While a bit slower of a year in terms of M&A activity, 2020 has had its fair share of surprising acquisition announcements. With some stocks trading at a discount to where they were 12 months ago, it makes sense that some of these businesses are now attractive buyout opportunities. As it turned out, one of Monday’s biggest winners was the owner of Dunkin Donuts and Baskin-Robbins, Dunkin Brands (NASDAQ: DNKN), whose stock shot up big time after news comes out that the company might be getting acquired by another business altogether.
Dunkin Brands released a statement that confirmed the rumors, saying that it’s currently in talks to potentially go private in an acquisition by a company called Inspired Brands, which runs a variety of other restaurants and food chains, such as Arby’s and Buffalo Wild Wings. Dunkin Donuts has proven to be one of the more resilient food chains out there, despite the fact that sales declined significantly during the pandemic.
However, the company still has a market cap of around $8.5 billion. Including goodwill premiums, that means this takeover offer will likely come in at around $10 billion in total. That’s a sizable amount for a business in an industry that’s been pretty significantly impacted by COVID-19. Dunkin would be the fourth major restaurant chain acquisition Inspire Brands has made since 2018.
“Dunkin’ Brands Group, Inc., the parent company of two of the world’s most recognized brands, Dunkin’ and Baskin-Robbins, confirms that it has held preliminary discussions to be acquired by Inspire Brands. There is no certainty that any agreement will be reached. The company will not comment further unless and until a transaction is agreed or discussions are terminated,” read an official press release from the company. Dunkin still stressed that these were just early talks right now, and things could easily change at a moments notice. Buyout talks could take as little as a few weeks to a few months on the long end.
Dunkin Donuts sales have fallen by around 19% in the U.S. during the second quarter of 2019 thanks to the pandemic. While that’s far from great, it could be quite worse. Many other restaurant chains were sold earlier this year during the height of the lockdown when shares of these restaurant chains were trading at near all-time lows.
Shares of Dunkin Brands shot up around 16.1% on Monday in response to the news. While things are far from certain at this point, even the rumors of a private buyout alone are enough to send the stock surging. It was a surprisingly optimistic piece of news in the markets, especially since yesterday saw major indexes across the board plummet as the number of coronavirus cases starting to increase once again.
Dunkin’ Brands, through Dunkin’ Donuts (83% of system sales) and Baskin-Robbins (17%), generates revenue through franchise royalties and rent payments, sales of ice cream products to franchisees, and sales at company-owned stores. Based on systemwide sales of $12.2 billion in 2019, Dunkin’ is the second- largest global beverage and snack chain behind Starbucks. There are more than 13,100 Dunkin’ Donuts (9,600 U.S. and 3,500 international) and almost 8,000 Baskin-Robbins locations worldwide (2,500 U.S. and 5,500 international). – Warrior Trading News