Roark Capital Group is poised to win the race to acquire US sandwich chain Subway, people with knowledge of the matter said, after seeing off a late challenge from a rival bid group led by TDR Capital and Sycamore Partners.
The private equity firm is putting the final touches on a deal that could be announced as soon as Thursday, according to the people, who asked not to be identified discussing confidential information. The deal would value Subway at more than $9 billion, they said.
While discussions are very advanced, the situation is still fluid, the people said. Representatives for Subway and Roark couldn’t immediately be reached for comment on Thursday.
Roark is set to beat competition from TDR and Sycamore, which brought on Goldman Sachs Group Inc.’s asset management arm and sovereign wealth fund Abu Dhabi Investment Authority in a last-ditch effort to come out on top, Bloomberg News reported on Tuesday.
The Wall Street Journal reported on Monday that Roark was in advanced talks to acquire Subway for around $9.6 billion and looking to finalize a deal this week. Axios later reported that the founding family hadn’t yet picked a buyer.
One of the most recognizable names in fast-food, Subway is the largest restaurant chain in the US by store count, dwarfing names like McDonald’s Corp. and Burger King. Globally, it has about 37,000 franchise-run locations in more than 100 countries. The company, which said in February it was exploring a sale and working with JPMorgan Chase & Co., initially drew about 20 bids.
Roark has backed restaurant chains including the parent companies of Arby’s, Dunkin’ Donuts, Carvel and Carl’s Jr. A purchase of Subway could draw scrutiny from antitrust regulators in the US amid a general trend in Washington DC to take a closer look at deals.
Fred DeLuca, who co-founded the Subway sandwich chain to finance his college studies, opened its first shop in Bridgeport, Connecticut, in 1965. With his death in 2015 and that of his co-founder, Peter Buck, in 2021, control of the company that owns Subway passed to their heirs. In March, Subway opened a dual headquarters in Miami.
Subway’s profitability has been squeezed as it spends money to overhaul stores to keep up with those rivals, which have been investing heavily to beautify locations and build up their online capabilities. It’s also been grappling with stiffening competition from upstart sandwich chains such as Jersey Mike’s Subs.
Read More: Subway Suitors Weigh $3 Billion Securitization to Fund Buyout
--With assistance from Kamaron Leach.
(Adds details on Subway, Roark from fifth paragraph.)
Author: Gillian Tan, Crystal Tse and Dinesh Nair