Financing

Subway is apparently nearing a sale

Roark Capital is reportedly close to a $9.6 billion acquisition, though a source said that the process remains “very competitive and fluid.”
Subway sale
Subway could soon have a new owner. | Photo courtesy of Subway.

Subway’s year-long sale process is apparently nearing its end. Or at least it seems that way.

The Wall Street Journal on Monday reported that the sandwich giant, based both in Miami and in Milford, Conn., is nearing an agreement with the private equity firm Roark Capital on deal that would value the chain at $9.6 billion—not far from the $10 billion said to be the asking price back in January.

A source, however, suggested that the deal isn’t done yet, suggesting the process remains “very competitive and fluid.”

Subway itself would not comment, saying that it is withholding public comment on the process “until the transaction is completed.”

Nevertheless, the Journal has generally been out front on the sale process since it first reported Subway was on the market back in January.

And it suggests that the process, which has taken months longer than many expected, may finally be coming to a close. A deal was expected to be reached as long ago as late May. Then July. More recently, reports indicated that the company’s adviser, JP Morgan, was hoping to complete a deal by the end of summer. With Labor Day in two weeks, that would mean a deal could be expected to be reached at any time.

(For more on Subway, check out our timeline of events leading up to the sale.)

The Subway sale process has been complicated by a variety of factors, notably its U.S. decline, which has seen 6,000 restaurants close since 2015, including more than 500 last year. It also saw net closures of international locations in recent years until 2022, despite generally strong fast-food chain growth outside the U.S. The combination resulted in the loss of Subway’s status, to McDonald’s, as the world’s largest restaurant chain by unit count.

The decline has made it difficult to value the chain and left a number of buyers worried about its growth potential.

In addition, rising interest rates made valuation difficult and a lack of strategic buyers who could have driven up the price tag also made the process slower.

News of the deal also comes just days after Subway announced the departure of Trevor Haynes, its president of North America and a longtime company executive.

Still, the sale would end the ownership of the families of Subway’s two founders, Fred DeLuca and Peter Buck, eight years after longtime CEO DeLuca’s death from leukemia and two years after Buck’s death.

Subway in recent years has aggressively taken steps to fix its business and improve sales, including opening the Miami headquarters, buying out business developers who sold and inspected franchisees, rebuilt its international development business and made several changes to its menu. Same-store sales have increased for 10 straight quarters, though franchisees say that has been done largely through price hikes.

Roark has long been thought as a possible buyer of Subway despite its current ownership of Jimmy John's, through Inspire Brands. The Atlanta-based private equity firm has been a major buyer of franchise brands for two decades. 

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