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Roark Capital to Bring Buffalo Wild Wings into Its Flock with Arby’s

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The deal

On November 28, 2017, Roark Capital, which owns Arby’s Restaurant Group, and Buffalo Wild Wings (BWLD) announced that they have entered into a definitive merger agreement, under which Arby’s will acquire BWLD for $157 per share, or $2.9 billion (including debt).

The acquisition price of $157 was 7.2% higher than BWLD’s November 27 closing price and 33.9% higher than its November 13 closing price, when Roark’s first bid of $150 per share was reported. The announcement increased Buffalo Wild Wings’ stock price by 6.3% to $155.60.

The companies expect the deal to be closed in 1Q18. However, the deal still awaits the approval from Buffalo Wild Wings’ shareholders. According to the deal, Buffalo Wild Wings would be a privately-held subsidiary of Arby’s and operate as an independent brand.

Marcato Capital Management, an activist investor that owns a 6.4% stake in the company, has been reported to be in favor of the deal.

Year-to-date performance

Buffalo Wild Wings has been under pressure in 2017 as it has struggled with same-store sales growth, and its margins were dented by the increase in chicken wing prices. The lackluster performance and mounting pressure from Marcato had forced long-standing CEO (chief executive officer) Sally Smith to announce her resignation.

Since the beginning of 2017, the company has returned 0.8%. During the same period, peers Cheesecake Factory (CAKE), Texas Roadhouse (TXRH), and Brinker International (EAT) have returned -21.1%, 1.9%, and -29.8%, respectively. The S&P 500 Index (SPX) and the Consumer Discretionary Select Sector SPDR Fund (XLY) have returned 17.3% and 17.6%, respectively, so far this year.

Notably, Wendy’s (WEN) owns an ~18.5% stake in Arby’s, which was valued at $325.9 million in 3Q17, and so the announcement of the deal led Wendy’s stock price to rise 3.5% to $14.18 on the same day.

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