Coverage: Buffalo Wild Wings sells to Arby’s for $2.4 billion

Fast-food chain Arby’s Restaurant Group said Tuesday it reached a deal to acquire Buffalo Wild Wings, which uses the slogan “wings, beer, sports” in its advertisements, for $2.4 billion in cash.

Nathan Bomey of USA Today had the story:

The deal comes as the casual dining sector is ailing as Americans have rediscovered home meals amid low grocery prices and new food delivery options. Competition from fast-casual competitors and higher labor costs also are hurting.

Buffalo Wild Wings also had been battered by a sharp increase in the cost of chicken wings, although the cost is down 20% from its high, according to analysts at investment bank UBS.

The company has recently bolstered foot traffic with a half-price deal on wings and has gleaned benefits from investments in delivery.

Buffalo Wild Wings had been a “star performer” in the sector for years but recently “lost their value proposition to families with kids,” NPD Group restaurant industry analyst Bonnie Riggs said.

Sarah Whitten of CNBC.com reported that the deal is also good news for Wendy’s:

Currently, Wendy’s owns about 18.5 percent of Arby’s, with its stake valued at around $325.9 million, as of the third quarter this year.

That stake could change depending “on how much equity is issued as part of the [Buffalo Wild Wings] deal and whether or not the company participates in that issuance,” said Stifel analyst Chris O’Cull.

“At this point, Wendy’s is evaluating the deal and preserving flexibility,” O’Cull said in an updated research note Tuesday.

Wendy’s declined to provide further detail about its Arby’s stake to CNBC.

“Given our investment position in Arby’s, we are supportive of the proposed transaction,” a Wendy’s spokeswoman said. “As has been our practice, we will provide periodic updates on the value of our ownership stake during our regular financial reporting.”

Evan Ramstad and Paul Walsh of the Minneapolis Star-Tribune reported that the sale is a quick exit for an activist investor:

The activist shareholder, Mick McGuire of San Francisco-based Marcato Capital, for months told the company’s shareholders he had a strategy to double or triple the company’s value by 2021 and was in it for the long term. But in less than six months, he sold the company at around the same price he paid to buy shares in it.

The company’s longtime leader, chief executive Sally Smith, announced her retirement when McGuire won control. And by early September, Buffalo Wild Wings shares had lost nearly one-third of their value as its direction foundered. The shares got a small boost in October when results for the fall quarter turned out better than expected and a large one two weeks ago when news emerged that McGuire was seeking a buyer.

Under the terms of the transaction, affiliates of Roark Capital Group will pay $157 a share for Buffalo Wild Wings, just a few dollars more than the $150 price that the company traded at on the day Marcato and McGuire won the proxy battle in June. Buffalo Wild Wings shares jumped around 6 percent to $156 in early trading Tuesday.

It wasn’t immediately clear whether Marcato made money on its investment and abortive attempt to remake Buffalo Wild Wings. McGuire wasn’t available for comment, a Marcato spokeswoman said.