ❗
🚀 Roark Capital, a US Private Equity firm with around $37 billion in AuM, announced their acquisition of the fast-food giant subway for $9.6 billion according to Reuters. Roark’s portfolio currently contains notable fast-food chains such as, Arby’s, Dunkin Donuts, Auntie Anne’s and Buffalo Wild Wings. However, this acquisition stands above the other assets in its portfolio with Subway’s substantial size in comparison to other assets and its global presence. Currently, Subway is the largest US chain by store count and is larger than names like McDonalds and Burger King with a foothold in over 100 countries.
ℹ The key advisors to this deal were JP Morgan, with the backers of the deal including Morgan Stanley, Wells Fargo, MUFG and Barclays.
💡 Subway’s performance over the past few years has not been smooth sailing but its performance is definitely on the up. According to CNN, the number of US Subway stores declined to 20,576 last year according to Technomic. That’s a sharp decrease from its peak in 2015 when it had 27,219 locations. However In July, the company announced its 10th consecutive quarter of positive sales at stores open at least a year, including a 9.5% increase at its North America locations. US revenues have rebounded in recent years to $9.8 billion in 2022, which is up 4% compared to the year prior, but well off from its 2015 peak when it raked in $11.5 billion.
❗ Another potential risk is Subway’s business model simply isn’t aligned with key trends we are witnessing in the food industry. Takeaway culture has shot brands like Uber Eats and Just Eat to fame at the expense of brands who are reliant on customer’s eating out. Roark have to think carefully about when they sell otherwise holding onto an asset like Subway could deteriorate. The sector has become saturated with other Private Equity firms which looks to be a positive when it comes to selling by driving up prices of the firms in this sector.
💡 Overall, Subway’s performance is encouraging, the numbers show this. What will determine the deal’s success will likely be how Roark is able to leverage its experience and industry connections within the US, to foster brand growth globally. Although current Roark assets have some presence abroad, Subway is established in many European countries which presents different challenges.
Analyst: Adam Hanlon
