An auction of Subway Restaurants has drawn lackluster interest from prospective buyers — forcing the sandwich chain to beat back bidding deadlines and raising the potential for a lower sale price, The Post has learned.
Insiders are actually pegging a takeout price for the fast-food giant at upwards of $7 billion — well wanting the $10 billion it had been looking for when news of the auction was first reported by the Wall Street Journal on Jan. 11.
After taking an initial round of bids in late February, sources said Subway has didn’t set a deadline for second-round bids, which usually comes a number of weeks after indications of interest are submitted.
Now, committed offers won’t likely be due until late this month — a delay meant to provide suitors more time to conduct due diligence, based on sources near the method.
One big problem: Rival fast-food giants like Yum Brands, owner of Taco Bell and KFC; and Burger King owner Restaurant Brands International — so-called “strategic” buyers that might be higher positioned to pay a high price for Subway — don’t look like participating within the auction, a source said.
Private equity firms including Bain Capital, Clayton, Dubilier & Rice and TPG Capital are meanwhile circling Subway, a source near the situation said.
A Subway spokeswoman declined to comment.
Subway has barred buyout firms from partnering now on an acquisition.Getty Images
Bloomberg reported last week that personal equity firm Roark Capital can also be in the combination. Roark owns Encourage Brands that’s the parent company of Arby’s, Buffalo Wild Wings, Dunkin’ Brands, Sonic and Subway rival Jimmy John’s. Gas station and restaurant operator EG Group can also be a possible suitor, based on Bloomberg.
In line with sources, Subway has barred buyout firms from partnering now on an acquisition — a move to maintain the auction competitive that nevertheless signals weak interest.
“They need to stop everyone teaming up and driving the value down,” a source near the situation said. “Subway likely shall be sold but price is a difficulty.”
Subway also has barred suitors from talking to lenders about leveraged financing apart from its own adviser, JPMorgan — a policy meant partly to stop leaks, sources near the situation said.
Subway collects an 8% royalty fee from its restaurants, whose numbers have been declining.Getty Images
The chain on Feb. 14 confirmed it was exploring a sale.
Prospective bidders are parsing the numbers as Subway — which last yr revamped its menu and tapped athletes like Tom Brady, Derek Jeter and Steph Curry as spokespeople to revive its sagging sales — has yet to reveal a solid rebound in its business.
The buyout firms will likely give you the chance to borrow money equal to about six times Subway’s roughly $700 million in Ebitda, or earnings before interest, taxes, depreciation and amortization, based on a source near the method.
Offers with that level of financing might value the corporate at 10 times Ebtida, or $7 billion, although the method continues to be fluid and the numbers could change, the source said.
Subway collects an 8% royalty fee from its restaurants, whose numbers have been declining. All locations are franchised and none are owned by the corporate.
The chain on Feb. 14 confirmed it was exploring a sale.Getty Images
At its 2015 peak, Subway had greater than 27,000 stores. But in the course of the 12 months ended April 4, Subway lost a net 555 US restaurants to wind up at 20,562, a 2.6 percent decrease, based on ChainXY Solutions, a consulting firm that tracks restaurant openings and closings.
Meanwhile, rival Jersey Mike’s over the identical period added 359 net restaurants to find yourself at 2,459, a 17% jump while McDonald’s was flat, opening in regards to the same variety of stores it closed, based on ChainXY.
“What we will tell from the information is that Subway is closing many shops as Jersey Mike’s expands and McDonald’s seems to stagnate,” Tara Newman, VP of business development at ChainXY told The Post.
Former Subway spokesman Jared Fogle was convicted in 2015 for possessing child pornography, a public relations disaster that was followed by Subway’s yearslong decline.
Many Subway franchisees have been losing money recently as they’re being forced to remain open more hours and are facing strong competition from sandwich upstarts Jersey Mike’s and Jimmy John’s, sources said.
Subway in the previous couple of months has made it harder for franchisees to shut as it really works to slow the decline, The Post reported exclusively last month.