- Shares of Dunkin' surged after the company confirmed it is in sale talks with Inspire Brands.
- The New York Times reported that the deal would take Dunkin' private for $106.50 per share, a 20% premium on Friday's closing price.
- Analysts pointed to the healthy state of Dunkin's business and its strategic opportunities for Inspire as the reason for the high valuation.
Shares of Dunkin' surged 15% Monday after the company confirmed sale talks with Inspire Brands, the privately held owner of Arby's and Jimmy John's.
The New York Times, which broke the news of the discussions, reported that the deal is valued at $8.8 billion, or $106.50 per share. The price represents a 20% premium over Dunkin's closing price on Friday. Shares are currently trading $102.55, giving the company a market value of $8.4 billion. The stock has risen 38% this year.
The coronavirus pandemic and its disruption of coffee drinkers' usual routines has hurt Dunkin's sales, sending same-store sales in the U.S. down 18.7% in the second quarter. But its drive-thru lanes are aiding its sales recovery, along with new drink offers and a partnership with TikTok star Charli D'Amelio. Rival Starbucks reported steeper U.S. same-store sales declines of 40% in its latest quarter.
"We believe Dunkin's comparatively healthy top line is reflected in the compelling takeout price," Cowen analyst Andrew Charles wrote in a note to clients on Sunday.
Charles also said Dunkin's business is much healthier than Inspire's other publicly traded acquisitions, which were viewed as turnarounds.
Jefferies analyst Andy Barish said he is not expecting a competing bid for Dunkin', given the valuation of the deal and strategic opportunities for Inspire. Adding Dunkin' to its portfolio, for example, would more than double Inspire's restaurant total and add more international markets to its footprint.
As business conditions improve, RBC Capital Markets analyst Christopher Carril is expecting more of the large, multibrand restaurant companies to consider acquisitions. Potential buyers include Restaurant Brands International, Yum Brands and Darden Restaurants.