Arby's owner Inspire Brands Inc. is continuing its efforts to expand the company, announcing plans to buy Sonic Corp. in a deal worth about $2.3 billion. Sonic serves about 3 million customers every day across more than 3,600 drive-ins, according to the chain.
Inspire Brands, which renamed itself from Arby's Restaurant Group when it bought Buffalo Wild Wings and R Taco for $2.9 billion in February, says Sonic will continue to operate as an independent brand.
While Inspire Brands CEO Paul Brown referred to Sonic as "a highly differentiated brand" in a statement, calling it "an ideal fit for the Inspire family," Sonic isn't exactly entering into the deal from a position of strength.
Arby's has grown in recent years thanks in part to its "We have the meats" marketing from Fallon. But Sonic's sales in longstanding locations fell for eight consecutive quarters until the most recent, which ended Aug. 31, finally turned it around with a 2.6 percent gain.
The deal comes as restaurant chains are battling fiercely for market share. McDonald's, Burger King and others have been relying on value-priced products to lure diners. This week, Sonic is promoting a $1.99 breakfast sandwich-and-tots deal, which comes days after a $1 hot dog special.
Craving breakfast? Text "DAILY" to 876642 and get a Breakfast Toaster and Medium Tots for only $1.99 until 11am September 24th through September 28th! pic.twitter.com/AiQFCjsjs0— Sonic Drive-In (@sonicdrivein) September 23, 2018
Sonic has long advertised its drive-ins with ads from Goodby Silverstein & Partners that center on the conversations of two guys in a car, played by comics Peter Grosz and T.J. Jagodowski. Earlier this year, Jane Krakowski and Ellie Kemper were featured in some of the chain's ads.
Sonic is bigger than Arby's in both systemwide sales and number of locations, according to Technomic industry data. Sonic's systemwide sales fell 2.4 percent to $4.4 billion in 2017, while Arby's systemwide sales rose 1.3 percent to $3.6 billion. Sonic had 3,593 locations in 2017, while Arby's had 3,283, Technomic data show.
Inspire Brands has more than 4,700 Arby's, Buffalo Wild Wings, and Rusty Taco (formerly R Taco) locations. Inspire itself is majority owned by affiliates of Roark Capital Group, a firm that has other wide-reaching restaurant investments, including Auntie Anne's, Carvel, Cinnabon, Culver's, Jamba Juice, Jimmy John's and Naf Naf.
Inspire says it will pay $43.50 per share for Sonic and assume the fast feeder's debt. Sonic's shares closed at $36.61 on Monday, the day before the deal was announced, and were trading near the offer price after the deal was announced Tuesday morning.
The deal, which still needs the approval of Sonic's shareholders, is expected to close by the end of 2018. The Sonic board of directors has unanimously approved it.