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Dunkin Brands Surges After $11.3 Billion Inspire Purchase in Biggest Restaurant Deal Since 2014

Inspire Brands, a private-equity group that controls Sonic, Arby's and Buffalo Wild Wings, will add around 20,000 Dunkin and Baskin Robbins stores to its restaurant portfolio.

Dunkin Brands Group  (DNKN) - Get Free Report shares surged higher Monday after the coffee and donut chain agreed to an $11.3 billion takeover from private equity group Inspire Brands in the biggest restaurant deal since 2014.

Inspire Brands, which runs a portfolio of around 11,000 restaurants around the world, including Arby's, Sonic and Buffalo Wild Wings, said late Friday that it will pay $106.50 per share for Dunkin' Brands, which owns both the coffee and donut chain as well as Baskin Robbins ice cream stores.

The purchase price represents a 20% premium to Dunkin's share price on October 23, when news of the deal was first reported by the New York Times and value the group at around $11.3 billion, including debt.

“We are excited to bring meaningful value to shareholders who have been with us on this journey and believe that Inspire Brands, a preeminent operator of franchised restaurant concepts, will continue to drive growth for our franchisees while remaining true to all that is unique and special about the Dunkin’ and Baskin-Robbins brands,” said CEO Dave Hoffmann. 

Dunkin Brands shares were marked 6.3% higher in early afternoon trading Monday to change hands at $106.02 each, a move that extends the stock's six-month gain to around 70%.

Last week, Dunkin said third quarter sales rose nearly 2% to a Street-beating $361.5 million thanks in part to menu changes and curbside pickup options that boosted traffic amid the summer coronavirus pandemic. 

"Inspire’s acquisition of Dunkin’ will be the largest deal in the restaurant industry since Burger King’s purchase of Tim Hortons in 2014," said KeyBanc Capital Markets analyst Eric Gonzalez, who lowered his rating on the stock to 'sector weight' following news of the Inspire deal. "While we do not expect to see further deals of this magnitude anytime soon, we do wonder whether this transaction is the first of others in the industry.

"Struggling brands can be had at a discount, interest rates are low, and COVID-19 is the ultimate stress test for survival," he added. "Within our coverage list, we believe Papa John’s may be on Inspire Brands' wish list. However, Dunkin’s purchase makes it less likely in the near term."