Jack In the Box runs and franchises a chain of fast-casual restaurants.
Photograph by David McNew/Getty Images
Stock in Del Taco Restaurants was soaring following news that Jack in the Box is buying the Mexican fast-food chain for $12.51 a share in cash.
Del Taco stock (ticker: TACO) was up 65.14% to $12.44 on Monday, while Jack in the Box (JACK) fell 4% to $80.62.
The transaction, valued at roughly $575 million, including debt, values Del Taco at a so-called synergy-adjusted multiple of approximately 7.6 times the Mexican-food chain’s adjusted earnings before interest, taxes, depreciation, and amortization for the past 12 months, according to a news release from Jack in the Box.
Jack in the Box operates and franchises a chain of quick-service and fast-casual restaurants that offer a broad selection of burgers, and product lines such as its Brunchfast menu. Del Taco focuses on Mexican-inspired and American classic cuisines.
Benchmark analysts, who have a $14 price target on Del Taco’s stock with a Buy rating, said the transaction should create a base for enhanced franchisee-driven growth as each brand is evaluated by existing franchisees. “JACK management highlighted their expertise in re-franchising … as almost 50% of TACO units are currently corporately owned vs. JACK which only owns and operates ~7% of the brand’s 2,218 units,” wrote analyst Todd Brooks in a note. “The combined brand will operate over 2,800 units in 25 states.”
“This is a natural combination of two like-minded, challenger brands with outstanding growth opportunities,” said Darin Harris, CEO of Jack in the Box. “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.”
The transaction is targeted to close in the first calendar quarter of 2022.
Write to Karishma Vanjani at [email protected]
