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Jack in the Box Buying Del Taco for $575 Million

San Diego-based Jack in the Box (Nasdaq: JACK) is buying fast food competitor Del Taco (Nasdaq: TACO) for $575 million.

The blockbuster deal, announced Dec. 6, combines two of the nation’s leading QSR (quick service restaurant) chains.

Jack in the Box will acquire Del Taco for $12.51 per share in cash in a transaction valued at approximately $575 million, including Del Taco’s existing debt.

While the price per share offers an attractive 60% premium to Del Taco shareholders, Jack in the Box estimates that the transaction values Del Taco at a “synergy-adjusted” multiple of approximately 7.6x trailing twelve months adjusted EBITDA.

TACO Shares Soar on Deal Announcement

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Del Taco shares surged 65% higher in Wall Street trading immediately after the deal was announced while Jack in the Box shares fell by more than 7%.

 

Founded in 1964, Del Taco serves more than three million guests a week at its approximately 600 restaurants across 16 states. Virtually all Del Taco restaurants feature a drive-thru, boosting strong off-premise sales and a diversified daypart mix.

After the deal closes, Jack in the Box and Del Taco will have more than 2,800 restaurants spanning 25 states with similar guest profiles, menu offerings and company cultures.

“Together, the companies will create a stronger QSR player with greater scale and the ability to enhance the guest experience while pursuing profitable growth,” stated a release issued Monday by both companies.

“We are thrilled to welcome Del Taco, a beloved brand and proven regional winner, to the Jack in the Box family,” said Darin Harris, CEO of Jack in the Box. “This is a natural combination of two like-minded, challenger brands with outstanding growth opportunities. Together, Jack in the Box and Del Taco will benefit from a stronger financial model, gaining greater scale to invest in digital and technology capabilities, and unit growth for both brands. This acquisition fits squarely in our strategic pillars and helps us create new opportunities for the franchisees, team members and guests of both brands.”

Leveraging Infrastructure

Harris praised Del Taco’s “loyal, passionate guest base” and “strong operating model.”

 

“We believe that we can leverage our infrastructure, experience refranchising and development strategy to support Del Taco’s growth plans and expand Del Taco’s footprint,” Harris added. “We can’t wait to welcome the Del Taco team members and franchisees to the Jack family.”

David Beshay, a Jack in the Box franchisee and operator of more than 210 restaurants, said, “I couldn’t be happier about the opportunity that this transaction offers to the franchisees of these two amazing brands. I believe the Del Taco brand will fit hand in glove with ours, and further enhance the strong franchise and guest-focused culture we have worked so hard to develop at Jack in the Box.”

John D. Cappasola, Jr., president and CEO of Del Taco, said the deal makes sense on multiple levels.

“We are excited to have found a partner in Jack in the Box that shares our vision for the future and has the QSR expertise to further accelerate Del Taco’s growth,” Cappasola said. “In recent years, we have uniquely positioned Del Taco as a leader in the growing Mexican QSR category, expanded our digital capabilities to enhance consumer convenience and focused on growing the brand through franchising, resulting in eight consecutive years of franchise same store sales growth and an accelerating new unit pipeline.”

 

Cappasola said he expects the transaction will provide Del Taco with “the scale, complementary capabilities and opportunity to become even stronger partners to our franchisees and support their ability to drive substantial growth in our core and emerging markets.”

Del Taco is the nation’s second largest Mexican QSR chain behind Taco Bell, which is a subsidiary of Yum! Brands.

Jack in the Box

Founded: 1951

CEO: Darin Harris

Employees: 388 corporate and field representatives

Headquarters: Kearney Mesa

Revenue: $1.14 billion in 2021; $1.02 billion in 2020

Website: https://www.jackintheboxinc.com/

Notable: Jack in the Box currently operates in 21 states and Guam

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