Dunkin’ Brands taken private in $8.76bn deal

January 2021 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

January 2021 Issue

Inspire Brands, the owner of brands such as Arby’s, Buffalo Wild Wings and Sonic Drive-In, has agreed to acquire Dunkin’ Brands in a deal worth $11.3bn, including debt.

Under the terms of the deal, Inspire will acquire outstanding shares of Dunkin’ brands for $106.50 per share in cash for a value of $8.76bn, a price which represents a nearly 20 percent premium over Dunkin’s last closing share price on 23 October, the last day before reports of the potential deal appeared in the media. The deal is expected to close by the end of 2020.

The companies have confirmed that upon completion, Dunkin’ and Baskin-Robbins will operate as separate brands within Inspire. Dunkin’ Brands operates 12,900 Dunkin’ restaurants and more than 8000 Baskin-Robbins stores around the world. Inspire Brands, which was formed in 2018 by private equity firm Roark Capital as a holding company, has a portfolio of more than 11,000 restaurants incorporating numerous brands which generate around $14.6bn in annual sales and has a network of around 1400 franchisees.

“Dunkin’ and Baskin-Robbins are category leaders with more than 70 years of rich heritage, and together they are two of the most iconic restaurant brands in the world,” said Paul Brown, co-founder and chief executive of Inspire Brands. “By joining Inspire, these brands will add complementary guest experiences and occasions to our current portfolio.”

“Today’s announcement is a testament to our world-class group of franchisees, licensees, employees, and suppliers who have worked together to transform Dunkin’ and Baskin-Robbins into modern, relevant brands,” said Dave Hoffmann, chief executive of Dunkin’ Brands. “This team’s grit and determination has enabled us to deliver outsized performance and made our brands among the most elite in the quick service industry,” he continued. “I am particularly proud of our actions since March of this year. During the global pandemic, we have stood tall. We’ve had each other’s backs and are now stronger than ever. We are excited to bring meaningful value to shareholders who have been with us on this journey and believe that Inspire Brands, a preeminent operator of franchised restaurant concepts, will continue to drive growth for our franchisees while remaining true to all that is unique and special about the Dunkin’ and Baskin-Robbins brands.”

Restaurants in the US were badly affected by the lockdowns required to tackle the COVID-19 pandemic, however demand for convenience during the pandemic helped some fast-food chains outperform, especially those with drive-through facilities. And Dunkin’ did see some success. Shares of Dunkin’ Brands more than doubled during 2020 due to investor optimism that its mobile ordering app and loyalty programme boosted sales during the pandemic.

Despite the sales rise, Dunkin announced in July that the company expected to close up to 800 underperforming stores in the US as part of a “real estate portfolio rationalisation”. Comparable-store sales have improved since the closures were announced, according to Dunkin’, but they remain in the low-single digits for stores of both Dunkin and Baskin-Robbins.

2020 saw something of a revolution in the coffee industry in the US, with the number of coffee shops falling for the first time in nine years amid declining sales. Though this has helped Dunkin’ and other larger chain stores, the state of the economy has still forced store closures. According to Euromonitor International, the US had 25,307 outlets specialising in coffee or tea at the end of 2020, down 7.3 percent from 2019. Annual sales are expected to fall 12 percent to $24.7bn.

The sale to Inspire Brands will reunite Dunkin’ with private equity ownership. In 2005, Dunkin’ Brands was sold by Pernod Ricard to a group of buyers including Bain Capital, the Carlyle Group and Thomas H. Lee Partners for $2.4bn. It was taken public in an initial public offering in 2011.

Richard Summerfield