Private equity group Inspire Brands to buy Dunkin' in $11.3 billion deal

The deal is one of the largest transactions ever in a restaurant industry that's being upended by the pandemic.

The owner of Dunkin’ and Baskin-Robbins agreed to be acquired by private equity-backed Inspire Brands Inc. in a $11.3 billion deal, one of the largest transactions ever in a restaurant industry that’s being upended by the pandemic.
 

Inspire, which owns chains such as Arby’s and Buffalo Wild Wings, will take Dunkin’ Brands Group Inc. private at $106.50 a share, the companies said Friday in a statement. That represents a 20% premium over the closing price of Oct. 23, before reports of the deal talks sent shares soaring. The price is 6.8% higher than Friday’s close.

Paul Brown, co-founder and chief executive officer of Inspire Brands, said in a statement that the Dunkin’ and Baskin-Robbins’ brands are “two of the most iconic restaurant brands in the world” and will strengthen Inspire with their international operations, licenses and 15 million loyalty members.

The deal underscores the Dunkin’s growth prospects and adds major brands to Inspire’s portfolio. While the pandemic has upended consumer habits and strained many restaurants’ finances, an investment in digital operations at Dunkin’ and expansion beyond traditional breakfast fare has helped its shares outpace the market this year as rivals struggle.

The stock climbed 32% this year, including a gain of 12% since news of the deal talks emerged over the weekend.

Fewer Commuters
 

The transaction comes at a volatile time for the restaurant industry, and particularly for those establishments focused on breakfast, as office closures mean less commuting and fewer coffee-shop visits. Rival McDonald’s Corp. has called this a troubled category, while Starbucks Corp. has struggled with sales declines. Still, Dunkin’ reported profit and sales that beat analysts’ estimates on Oct. 29.

“This team’s grit and determination has enabled us to deliver outsized performance,” Dave Hoffmann, chief executive officer of Dunkin’, said in the statement announcing the deal. “During the global pandemic, we have stood tall.”

Dunkin’ fared well due to to investments in its mobile ordering app -- enhancing contactless buying options -- and expansion in a lunch category where the company had previously had little presence. The Canton, Massachusetts-based chain, which dropped the word “Donuts” from its namesake chain about two years ago as it broadened its focus, has gained market share during the pandemic in part through wide availability of drive-thru and delivery, Dunkin’ executives said during an earnings call in July.

“The market is just beginning to credit Dunkin’ for the capabilities it has put in place that have positioned it to achieve sustainable growth,” KeyBanc analyst Eric Gonzalez said in a recent note. He said it was surprising to see Inspire Brands’ interest in a well-run company like Dunkin’ given the acquirer’s past focus on “turning around troubled brands.”

Building a Collection
 

Inspire, backed by the Atlanta-based private equity firm Roark Capital, was started in 2018 through the merger of Arby’s and Buffalo Wild Wings. The company, which has since acquired Sonic and Jimmy John’s, has said it wants to build a collection of restaurant brands serving customers across different markets.

The Dunkin’ transaction is expected to close by the end of the year. Bank of America Corp. advised Dunkin’ on the deal, while Barclays Plc advised Inspire.

Dunkin’, which had sales last year of $1.4 billion, gives Inspire a portfolio of more than 12,500 Dunkin’ and almost 8,000 Baskin-Robbins restaurants around the world. Dunkin’ has been reshaping its footprint during a period of dislocation for the industry, announcing plans in July to close about 800 U.S. locations permanently as part of a “real estate portfolio rationalization.”

The Inspire transaction comes about nine years after Dunkin’ went public. The company was sold in 2006 by Pernod Ricard to a group of buyers including Bain Capital, the Carlyle Group and Thomas H. Lee Partners for $2.4 billion.