Editors' pick: Originally published Nov. 7.
Could an activist hedge fund drive Dunkin' Brands (DNKN) to put itself on the market?
At least one analyst following the fast-food donut and restaurant chain believes the answer is yes. John Gordon, restaurant analyst at Pacific Management Consulting, suggests that an activist at Dunkin' Brands could agitate for a sale of the chain, and that Yum! Brands (YUM) might be a possible buyer now that it has completed the separation of its China business. Yum!, the company behind Taco Bell, Kentucky Fried Chicken and Pizza Hut, completed the spinoff of its China unit on Nov. 1.
For Gordon, a Yum! acquisition of Dunkin' Brands would help boost the donut company's international growth. Yum! is already subject to an activist that is likely looking for more growth-oriented deal-making. And the restaurant chain has the infrastructure and expertise in place to help Dunkin' Brands expand its franchised model successfully.
"Dunkin' Brands hasn't been successful internationally," Gordon said. "Yum! would have the international infrastructure and business development expertise in place so it could slide Dunkin' Brands into its existing organization."
Dunkin' Brands currently has roughly 5,000 Baskin-Robbins and 3,000 Dunkin' Donuts locations outside of the U.S., which, as a group, haven't performed well lately, posting negative same-store sales for the past three quarters. Gordon noted that it opened 11 Dunkin' Donuts International locations in the third quarter, a low number signaling weakness.
Would Yum! be interested in making a major acquisition? It's a serious possibility. Yum! CFO David Gibbs told an investor conference on Oct. 11 that if there were an acquisition that the Louisville, Ky., company could make to "accelerate" its growth, it would "certainly be considered."