Blackstone Strikes Deal for Jersey Mike’s Subs – WSJ
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SOURCE: Lauren Thomas and Miriam Gottfried | Wall Street Journal
Private-equity giant Blackstone said it has struck a deal to take a majority stake in closely held Jersey Mike’s Subs.
The details
The announcement confirms a report by The Wall Street Journal on Monday. The deal would value the sandwich chain at around $8 billion, including debt, the Journal reported.
Blackstone had been in on-and-off talks for a deal with the Manasquan, N.J.-based sandwich chain earlier this year, the Journal reported in April.
The context
Blackstone has a history of investing in franchise businesses, which can benefit from a brand’s growth without requiring significant capital investment.
Its deal for franchiser Hilton Hotels was the most profitable private-equity investment in real estate ever. The firm also owns cleaning- and emergency-restoration services franchiser Servpro and coffee brand 7Brew. In April, Blackstone struck a deal to buy franchiser Tropical Smoothie Cafe.
Jersey Mike’s is the second largest sub-style sandwich company in the U.S. by sales, following Subway, according to Technomic.
Jersey Mike’s has roots in a Jersey Shore sandwich shop that opened in 1956. Peter Cancro, who started working at one location at age 14 in 1971, scraped together the money to buy Mike’s Subs in 1975.
Cancro later changed the outfit’s name to Jersey Mike’s and began franchising in the 1980s. The 66-year-old, who owns the company outright, remains chief executive.
Today, Jersey Mike’s counts more than 3,000 locations. Cancro has told the Journal he thinks the business can expand to 4,000 locations with $6.5 billion in sales by 2027.
The rationale
Consolidation has been picking up among restaurant owners, whose cash flows have drawn interest from a range of buyers, including deep-pocketed private-equity firms. (Restaurant chains and operators are also on track this year to declare the most bankruptcies in decades outside of 2020, with many consumers reining in their spending at sit-down and fast-casual chains.)
Subway agreed last year to be sold to private-equity firm Roark Capital for $9.6 billion. Earlier this year, Olive Garden parent Darden Restaurants bought Chuy’s for $605 million. Burger King owner Restaurant Brands International also spent $1 billion to acquire its biggest Burger King franchisee in the U.S.
Roark-backed Inspire Brands struck a deal for sandwich rival Jimmy John’s in 2019, leading industry watchers to speculate when—if ever—a deal could come for Jersey Mike’s.
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This article was originally published on the Wall Street Journal – navigate to the original article here.
