Jack in the Box to Acquire Del Taco, Combining Two Challenger Brands to Create Substantial Opportunities for Growth and Increased Profitability
SAN DIEGO & LAKE FOREST, Calif. - (BUSINESS WIRE) - December 06, 2021 - Jack in the Box Inc. (NASDAQ: JACK) and Del Taco Restaurants, Inc. (NASDAQ: TACO) today announced that the companies have entered into a definitive agreement pursuant to which Jack in the Box will acquire Del Taco for $12.51 per share in cash in a transaction valued at approximately $575 million, including existing debt. While this price per share offers an attractive premium to Del Taco shareholders, Jack in the Box estimates that the transaction values Del Taco at a synergy adjusted multiple of approximately 7.6x trailing twelve months Adjusted EBITDA.
Founded in 1964, Del Taco serves more than three million guests each week at its approximately 600 restaurants across 16 states. 99% of Del Taco restaurants feature a drive-thru, helping to achieve strong off-premise sales and a diversified daypart mix. Jack in the Box and Del Taco will have more than 2,800 restaurants spanning 25 states with similar guest profiles, menu offerings and company cultures – both priding themselves on serving guests with unique variety, quality, innovation and value.
“We are thrilled to welcome Del Taco, a beloved brand and proven regional winner, to the Jack in the Box family,” said Darin Harris, CEO of Jack in the Box. “This is a natural combination of two like-minded, challenger brands with outstanding growth opportunities. 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. This acquisition fits squarely in our strategic pillars and helps us create new opportunities for the franchisees, team members and guests of both brands.”
Mr. Harris continued, “Del Taco has a loyal, passionate guest base and a strong operating model, and we believe that we can leverage our infrastructure, experience refranchising, and development strategy to support Del Taco’s growth plans and expand Del Taco’s footprint. We can’t wait to welcome the Del Taco team members and franchisees to the Jack family!”
David Beshay, a Jack in the Box franchisee and operator of 210+ restaurants, added, "I couldn’t be happier about the opportunity that this transaction offers to the franchisees of these two amazing brands. I believe the Del Taco brand will fit hand in glove with ours, and further enhance the strong franchise and guest-focused culture we have worked so hard to develop at Jack in the Box. We are excited about the potential to open Del Taco restaurants, helping the company expand these two beloved brands."
John D. Cappasola, Jr., President and CEO of Del Taco, said, “We are excited to have found a partner in Jack in the Box that shares our vision for the future and has the QSR expertise to further accelerate Del Taco’s growth."
Mr. Cappasola, Jr. continued, “We expect this transaction will provide Del Taco with the scale, complementary capabilities and opportunity to become even stronger partners to our franchisees and support their ability to drive substantial growth in our core and emerging markets. On behalf of Del Taco Restaurants, Inc. Board of Directors, we’re confident the agreement delivers immediate value to Del Taco shareholders and will greatly benefit our brand, team members, franchisees and loyal guests for many years to come.”
Brent Veach, a Del Taco franchisee and operator of 50+ restaurants, shared, “Del Taco and Jack in the Box are two iconic brands that both represent a tremendous business opportunity for existing and new franchisees. I am excited how this new larger organization can provide operating cost synergies and further accelerate franchise growth through enhanced support, additional resources and shared real estate knowledge. We are excited to join the Jack in the Box family and assist in growing both amazing brands.”
Compelling Strategic and Financial Benefits
The transaction is expected to:
- Deliver Immediate Earnings Accretion with Significant Upside. Jack in the Box expects the transaction to be mid-single-digit accretive to earnings per share excluding transaction expenses in year one and meaningfully accretive beginning in year two once full synergizes are realized.
- Create a Stronger QSR Player with Enhanced Scale. This transaction combines two challenger brands with complementary geographic footprints, guest profiles and menu offerings to create a scaled QSR player with a stronger financial model to drive growth and enhanced profitability. Jack in the Box and Del Taco will also benefit from sharing best practices and the opportunity to strengthen guest loyalty and reach new guests. As a combined QSR player, Jack in the Box and Del Taco plan to expand their footprint and continue to drive innovation at both brands to create more unique, innovative menus and exceptional guest experiences.
- True QSR in the Expanding Mexican Category with a Track Record of Consistent Growth. The transaction allows Jack in the Box to tap into the growing and attractive Mexican QSR category, where Del Taco has been a leading brand with a track record of consistent performance. By leveraging the combined scale of the companies, we will be able to effectively target secular demographic trends underpinning the category.
- Reinforce Unit Growth Plans for Both Brands. By leveraging Jack in the Box and Del Taco’s unique strengths and their shared approach to building out markets, Jack in the Box will be able to support growth plans for both brands. Jack in the Box will benefit from Del Taco’s strong operations, construction, and development expertise to drive more efficient expansion supporting its long-term objective of 4% annual unit growth by 2025. By leveraging Jack in the Box’s broader footprint, re-franchising experience, and digital capabilities, the combined company expects to drive energized growth at both brands in existing and new markets.
- Create Substantial Opportunities for Franchisee Expansion and Unit Level Economics. The transaction brings together two exceptional franchisee bases and creates an enhanced platform for franchisee expansion and growth by leveraging the combined company’s scale, technology and digital capabilities. Both brands’ franchisees will benefit from economies of scale in supply chain and more diverse opportunities to expand their businesses and drive enhanced profitability. The transaction will enable both brands to provide stronger support to franchisees with a broader set of resources to help them optimize and grow their businesses.
- Build a Stronger, More Flexible Financial Model. The transaction will create a stronger combined organization, with increased size and scale, and the financial resources to pursue a wider set of opportunities for profitable growth. Jack in the Box expects that the combined organization will also benefit from a more efficient capital structure. Jack in the Box expects to maintain a leverage ratio within its target range of 4.0x to 5.5x total debt to Adjusted EBITDA and an investment grade credit rating.
- Drive Meaningful Synergies. Jack in the Box expects the combined company to realize run-rate strategic and cost synergies of approximately $15 million by the end of fiscal year 2023, with approximately half of the synergies achieved in the first year. Jack in the Box expects to achieve these synergies largely through procurement and supply chain savings, technology and digital efficiencies and other financial benefits, as well as knowledge-sharing initiatives.
Financing and Path to Completion
Jack in the Box intends to finance the acquisition through the issuance of additional securitization notes from its existing program with a financing commitment provided by BofA Securities, Inc.
The transaction is expected to close in the first calendar quarter of 2022 and is subject to customary closing conditions, including receipt of Del Taco shareholder approval and regulatory approvals.
BofA Securities is serving as exclusive financial advisor and Gibson, Dunn & Crutcher LLP is serving as legal advisor to Jack in the Box. Piper Sandler & Co. is serving as exclusive financial advisor and McDermott Will & Emery LLP is serving as legal advisor to Del Taco.
Jack in the Box will host a conference call for analysts and investors today, beginning at 5:30 a.m. PT (8:30 a.m. ET), to discuss the transaction. The call will be webcast live via the Investors section of the Jack in the Box company website. A replay of the call will be available through the Jack in the Box Inc. corporate website for 21 days.
An investor presentation regarding the transaction will be posted on the Investors section of the Jack in the Box company website and will be filed with the Securities and Exchange Commission.
SOURCE Jack in the Box Inc. and Del Taco
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