Jack in the Box Unloads Qdoba to Private Equity Firm

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Jack in the Box Inc. (NASDAQ: JACK) shares made a handy gain early on Tuesday after the fast-food chain announced that it would be unloading one of its core businesses. Specifically, Jack has reached a definitive agreement to sell Qdoba Restaurants to the activist firm, Apollo Global Management.

Qdoba operates and franchises more than 700 restaurants, and it is fetching a price of approximately $305 million. The deal is an all-cash transaction expected to close in April 2018, but it is still subject to customary closing conditions.

Keep in mind that Jack in the Box has a total market cap of just over $3 billion.

Jack in the Box had originally acquired Qdoba in 2003, and at that time it had 85 locations with $65 million in systemwide sales. Currently, Qdoba is the second largest fast-casual Mexican food brand in the United States, with systemwide sales of more than $820 million in fiscal 2017.

After the close of the transaction, Jack in the Box expects to use the net cash proceeds to retire outstanding debt under its term loan, as required by the terms of its credit facility.

Lenny Comma, board chair and chief executive of Jack in the Box, commented:

For the past several months, we have worked closely with our financial advisors and evaluated various strategic alternatives with respect to Qdoba, including a sale or spin-off, as well as opportunities to refranchise company restaurants. Following the completion of this robust process, our Board of Directors has determined that the sale of Qdoba is the best alternative for enhancing shareholder value and is consistent with the Company’s desire to transition to a less capital-intensive business model.

Lance Milken, Apollo senior partner, added:

We are extremely excited to be acquiring Qdoba and look forward to working with the management team, employees and franchisees to continue building the Qdoba brand. We are firmly committed to Qdoba’s continued growth as a leading fast-casual restaurant operator.

Shares of Jack traded up 2% at $102.49 on Tuesday, with a consensus analyst price target of $110.47 and a 52-week range of $90.89 to $113.00.