Newswires are ablaze with a recent announcement from global foodservice operator Subway. The sandwich maven has announced it will be acquired by private equity firm Roark Capital, which has agreed to buy the company in a deal that sources say values the chain at up to $9.55 billion.
The auction of Subway started in February, according to reporting from Reuters, and attracted interest from several other private equity firms. An earn-out agreement reported earlier this week served as the key to Roark getting the deal.
In order for the full deal price to be paid, Subway’s cash flow will need to reach specific milestones over a period of two or more years after the deal closes, sources said. Without the earn-out, the deal will be worth $8.95 billion. This arrangement helped close the gap in valuation expectations between the private equity firm and the DeLuca and Buck families that own Subway and were hoping for over $10 billion based on international and brand growth.
Roark is the owner of other restaurant chains and franchises, including Jimmy John’s, which operates over 2,600 restaurants in 43 states. Subway currently has more than 37,000 locations in over 100 countries.
This deal allows for 12 months for the completion of the transaction.
As more details of the acquisition become available, Deli Market News will report.