Subway Looking for Buyers in Potential $10 Billion Deal

The closely held sandwich chain is exploring a sale for $10 billion or more

By
Igor Greenwald
Igor Greenwald
Full Bio
Igor is an experienced finance journalist. He has covered U.S. and global financial markets, business, and economics as an editor and columnist for more than two decades.
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Published January 12, 2023
Subway sandwich shop
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Subway, the largest U.S. restaurant franchise with 21,000 U.S. stores and 37,000 worldwide, is reportedly looking into finding a buyer for the company in a deal that would value the firm at over $10 billion, according to exclusive reporting by the Wall Street Journal.

Key Takeaways

  • Privately-held Subway is exploring a sale that could value the sandwich chain at more than $10 billion.
  • Corporate as well as private equity buyers may bid for the largest U.S. restaurant chain by number of outlets.
  • Subway grew rapidly but its fortunes have declined in recent years amid store closings and mounting competition.
    A Subway deal would likely be the largest U.S. M&A transaction announced since Elon Musk offered $44 billion for Twitter.

A privately-held firm, Subway is in the early stages of considering a sale after retaining advisers. The company could draw bids from corporations as well as private equity firms.

The reported $10 billion valuation amounts to slightly more than its 2021 revenue of $9.4 billion. That was up 13% from the prior year but down by roughly half from its 2012 peak, amid store closures and mounting competition.

Expressed in terms of the $5 footlong Subway sandwiches lined up end-to-end, $10 billion would stretch to the Moon and most of the way back down. The long-running promotion, a loss leader, juiced growth of the Subway franchise. But the promotion's cost and Subway's high rate of royalties on franchisees' sales proved unsustainable, leading to an eventual decline. Subway received lots of bad publicity when an Australian teen discovered his footlong only measured 11 inches, and again when the chain's longtime spokesman Jared Fogle went to prison after a child pornography conviction.

Mergers and acquisitions (M&A) slowed dramatically last year amid rising interest rates, which have made financing big deals much more expensive. The value of such deals globally was down 37% year-over-year (YOY) as of late December. If Subway goes through with the sale, it would be the largest U.S. M&A deal since Elon Musk agreed to buy Twitter for $44 billion in April.

Fast food industry fortunes and equity valuations are often volatile. The share price of Chipotle Mexican Grill (CMG) has nearly quadrupled over the last four years. Conversely, Domino's Pizza (DPZ) is down 40% from its high in late 2021.

Article Sources
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  1. Subway. "The Subway Story."

  2. The Wall Street Journal. "Subway Explores Sale That Could Value Sandwich Chain at More Than $10 Billion."

  3. The Hustle. "The Rise and Demise of Subway’s $5 Footlong Promotion."

  4. Reuters. "Dealmakers Brace for Slow 2023 Recovery After Global M&A Sinks."

  5. Intellizence. "Largest Mergers and Acquisitions ( M&A) Deals Data."

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