Subway Putting Itself Up For Sale

Subway, the sandwich chain, is set to be acquired by private equity firm Roark Capital for $9.55 billion, with conditions attached to the windfall for the owning families. This conclusion comes after a competitive auction that attracted various bids. The deal includes an “earn-out” clause, deferring a portion of the payment contingent on Subway’s cash flow achieving specific milestones post-deal closure. The initial valuation of the deal, excluding the earn-out, was $8.95 billion.

Roark Capital outbid a rival group led by TDR Capital and Sycamore Partners, which submitted a bid of $8.75 billion, or $8.25 billion without the earn-out. The earn-out condition aided in bridging the valuation gap between Roark Capital and Subway’s owning families.

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Subway, operating around 37,000 restaurants in over 100 countries, is yet to disclose the deal’s terms. With this acquisition, Roark Capital, already controlling Inspire Brands, becomes a significant global restaurant operator.

The deal’s closure is subject to a 12-month timeline, and a 4% breakup fee is in place to account for potential regulatory obstacles. The acquisition aligns with Subway’s recent efforts, which include menu changes and increased marketing, resulting in a 9.3% rise in same-store sales in North America during H1 2023.