Is JACK up for sale?
Today, Jack in the Box’s (JACK) management announced that it is evaluating all possible strategic and financing alternatives to maximize shareholder value, which includes the sale of the company or going ahead with its previously announced plan of raising its leverage. However, the company’s management has not announced any time limit for the completion of this process.
Management further added that it has had discussions with potential investors but cautioned that there is no guarantee that the transaction will happen. If the strategic transaction fails to transpire, the company has asserted it will go ahead with its earlier stated plan of having a new capital structure by the end of the first half of fiscal 2019.
For the last few quarters, JACK has been struggling with its sales, and the company has also had to contend with its franchisees’ dissatisfaction. Alleging a lack of communication or action from the company’s management to reverse the declining trend in the transaction, the National Jack in the Box Franchisee, which represents 95% of Jack in the Box’s franchise owners, asked the board to remove CEO Lenny Comma and make some key leadership changes on October 9. So, the announcement appears to have excited investors. The stock was trading ~5.9% higher as of 10:15 AM EST today.
As of December 14, Jack in the Box’s stock has declined by 18.1% since the beginning of this year. During the same period, peers Wendy’s (WEN) and McDonald’s (MCD) have returned 1.8% and 6.5%, respectively. Meanwhile, the stock price of the broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), which has invested ~7.8% of its holdings in restaurant and travel companies, has returned 3.7% during the same period.