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2017 will be a huge year for restaurant M&A

Blog: Several operators could make big moves as sales, stock weakness persist

This post is part of the On the Margin blog.

February is only two days old, and already 2017 is looking like a big year for restaurant acquisitions.

To wit: Last week, New Albany, Ohio-based Bob Evans Farms Inc. announced plans to sell Bob Evans Restaurants to Golden Gate Capital.

This morning, Columbus-based Bravo Brio Restaurant Group Inc. said it’s talking with investment bankers on potential strategic alternatives, which is typically corporate speak for “we’re up for sale.”

That’s not all. Earlier this week, in a release announcing that it has nominated three people to the Fiesta Restaurant Group Inc. board, activist investor JCP Investment Management said this: “Adding to uncertainty for stockholders is the persistent rumor of a strategic review process.”

Meanwhile, Freshii Inc. had an initial public offering in Canada this week. CEC Entertainment Inc. is considering an IPO or a sale. And Sentinel Capital is apparently planning to sell Checkers Drive-In Restaurants Inc. 

In short, 2017 could see massive shifts in restaurant ownership. The market has been more receptive to the restaurant industry in recent weeks amid a belief that the industry has hit bottom. Restaurant stocks are up more than 8 percent over the past three months, according to the NRN Restaurant Index.

At the same time, however, investors have shied away from chains with persistent problems.

That has created a market that is both welcoming and punishing at the same time. And companies might want to get away from that market, or take advantage of it. The Freshii move and a potential CEC IPO suggest that the market for newly public companies is slowly returning.

Meanwhile, several restaurant companies face come-to-Jesus moments this year when it comes to their stock price and financial performances. Ruby Tuesday Inc., Ignite Restaurant Group Inc., Famous Dave’s of America Inc., Papa Murphy’s Holdings Inc. and Noodles and Co. all face challenges to one degree or another.

In addition, while restaurant stock prices have rebounded somewhat, valuations have come down to the point that it could prompt more merger and acquisition activity.

As the Bob Evans Restaurants sale suggests, there are buyers out there willing to take chances on concepts that have some assets and other strengths. 

Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company.

Contact Jonathan Maze at [email protected]

Follow him on Twitter: @jonathanmaze

TAGS: Stock Data
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