Subway Sandwich Restaurants Nears $9.6 Billion Sale After “Long, Heated Auction”

Atlanta‐based private equity firm Roark Capital, which owns Inspire Brands (the owner of Arby’s, Baskin Robbins, Buffalo Wild Wings, Dunkin’, Jimmy John’s, and Sonic) and many other restaurant brands, is allegedly nearing a deal to purchase the Subway sandwich-shop chain, according to The Wall Street Journal, citing people familiar with the matter.

Roark has been engaged in “a long, heated auction” for Subway, the people said, adding the investment firm, with $35 billion in assets under management, offered $9.6 billion. 

On Jan. 11, WSJ first noted that Subway was exploring a sale with a more than $10 billion valuation. The sale process has been a long-drawn-out process, now entering 7.5 months. 

Subway Sandwich Chain Explores Sale That Could Value Chain at Over $10BNhttps://t.co/tju6c5ZFRE

— zerohedge (@zerohedge) January 12, 2023

By February, Subway announced it had retained advisers for a sale. Then in April, The New York Post reported that even though PE firms showed interest in the sale, the auction drew little attention with a lower valuation. 

Soaring interest rates and concerns about an economic slowdown have weighed on Subway’s sale, making debt more expensive and less available for buyout firms searching for deals.

Reuters reported weeks ago that PE firms TDR Capital and Sycamore Partners were discussing a plan to join forces and purchase the eighth-largest US restaurant chain, with 20,810 locations, producing $9.8 billion in domestic sales. On an international level, the chain has 37,000 restaurants.

The chain has stumbled in the last decade. The chain’s global sales topped around $18 billion in 2012, market research firm Technomic said. We noted in 2017 the “Beginning Of A Crisis” as the chain shuttered hundreds of stores. More stores were closed in 2018 as sales sputtered. 

On top of waning growth, Subway was hit with a menu crisis when journalists tested the company’s chicken, only to find as little as 42.8% actual chicken. And another test found there was something ‘funky’ with its 100% tuna claim. This forced the company to make a major menu overhaul or pivot toward “freshness.” It spent $80 million on slicers for franchisees to provide customers with freshly sliced meats for the first time. 

With the co-founder Fred DeLuca dead, John Chidsey, the chain’s first outside CEO, has been in charge since 2019. Maybe Roark will have the magic touch to revive the dying brand.