Del Taco to be bought by Jack in the Box in $575 million deal

Jack in the Box was all set on its next big leap by acquiring Del Taco for $575 million. While the acquisition also includes debt assumptions, this deal combines two long-standing Southern California fast-food restaurants.

In early 2022, the acquisition was set to be fully completed. In addition, this would bring 2,800 more restaurants to Jack in the Box. Which is ranging to about 25 states.

As the acquisition merges the two Southern Californian restaurant brands, their goal is to achieve $15 million worth of cost savings in the next two years. Moreover, Jack in the Box also aims to grow their profit margins through a boost in bulk buying potentials.

The merger also gives the Jack in the Box franchisees their chance to touch a Mexican food market to add restaurants. Perhaps with better and competitive market movement in certain cities and lower development costs, adding more franchises is feasible.

Jack in the Box CEO Darin Harris on the company's deal with Del Taco and its outlook for 2022:https://t.co/Jb7k9twFHf pic.twitter.com/iBl2BpHrV7

— Yahoo Finance (@YahooFinance) December 7, 2021

The head of Pacific Management Group John Gordon said, “The point the company made is that two quick-service restaurants are better than one, and I can see some logic in that. This provides the potential for the franchisees of each brand to co-invest, particularly the Jack in the Box franchisees, who have had a good couple of years.”

Jack in the Box will pay $12.51 per share for Del Taco which is based in Orange County. While both of them are successful regional brands, most of their restaurants are in the same state. Which won’t give the acquisition a lot of geographic expansion in challenging fast-food giants Taco Bell and McDonald’s.

Sales outlook

Gordon added, “The bear case here is that you’re paying $575 million for more Californian markets and California expansion for your franchisees.”

Jack in the Box, which still does its famous free tacos promotion with the Lakers, has bought Del Taco for $575 million. pic.twitter.com/CfEcVptjQN

— Arash Markazi (@ArashMarkazi) December 7, 2021

Regardless, the deal is still set to increase Jack in the Box’s earnings and help aim the company’s goal of increasing its restaurant markings by 4% each year starting in 2025. If achieved, the company is on its way to becoming a national brand.

According to the Associated Press, Del Taco’s shares soared at 66% after the news of the merger came out. Del Taco is popular for their Mexican dishes like tacos, nachos, and burritos. Though they also offer hamburgers and crinkle fries.

While Jack in the Box is a fast-food hamburger chain outside of California. However, its menu offers a variety of food. They also offer egg rolls, teriyaki bowls, and tacos.

Jack in the Box CEO Darin Harris said, “Del Taco has a loyal, passionate guest base and a strong operating model, and we believe that we can leverage our infrastructure, experience in refranchising and development strategy to support Del Taco’s growth plans and expand Del Taco’s footprint.”

As Jack in the Box’s success continued, the company also bought and sold another Mexican food chain, Qdoba.