Del Taco is apparently considering a sale and has received interest from both investment firms and other restaurant chains.
A source confirmed a Street Insider report saying the company has hired bankers as it weighs a possible sale.
The report suggested several companies could be interested in the fast-food Mexican chain, including Applebee’s owner Dine Brands Global, which has long actively discussed acquiring a third brand.
Other potential buyers mentioned include The Habit Restaurants, Fiesta Restaurant Group, Chuy’s and El Pollo Loco, along with a handful of private-equity firms such as Checkers and Rally’s owner Oak Hill Capital and Red Lobster and California Pizza Kitchen owner Golden Gate Capital.
Del Taco has not yet responded to requests for comment.
Stock in the Lake Forest, Calif.-based chain rose 4% on the news Tuesday.
Interest in Del Taco may well come from a perception that the chain has been undervalued since it was taken public in a reverse merger in 2015.
The chain outperformed its larger rival, Taco Bell, in all but one quarter between 2015 and the third quarter of last year.
Despite that consistent outperformance, Del Taco’s stock did very little. And as its same-store sales slowed in recent quarters, its stock has suffered. Del Taco shares are down 13% over the past year, even with Tuesday’s spike.
The 583-unit Mexican chain reported 2.2% same-store sales growth in the second quarter and said it had big hopes for products featuring the plant-based Beyond Meat. Its Beyond Taco was one of the most successful product introductions in the company’s history.
A potential sale process would come as investors seem to be increasingly interested in acquiring restaurants. Numerous companies, such as the fast-food chains Jack’s and Whataburger as well as polished-casual chain Cooper’s Hawk Winery & Restaurants, have been sold in recent months.