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Financing

NPC International cancels its bankruptcy auctions

Flynn Restaurant Group has an $816 million agreement to buy the big Pizza Hut and Wendy’s franchisee out of bankruptcy.
Photo courtesy of Wendy's

NPC International canceled a trio of bankruptcy court auctions scheduled for this week, according to a court filing on Sunday, a move that could pave the way for its sale to the giant Applebee’s operator Flynn Restaurant Group.

It’s uncertain why the auctions were canceled, but there were believed to be dozens of bidders eyeing some of the restaurants—including Wendy’s, which submitted a bid along with a group of franchisees for the nearly 400 units NPC operates of its chain.

Wendy’s objected to Flynn's purchase and has yet to agree to allow Flynn Restaurant Group, or FRG, to run its restaurants. Pizza Hut, however, has OK’d FRG to be the operator of the 900 units in its chain that NPC operates.

In a statement, Wendy’s said that it “continues to be an active participant in the Chapter 11 sales process, including its continued pursuit of a consortium bid with a group of pre-qualified franchisees.” FRG in court filings has called differences with Wendy's "solvable."

NPC is the largest operator of both Wendy’s and Pizza Hut, making the company’s sale a significant issue for two of the 11 largest U.S. restaurant chains.

FRG, the largest restaurant franchisee in the U.S., already operates four brands: Arby’s, Applebee’s, Taco Bell and Panera Bread. It agreed to spend $816 million for all of NPC and was named the “stalking horse” bidder for the company, a position that gave it the inside track to buy all 1,300 of the restaurants.

NPC is the second largest franchisee in the U.S., according to the Restaurant Finance Monitor.

FRG’s bid was well over the $725 million that NPC wanted in a trio of auctions, one apiece for its Wendy’s and Pizza Hut locations and another for the whole company. But more than 50 other bidders were said to be interested in at least some of the restaurants.

But bidders would need to go far above the $816 million to buy all of NPC, as FRG earned a “breakup fee” of at least $10 million if it wasn’t the winning bidder.

Wendy’s wanted FRG to sell its Arby’s and Panera restaurants, calling them competitors. The company also said that there were disagreements over how many restaurants FRG would remodel and how many new locations it would build.

But FRG noted that it was willing to pump millions into its Wendy’s units. The company also noted that a number of other operators run both Wendy’s and Arby’s or Panera units, and Wendy’s until recently held a stake in Arby’s parent company Inspire Brands.

The potential sale of NPC to FRG would create a franchisee on a scale far beyond any other U.S. company, giving the company six brands, restaurants across the U.S., and annual sales of $3.9 billion.

As the largest franchisee in the U.S., FRG has been established in part to easily fold in acquisitions of restaurants in different regions or of different brands. The San Francisco-based company was formed in 1999 and has been built with a long series of acquisitions over 21 years.

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