Jack in the Box buys Del Taco in $575 million deal

KEY POINTS

• Jack in the Box is buying Del Taco in a deal valued at roughly $575 million.
• The burger chain will pay $12.51 per share in cash for the acquisition.
• The companies expect to benefit from a stronger financial model, gaining scale and helping add new locations.

Del Taco signage is displayed outside of a Del Taco restaurant in Gardena, California.

Patrick T. Fallon | Bloomberg | Getty Images

Jack in the Box is buying Del Taco, the second-largest Mexican fast-food chain in the U.S., in a deal valued at roughly $575 million.

The burger chain will pay $12.51 per share in cash for the acquisition. Del Taco stock closed Friday at $7.53 per share. Jack in the Box plans to finance the acquisition by issuing additional securitization notes.

"This is a natural combination of two like-minded, challenger brands with outstanding growth opportunities," Jack in the Box CEO Darin Harris said in a statement. "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."

Shares of Jack in the Box were down more than 3% in Monday afternoon trading. Jack in the Box's stock has fallen over 10% this year, giving it a market value of $1.76 billion. Del Taco shares surged more than 65% to $12.54 per share in afternoon trading. bringing its market value to more than $450 million.

Del Taco has a footprint of roughly 600 restaurants across 16 states, making it the second-largest Mexican fast-food chain by number of restaurants behind Yum Brands' Taco Bell. In its third quarter, it earned 11 cents per share, after adjustments, on revenue of $124.3 million.

The combined company will have more than 2,800 locations across 25 states. The purchase is expected to close in the first three months of 2022.

Jack in the Box is forecasting that the deal will grow its earnings per share by mid single digits in the first year, excluding transaction expenses. By the end of fiscal 2023, the company predicts it will realize about $15 million in benefits from the deal, including supply chain savings and knowledge-sharing initiatives.