Why did Bojangles’ sell itself? New document provides more insight

Biscuit making at Bojangles

Bojangles Regional Vice President Mike Burns explains the restaurant chain's unique and meticulous 48-step process for making biscuits in one of its new biscuit theaters.
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Bojangles Regional Vice President Mike Burns explains the restaurant chain's unique and meticulous 48-step process for making biscuits in one of its new biscuit theaters.

Before announcing plans to sell itself in November, Bojangles’ had been considering alternative options for its future for more than a year.

A securities filing Friday showed that between October 2017 and January 2018, several third parties contacted board members affiliated with Bojangles’ majority stockholder, Advent International, to ask about the company’s interest in “a strategic transaction.”

The filing outlines the sequence of events that ultimately led to Bojangles’ decision to sell itself to two New York firms, Durational Capital Management LP and The Jordan Company LP, drawing to a close months of speculation about the fate of the Charlotte chain that has struggled in the years since going public.

From October 2017 to October 2018, Bojangles’ board received five preliminary indications of interest in some sort of deal, including unsolicited inquiries, according to the filing. Bojangles’ doesn’t name all of the parties involved but did say they included “both strategic parties and financial sponsors.” In other similar deals, this has meant either other restaurant groups, as well as investment managers such as private equity firms.

According to the merger agreement, which still has to be approved, Bojangles’ shareholders will receive $16.10 per share.

But the filing indicates that at one point last spring, Durational submitted a preliminary non-binding indication of potential interest to buy the company at a per-share price of $17.50. After some back and forth this summer, and after “its evaluation of due diligence,” Durational and The Jordan Company revised their offer to $15.50 a share, a price that Bojangles’ rejected. The two firms landed on their $16.10 price on Oct. 17.

Bojangles’ said its board considered a number of factors in its decision to sell the company, including the “risks and uncertainties” of remaining an independent, standalone company; the open CEO position (Clifton Rutledge stepped down as CEO abruptly in early March); the geographic concentration of Bojangles’ restaurants in the Southeast; and Bojangles’ ability to open restaurants in new markets and expand its franchise base.

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Bojangles’ has struggled since it went public in 2015, prompting speculation about a sale in recent months. For instance, some of the new markets in which it’s opened restaurants haven’t performed as well as the ones in core regions like the Carolinas, where the Bojangles’ name is well-known.

Representatives from Durational, The Jordan Company and Bojangles’ could not be reached for comment.

Here are some of the key milestones in the Bojangles’ deal, according to the filing:

In early February, Bojangles’ board considered several investment banks and signed confidentiality agreements with Bank of America Merrill Lynch and “another major investment banking firm” to act as advisers.

When looking at the options for Bojangles’, the chain’s advisers compared its financial health with that of other competitors in the quick-service restaurant industry, including Del Taco Restaurants, Jack in the Box and Zoe’s Kitchen.

At a board meeting Feb. 27, the board of directors formed a subcommittee to consider options for Bojangles’ future. The subcommittee was headed by Bob Hull, who had announced his retirement as the chief financial officer of Lowe’s in January.

The committee, called the “Strategic Alternatives Sub-Committee,” met nearly two dozen times over the course of the year to discuss the sale. The committee also considered what Bojangles’ future would look like if it remained an independent, public company.

According to the merger agreement, if Bojangles’ terminates the deal, it would have to pay a fee of $24 million to Durational and The Jordan Company. If the two acquiring firms back out of the deal, they would have to pay Bojangles’ a termination fee of $45 million.

Katherine Peralta: 704-358-5079, @katieperalta