This article has been updated.
Inspire Brands CEO Paul Brown’s hunger for big deals is flaring up again. And this time, it looks like he has a hankering for a ghost pepper donut and iced cold brew.
The owner of Arby’s, Buffalo Wild Wings, Jimmy John’s and Sonic is nearing an $8.8 billion deal to acquire Dunkin’ Brands (DNKN), both companies said late Friday. Inspire said its all-cash deal to take the owner of Dunkin' Donuts and Baskin-Robbins chains private would value it at $106.50 a share, representing a nearly 20% premium over Dunkin's closing share price on Oct. 23.
The news isn’t surprising.
For starters, Inspire Brands’ Brown hasn’t hidden his interest in getting into the breakfast day-part. Dunkin’ is among the category leaders in the breakfast hours, more so now amid a push to focus more on specialty coffees. And Brown has shown a willingness to open Inspire’s checkbook, big to fuel his vision of operating a portfolio of large restaurant brands with growth potential. The model is rooted in the view of the portfolio of brands helping to gain economies of scale through food purchasing and talent sharing.
Brown sounded like a man back on the hunt in an August interview with Yahoo Finance, despite the COVID-19 pandemic bringing havoc to the restaurant industry.
“Really the thesis we have around the value of having a broad brand portfolio and achieving scale through acquisition really has played out very much over the last few months in terms of the value of our portfolio and the value of our scale,” Brown said. “What that turns into as far as additional acquisitions, I really can’t speculate at this time. But the thesis has certainly been validated over the past several months.”
Indeed Dunkin’ — led by restaurant veteran David Hoffmann — would mark Brown’s biggest acquisition yet over a three-year buying spree.
In September 2019, Inspire Brands purchased sandwich chain Jimmy John’s for an undisclosed sum.
The company completed its $2.3 billion acquisition of Sonic in December 2018. Inspire paid a 20% premium for the burger brand. Since then, Brown and his team have overhauled the brand’s marketing and improved the chain’s digital ordering platform. More recently, Sonic unveiled a new restaurant design that emphasizes safe eating outside alongside the traditional eating in your car format.
Brown’s buying binge started in 2017 with the $2.9 billion acquisition of Buffalo Wild Wings. The deal came at about a 38% premium. The company has revamped Buffalo Wild Wings’ menu and closed lagging locations, among other measures.
“We believe Dunkin’/Baskin-Robbins make sense as an acquisition target, and would fit well within Inspire’s current portfolio, although the size of this acquisition is notably larger than previous transactions,” said Jefferies restaurant analyst Andy Barish.
A version of this article was first published on October 25, 2020.
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