The fast-food sandwich chain is accelerating its “for sale” mode with a new debt financing package.
When Subway announced in February it was exploring a sale, company financial analysts pegged the sale at $10 billion.
That was then and this is now.
In the last few months, the fast-food sandwich chain hasn’t received any qualified bites on the $10 billion price tag, although some offers are in the neighborhood at $8.5 billion, sources have told CNBC. Company insiders reportedly point to continued high inflation and a looming recession as the primary reasons Subway can’t get its full sale price.
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To get to that $10 billion figure, Milford, Ct.-based Subway is taking matters into its own hands with a new $5 billion debt financing plan designed to attract buyout companies who can leverage the debt deal to structure an offer that gets them to $10 billion, but with lower financial risk.
The deal was put together by JPMorgan, which is handling the Subway sale.
The debt financing plan morphs “a combination of loans and bonds that’s equivalent to 6.75 times Subway’s 12-month earnings before interest, taxes, depreciation, and amortization (EBITDA), which is approximately $750 million,” according to BestStocks.com.
“JPMorgan Chase & Co is hopeful that the $5 billion debt financing package will demonstrate to buyout firms they can borrow enough to structure an attractive deal, even at a $10 billion-plus valuation,” BestStocks reported.
A new bidding round has apparently thinned out the contenders seeking to buy Subway, with the company shedding the lowest bidders and turning their attention to a handful of big-name private-equity firms, including Bain Capital, Advent International, and TDR Capital.
Subway is fighting an uphill battle for the younger customers it needs to compete in the highly-competitive fast-food market. The company’s staid image and conventional menu are getting an upgrade, however, with two new sandwiches appearing on the menu – the #19 Pickleball Club and the #33 Teriyaki Blitz.
Older sandwiches like the #18 Ultimate BLT and the #23 Hotshot Italiano are getting a makeover, as well.
In a nod to the younger set, the company is also bringing the Dancing with the Stars duo Maksim (Maks) and Valentin (Val) Chmerkovskiy in a new ad campaign to tout their “decade-long love of Subway’s Italian B.M.T. and Sweet Onion Teriyaki” sandwiches.
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This story was originally published May 1, 2023, 11:27 AM.
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