Subway, based in Milford, Connecticut, has been acquired by Roark Capital affiliates in a definitive agreement, according to a press release.
“The transaction is a major milestone in Subway's multi-year transformation journey, combining Subway's global presence and brand strength with Roark's deep expertise in restaurant and franchise business models, the release stated.
The deal is valued at $9.55 billion, including debt, subject to targets in its financial performance. It concludes a drawn-out auction that kicked off earlier this year, garnering interest from several private equity firms.
“For the full deal price to be paid, Subway's cash flow would need to reach certain milestones over a period spanning two or more years after the deal closes, according to the sources,” a Reuters report stated. “Without the earn-out, the deal is worth $8.95 billion, the sources said.”
The move is confirmed to the public after Subway announced its 10th consecutive quarter of positive same-store sales.
"This transaction reflects Subway's long-term growth potential and the substantial value of our brand and our franchisees around the world," John Chidsey, CEO of Subway, said. "Subway has a bright future with Roark, and we are committed to continuing to focus on a win-win-win approach for our franchisees, our guests and our employees."
J.P. Morgan contributed to the deal as financial advisor, while Sullivan & Cromwell LLP served as legal counsel to Subway. The deal's timing is subject to regulatory approvals and customary closing conditions.
“The company will continue to execute its strategy with a focus on sales growth, menu innovation, modernization of restaurants, overall guest experience improvements and international expansion,” the release stated.
Based in Atlanta, Georgia, Roark is a private equity firm credited with managing $37 billion in assets. The firm specializes in consumer and business service companies, specifically franchise and franchise-like businesses.