Shares of Del Taco Restaurants (NASDAQ:TACO) are up more than 60% this morning after investors were surprised with great news. It was announced that Jack in the Box (NASDAQ:JACK) is buying Del Taco, the second-largest Mexican fast food chain in the U.S.
So, what are the details surrounding this news?
The transaction will value TACO stock at $12.51 per share, implying a $575 million enterprise value. Current shareholders of TACO stock will receive $12.51 in cash per share. Combined, the two restaurants will have more than 2,800 locations in 25 U.S. states. Del Taco currently has 600 restaurants in 16 states, falling second only to Yum Brands’ (NYSE:YUM) Taco Bell in terms of number of Mexican restaurant locations.
Jack in the Box CEO Darin Harris is excited about the synergies the acquisition could bring and commented that:
“This is a natural combination of two like-minded, challenger brands with outstanding growth opportunities. Together, Jack in the Box and Del Taco will benefit from a stronger financial model, gaining greater scale to invest in digital and technology capabilities, and unit growth for both brands.”
With that said, investors are curious about the other terms of the acquisition. Let’s take a deeper dive into the details.
8 Things to Know About TACO Stock Ahead of Acquisition
- Shares of TACO stock are currently halted at the time of writing as investors digest the news.
- Jack in the Box forecasts that the acquisition will help grow its earnings per share (EPS) by mid-single digits in 2022.
- By the end of 2023, the company forecasts that it will realize about $15 million from supply-chain savings, increased digital efficiencies and intellectual property synergies.
- Additionally, both parties see the deal as complementary in regards to geographic locations and menu offerings.
- During Q3, Del Taco reported revenue of $124.3 million and adjusted EPS of 11 cents per share.
- Shares of JACK stock are down 4% today and 11% year-to-date (YTD). On the other hand, shares of TACO stock are up 38% YTD, aided by today’s massive move. Jack in the Box stated that it plans on financing the acquisition by issuing securitization notes.
- Furthermore, Jack in the Box predicts that the combined entities will benefit from a more efficient capital structure.
- The deal is expected to close during the first quarter of 2022.
On the date of publication, Eddie Pan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.