The long and public sale process at Subway is going to last a little longer.
A source confirmed a report on Thursday in the New York Post that said the company has extended the bidding deadline as new bidders have emerged for the chain.
The extension suggests that these additional buyers could potentially drive up the sale price for the Miami-based sandwich giant, at least compared with existing bids. The auction had been said to be entering a final phase, so the company clearly believes extending the process a while longer will lead to a higher price than it could get otherwise.
The sale, which was expected to be complete by early this month, is still expected to be announced in the coming weeks.
The sale process of Subway has been one of the most public and extensive sale processes in the restaurant industry in recent memory.
The Wall Street Journal first reported that the company was on the market in January and one month later Subway itself took the rare step, at least for a private company, of announcing that it had hired advisers to explore a sale.
CEO John Chidsey himself said at the Restaurant Leadership Conference that a sale was expected to be announced by June. Later reports, however, suggested that the company had picked a group of finalists, including Inspire Brands owner Roark Capital and the private equity owner of the convenience-store operator—and Subway franchisee—EG Group.
That report suggested that a sale would be announced by early this month. The latest report, however, suggests that the process could drag on into August.
In the meantime, reports of interested bidders and various asking prices or expected sale prices have proliferated. The initial Journal report indicated the company could fetch $10 billion. Other reports indicated that the price tag could end up as low as $7 billion.
Chidsey himself has suggested that there was plenty of interest in the chain from buyers.
“It’s really hard to lose your money in the franchise business,” he said.
Subway itself has unleashed a steady torrent of press releases and announcements and interviews announcing the state of its turnaround effort. The company has been taking numerous steps to improve its menu, the size of its franchisees and the rate of growth of its international business.
A sale of the sandwich giant was never going to be easy. The company’s sheer size, with some 37,000 restaurants globally, coupled with an asking price initially said to be in the $10 billion range, makes the process more complicated on its own.
But the market for restaurant mergers and acquisitions is difficult, as high interest rates weakened financials following the run-up in inflation last year and lowered the prices many buyers were willing to pay for a restaurant company—if they were willing to buy a restaurant company in the first place.
Then there is the matter of Subway itself. The brand has closed about 8,000 restaurants globally over the past eight years, more than any other restaurant chain in history. Prospective buyers have also been concerned about the state of the domestic franchisee base, where operators have some of the lowest unit volumes in the restaurant industry—and difficulty generating profits.
Meanwhile, there appear to be few, if any, strategic buyers among the reported bidders for the chain. Some high-profile potential strategic buyers that might have made sense at one point as a Subway buyer, such as KFC and Taco Bell owner Yum Brands or Burger King owner Restaurant Brands International, do not appear to be in on the bidding.
It’s uncertain who the additional bidders could be for Subway. But they must be important enough for the chain to extend a sale process that has already taken longer than expected.
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