Is Dunkin’ Brands Worth $9 Billion?

The New York Times on Sunday reported that Dunkin’ Brands Group Inc. (NASDAQ: DNKN) is in talks with privately held Inspire Group to sell the company for a reported $9 billion. Dunkin’ Brands owns the Dunkin’ and Baskin-Robbins chains and private equity-backed Inspire Group owns a portfolio of restaurant brands including Arby’s, Buffalo Wild Wings, Jimmy John’s and Sonic drive-ins.

The $9 billion price tag represents a premium of about 23% to Dunkin’s market cap of $7.31 billion as of Friday. Dunkin’s stock traded up about 18% in Monday’s premarket session.

Since coming public in 2011 at $19 a share, Dunkin’ shares have risen by more than 350%. That includes a drop of 47% in March from January’s opening price. Since then the stock has risen by 125% to an all-time high of $89.85 posted last Friday.

Dunkin’ confirmed on Sunday that the talks are indeed taking place but that there is “no certainty that any agreement” will be struck. The company also said it would have nothing further to say on the matter “unless and until a transaction is agreed.”

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Dunkin’ and Baskin-Robbins combined have more than 21,000 stores and all are franchised. And Dunkin’ CEO Dave Hoffman stands to earn a change-of-control bonus of $10.8 million if the company can sell itself this year. That’s $1 million more than a similar bonus would have paid for a deal in 2019, according to Dealbook.

Cheap capital combined with Dunkin’s predictable cash flow make this an opportunistic deal for Inspire Group. The firm is backed by private equity firm Roark Capital, and the acquisition of Dunkin’ could set Inspire up for its own public offering at some later date.

At last look, Dunkin’ Brands stock traded up about 14.9% at $102.00 Monday morning. Its 52-week low is $38.51, and it pays a dividend yield of 1.81%.

Dunkin’ is scheduled to report quarterly earnings on Thursday. Analysts are looking for earnings per share of $0.80 (down from $0.90 in the same period last year) and revenue of $345.7 million (down from $355.9 million last year).

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