Dive Brief:
- Jack in the Box has concluded its review of strategic and financing alternatives that it began in December and appears to no longer be exploring a sale, according to a press release.
- Instead, the company will implement a new capital structure in the form of a securitization that the company anticipates will drive shareholder value.
- "With this evaluation behind us, we are dedicated to moving the Jack in the Box brand forward. The Board of Directors unanimously and wholeheartedly supports chairman and chief executive officer Lenny Comma and the entire management team as we collectively pursue a strategic plan focused on value creation as a standalone company," David Goebel, lead director of the board said in a statement.
Dive Insight:
Jack in the Box isn't the only chain forgoing a potential sale. Papa John's ended up securing $200 million from Starboard Value rather than selling earlier this year. Instead of outright sales, these brands have opted for investments and financial structures to try and increase shareholder value.
That doesn't mean sales aren't happening across the industry, however. Chuck E. Cheese's parent company Queso is merging with Leo Holdings and taking the company public. Papa Murphy’s is also expected to close its $190 million sale to MTY Food Group by the end of the second quarter, and Centerbridge Partners' sold P.F. Chang's to TriArtisan Capital for $700 million in January. McDonald’s made a rare acquisition of tech company Dynamic Yield to gain new technology to use at the drive-thru, and Macaroni Grill executives said in December that they are actively seeking acquisition opportunities.
Analysts expected this year to be particularly active for mergers and acquisitions, especially as activist investors hone in on the industry putting pressure on public restaurant groups to improve profits or endure a takeover. For example, J. Alexander's has been fighting back against pressure from an activist investor, which previously offered to buy the company for $186 million.
Jack in the Box will need to start turning things around after the securitization, and it has a bit of a hill to climb. While it sold its Qdoba brand in March 2018, revenues have yet to significantly improve. During the 12 weeks ended April 14 its revenue increased 2.8% to $215 million compared to the prior year period, according to an earnings release. For the 28 weeks ended April 14, its revenue increased by 0.5% compared to the prior year period. Its same store sales also were flat during the 28 weeks ended April 14. The company will need to start posting stronger numbers in the subsequent quarters to convince investors that securitization was a better option than a sale.
