Del TACO spikes 65% on JACK in the Box acquisition plan
Del Taco’s (TACO) share price mushroomed more than 65% Monday on the Nasdaq Capital Market after hamburger chain Jack in the Box announced plans to buy the second largest US player in the Mexican quick serve restaurant space.
Jack in the Box stock fell more than 3% on news of the anticipated friendly takeover before improving slightly. JACK also trades on the Nasdaq Global Select Market.
San Diego, California-based Jack in the Box plans to buy Lake Forest, California-based Del Taco for $12.51 per share in cash – or approximately $575m, including assumption of debt – the companies said in a news release. Del Taco had net debt of $105.6m at 7 September.
The transaction values Del Taco at a synergy-adjusted multiple of 7.6 time last 12 months adjusted EBITDA, the companies said in an investor presentation.
The acquisition will create a combined company with system-wide sales of $5.1bn and revenue of $1.7bn.
Del Taco has 600 locations
Founded in 1964, Del Taco serves about three million customers weekly at 600 restaurants in 16 states. The proposed acquisition will give the two chains more than 2,800 restaurants in 25 states, the firms said.
“This is a natural combination of two like-minded, challenger brands with outstanding growth opportunities. Together, Jack in the Box and Del Taco will benefit from a stronger financial model, gaining greater scale to invest in digital and technology capabilities, and unit growth for both brands,” Jack in the Box CEO Darin Harris said in the news release. “This acquisition fits squarely in our strategic pillars and helps us create new opportunities for the franchisees, team members and guests of both brands.”
The transaction is expected to close between January and March of 2022. Jack in the Box plans to finance the purchase through the issuance of additional securitisation notes from its existing programme with financing provided by BofA Securities. The company expects to maintain its investment grade credit rating.
What is your sentiment on JACK?
“We are excited to have found a partner in Jack in the Box that shares our vision for the future and has the (quick-service restaurant) expertise to further accelerate Del Taco’s growth,” said Del Taco president and CEO John Cappasola in the news release.
Jack in the Box expects to realise $15m in benefits through supply-chain-related savings, technology and digital efficiencies, and knowledge-sharing initiatives, by the end of the company’s 2023 fiscal year.
BofA is serving as the exclusive financial advisor on the transaction for Jack in the Box, while Piper Sandler is playing the same role on behalf Del Taco.