Jack in the Box (NASDAQ:JACK) is buying Del Taco (NASDAQ:TACO), the second-largest Mexican fast-food chain in the U.S., in a deal valued at roughly $575 million.
The burger chain will pay $12.51 per share in cash for the acquisition. Del Taco stock closed Friday at $7.53 per share. Jack in the Box plans to finance the acquisition by issuing additional securitization notes.
"This is a natural combination of two like-minded, challenger brands with outstanding growth opportunities," Jack in the Box CEO Darin Harris said in a statement. "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."
Shares of Jack in the Box were down $5.85, or 7%, in early Tuesday trading, to $78.15. Jack in the Box’s stock has fallen 9% this year, giving it a market value of $1.82 billion. Del Taco shares surged nearly 65% to $12.36 per share in pre-market trading, bringing its market value from $274 million to $450 million.
Del Taco has a footprint of roughly 600 restaurants across 16 states, making it the second-largest Mexican fast-food chain by number of restaurants behind Yum Brands’ Taco Bell. In its third quarter, it earned 11 cents per share, after adjustments, on revenue of $124.3 million.
The combined company will have more than 2,800 locations across 25 states. The purchase is expected to close in the first three months of 2022.
TACO shares soared $4.87, or 64.6%, $12.40.
