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Subway, the restaurant chain best known for selling foot-long sandwiches, has agreed to sell itself to US private equity group Roark Capital for more than $9 billion, in one of the largest private equity acquisitions this year.

Roark Capital will pay $9 billion upfront, according to two people familiar with the matter. It also agreed to a further potential payment of up to $600 million over three years for the family-owned restaurant group.

The Atlanta-based private equity group will fund its acquisition with about $4 billion in equity and $5 billion in debt, the people said. The financing was led by Barclays, Morgan Stanley, JPMorgan and four other banks. Rock will consider options such as securitizing some of Subway’s stores after the acquisition closes.

Subway declined to comment on the terms of the deal, which were not disclosed in the announcement. announcement Confirm the sale. Representatives for Rock did not respond to emails seeking comment. The lenders either declined to comment or did not immediately respond to a request for comment.

The takeover underscores the growing interest of big banks in acquisition financing after they largely avoided new loan commitments over the past 18 months. Institutions are holding back as they face billions of dollars in losses on debt commitments that were not sold before interest rates rose sharply last year.

Private equity firm GTCR’s spinoff of payments business Worldpay from fintech group FIS last month was seen as a signal of the reopening of the lending market. A consortium of banks led an $8.4 billion financing package for the transaction.

The sale will mark the end of more than half a century of family ownership of Subway Connecticut. The company is a pioneer in utilizing franchise stores to achieve rapid growth with minimal capital costs.

Back in 1974, Subway began selling the rights to its brand and marketing campaigns to independent entrepreneurs who would own and operate the stores in exchange for paying royalties. The model has helped Subway grow from about 16 sandwich shops to more than 37,000 stores worldwide.

Other larger restaurant groups, such as McDonald’s, are also increasingly shifting their operations to the same model.

Over the past decade, Rock has spent more than $10 billion acquiring restaurant chains including Arby’s, Buffalo Wild Wings and the parent company of Dunkin’ Donuts. The private investment group, controlled by Neal Aronson, manages $37 billion in assets. It’s named after Howard Locke, the protagonist of Ayn Rand’s libertarian novel The Fountainhead, and is known for its turnaround focus on leveraging franchises for expansion.

The private equity group also owns Driven Brands, a conglomerate of well-known auto service brands such as Maaco, Meineke and 1-800 Radiator. In addition, it has invested in gyms, fitness centers and pet care clinics that rely on franchises.

Roque emerged from a process that included several other private equity bids after Subway hired JPMorgan earlier this year to manage the sales process.

The private equity group is tasked with reviving a brand that many experts say is overextended in the U.S. and hit by changing consumer habits.

Subway has closed thousands of stores in recent years in response to falling demand as workers slowly return to the central business district, where many of its restaurants are located, following low-carb diets and the coronavirus pandemic. The company recently designated non-U.S. markets as the basis for its expansion plans, and sales growth has stabilized.

“This transaction is an important milestone in Subway’s multi-year transformation journey, combining Subway’s global reach and brand strength with Roark’s deep expertise in restaurant and franchise business models,” Subway said in a release. Combine.”


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