Dunkin’ Brands, the parent of Dunkin’ and Baskin Robbins, is negotiating with a private equity-backed company for a sale that values the restaurant chain at nearly $9 billion. The potential takeover, reported first by The New York Times on Sunday, would come at a 20 percent premium to Dunkin’s share price on Friday, which was already trading near a high.
That’s a lot of doughnuts, notes today’s DealBook newsletter. What is the prospective buyer, Inspire Brands, getting for its money?
Dunkin’ has done well during the pandemic, benefiting from investments in its digital business before the coronavirus outbreak, helping it offer contact-free takeout. Shifting work patterns mean more people are coming in later in the day, bolstering premium products like espresso and specialty beverages, which diners may have bought from smaller, independent coffee shops before. (Drinks make up more than half of Dunkin’s revenue, and it dropped “Donuts” from its name last year.)
Bankers have long considered the company, whose 21,000 Dunkin’ and Baskin Robbins outlets are all franchised, a takeover target. It would be a jewel in the portfolio of Inspire Brands, a conglomerate backed by the investment firm Roark Capital, which has been on a buying spree in recent years, acquiring chains like Arby’s, Buffalo Wild Wings and Jimmy Johns.
Inspire’s strategy is to improve companies’ digital operations while keeping their brands separate. (Its chief executive, Paul Brown, has said he wants to organize the company like Hilton Hotels, where he once worked.) Owning a dominant chain like Dunkin’ could be the final touch Inspire needs before going public, as some expect — though Inspire has never confirmed such plans.
Despite the price, the availability of cheap debt and steady cash flow from the chain’s franchises should make it easier to finance. Pent-up demand for deals led to a big jump in mergers and acquisitions in the third quarter, and a Dunkin’ takeover could inspire other private equity firms to jump into the fray for pandemic-proof targets.
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