Financing

Tropical Smoothie Café is apparently planning a $2B sale

The smoothie chain is reportedly exploring a sale for as much as $2 billion, the latest indication of a warming restaurant M&A market.
Tropical Smoothie
Tropical Smoothie Café would get a valuation of 20 times EBITDA if it can get $2 billion, according to a report. | Photo: Shutterstock.

Want a smoothie chain? You may be able to buy Tropical Smoothie Café. But it’ll cost you $2 billion.

According to Reuters, the Atlanta-based chain is apparently exploring a sale that would value the company at $2 billion. Levine Leichtman Capital Partners, which bought the chain in 2020, has apparently hired investment banker Robert W. Baird & Co. to launch a sale process next month.

The sale is the latest sign of growing interest in restaurant mergers and acquisitions. Panera Bread owner Panera Brands plans an IPO next year, along with the sports bar Twin Peaks. Chuck E. Cheese owner CEC Entertainment is also exploring a sale.

Tropical Smoothie, however, may also test the idea whether buyers are willing to splurge again. Reuters suggested that Tropical Smoothie could get a valuation multiple of 20 times EBITDA, or earnings before interest, taxes, depreciation and amortization. Multiples that high are generally rare and reserved for well-established fast-food chains.

Yet Tropical Smoothie has quietly been among the industry’s top-performing restaurant chains. The company has averaged 22% system sales growth over the past five years, according to data from Restaurant Business' sister research firm Technomic. That’s nearly double the average for quick-service beverage concepts.

Unit count has doubled over that period, to nearly 1,200 locations at the end of 2022, according to Technomic. All but one of the chain’s locations are franchise-operated.

“We don’t comment on rumors and speculation,” Tropical Smoothie said in a statement sent through a representative.

The Reuters report also had this nugget: Tropical Smoothie apparently considered the IPO market but opted against it, noting that the public markets “became hostile for restaurant companies.” Fogo de Chao, which had seemed a sure bet for an IPO in 2021, instead was sold to Bain Capital earlier this year for $1.1 billion.

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