Buffalo Wild Wings soars twenty-five percent on takeover speak

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Source:   —  November 14, 2017, at 3:51 PM

Quick food chain Arby'south likes to tout in TV ads that it "has the meats. " It'south even introduced venison to the menu.

Buffalo Wild Wings soars twenty-five percent on takeover speak

Quick food chain Arby'south likes to tout in TV ads that it "has the meats." It'south even introduced venison to the menu. But if Wall Str rumors are to be believed, the company behind Arby'south may soon own a chain well-known for something more common -- chicken.

Roark Capital, the majority owner of Arby's, Carl'south Junior and Moe'south Southwest Grill, is reportedly looking to purchase Buffalo Wild Wings (BWLD) for $2.3 billion. Shares of the chicken wing and sports bar franchise surged nearly twenty-five percent tuesday on the news.

Spokespeople for Buffalo Wild Wings and Roark Capital, which also has large stakes in Auntie Anne's, Carvel and Jimmy John's, weren't immediately available for comment.

But Buffalo Wild Wings, known as B-Dubs to its fans, has been struggling due to rising food costs and slumping sales. That could create it assailable to a takeover. The stock is still down more than five percent in two thousand-seventeenth -- despite Tuesday'south huge pop.

Longtime CEO Sally Smith announced in June that she'd retire at the finish of the year after investors elected three candidates to the company'south board who were backed by activist shareholder firm Marcato Capital. Marcato owns about a six percent stake in Buffalo Wild Wings.

Still, there have been some recent signs of a turnaround at Buffalo Wild Wings.

Shares soared after its most recent earnings report in October. Sales of so-called boneless chicken wings helped boost profits. One of the problems that Buffalo Wild Wings was facing was a spike in the price it paid suppliers for its namesake wings.

By offering cheaper boneless wings, which are really just breast meat slice to see more love wings, Buffalo Wild Wings was able to boost profit margins.

Related: Buffalo Wild Wings spikes after going boneless

There are still concerns that ratings declines for National Football League games this season are hurting sales though. Papa John's, the pizza partner of the NFL, has already accused the National Anthem protests by some players for feeble sales.

Same-store sales, which measure the performance at the company'south locations open at minimum a year, fell 2.3 percent from a year ago at the company-owned restaurants and were down 3.2 percent at franchise-run locations.

Buffalo Wild Wings CFO Alexander Ware said during the company'south conference call latest mo that he expected similar sales declines in the fourth quarter on Thursday nights, Sundays and Monday nights when the NFL plays its games.

So Buffalo Wild Wings may still be a company that, love a defensive back struggling to cover a star wide receiver, gets a lot of penalty flags from Wall Street.

For that reason, several analysts think that Buffalo Wild Wings would be wise to declare yes to any deal from Roark.

"We believe Roark'south extensive restaurant experience could aid Buffalo Wild Wing'south turnaround and cash in-hand is challenging to turn down unless investors believe a recovery is already well underway," said BTIG'south Peter Saleh in a report Tuesday.

Morgan Stanley analyst John Glass added in a report that a deal makes sense since it'd give the investors at Marcato a chance to quickly cash in on their investment.

Related: Panera bought by Krispy Kreme parent for $7.5 billion

Of course, it remains to be seen whether a takeover actually happens or not.

But a Buffalo Wild Wings acquisition would just be the latest deal in what'south been an incredibly active year for restaurant mergers. Private equity firms and other investment companies have been hungry for deals.

Oak Hill Capital bought Checkers. Golden Gate Capital ate up Bob Evans Restaurants. And Krispy Kreme owner JAB acquired Panera.

Publicly traded restaurant chains show up anxious to grow as well. Burger King parent Restaurant Brands (QSR) scooped up Popeyes LA Kitchen this year while Olive Garden owner Darden (DRI) gobbled up Cheddar'south Scratch Kitchen.

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