Buffalo Wild Wings Selling to Arby’s for $2.9B
Buffalo Wild Wings Inc. announced on Tuesday its intent to sell to Arby’s Restaurant Group in a $157-per-share cash deal, valued at $2.9 billion.
The transaction, which was unanimously agreed upon by both companies’ boards of directors, confirmed recent rumors that Golden Valley-based Buffalo Wild Wings had received a “more than $150 per share” offer from Roark Capital Group, the parent company of Arby’s.
Ultimately, the sale to Arby’s marks the end of a nearly yearlong standoff between Buffalo Wild Wings executives and activist investor Mick McGuire of Marcato Capital Management. After acquiring a six percent stake in the chicken wing chain, McGuire began to pressure Buffalo Wild Wings’ top brass, claiming a shift to a largely franchise-operated model could send company shares soaring. Throughout the proxy war, he suggested his strategy could as much as triple the value of Buffalo Wild Wings in less than five years.
Shareholders sided with McGuire during a vote this summer, which also led longtime Buffalo Wild Wings CEO Sally Smith to announce a plan to retire before the year’s end.
As one of the board members who agreed to the Arby’s deal, McGuire will be selling shares of Buffalo Wild Wings for dollars more per share than what he paid to buy it.
Rather, one of the people who stands to gain the most from the transaction is someone with days left in their tenure at Buffalo Wild Wings: CEO Sally Smith.
A proxy statement filed by Buffalo Wild Wings in April shows Smith had more than 86,500 company shares to her name, which, if unchanged, would now be worth roughly $13.5 million. On top of that, Smith has equity awards agreements with her employer that could net her millions of dollars in termination fees.
Other Buffalo Wild Wings executives will be compensated similarly, but perhaps one of the more unexpected beneficiaries of the deal will be the burger chain Wendy’s. Analyst Chris O’Cull from stock investment firm Stifel pointed out the value of Wendy’s 18.5 percent stake in Arby’s would grow considerably with the deal—from roughly $326 million to $775 million before tax, representing a nearly $450 million gain.
Moreover, Roark Capital Group will add one more to its already dense portfolio of fast food brands—including Hardee’s, Jimmy John’s, Naf Naf Grill and Cinnabon—as well as numerous retail health care and business services companies. Roark Capital, notably, also owns a minority stake in Culver’s and has invested in local lifestyle businesses Anytime Fitness and Waxing the City.
“We are excited about this merger and confident Arby’s represents an excellent partner for Buffalo Wild Wings,” said Sally Smith in a statement about the deal. “We are confident the strength of our two industry-leading brands, under the sponsorship of Roark Capital… will enable us to capitalize on significant growth opportunities in the years ahead.”
If the deal is approved, Buffalo Wild Wings will continue as an independent brand under Arby’s.
Arby’s CEO Paul Brown added in prepared remarks, “We look forward to leveraging the combined strengths of both organizations into a truly differentiated and transformative multi-brand restaurant company.”
The proposed deal is expected to receive regulatory approval in the next several months, Arby’s and Buffalo Wild Wings said in a joint statement.
Shares of Buffalo Wild Wings leapt more than 6 percent before Wall Street’s morning bell. The company’s stock was trading at $155.50 as of Tuesday afternoon.