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Why Zoe's Kitchen Shares Are Soaring Today

By Anders Bylund – Aug 17, 2018 at 3:17PM

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The Mediterranean restaurant chain is going private in a $255 million buyout, led by Panera chairman Ron Shaich.

What happened

Shares of Zoe's Kitchen (ZOES) jumped sky-high on Friday as the fast-casual restaurant chain agreed to a buyout offer from privately held sector rival CAVA Group. The stock quickly settled down to trading right in line with CAVA's offer of $12.75 per share, which represents a 33% premium over Thursday night's closing price.

So what

Fellow Mediterranean restaurant chain CAVA will quadruple its restaurant network if and when the Zoe's deal closes, adding up to 327 locations across 24 U.S. states. The company is getting some financing help for its all-cash offer from private equity fund Act III Holdings, led by Panera chairman and co-founder Ron Shaich. CAVA CEO Brett Schulman is taking the executive reins of the combined company, while Shaich plans to serve as chairman of the board.

Artist painting a mural on a gray concrete wall, featuring one large yellow fish that is about to swallow a smaller yellow fish.

Image source: Getty Images.

Now what

Act III already holds a significant ownership stake in CAVA Group and Ron Shaich is a member of that company's board of directors. I think it's fair to characterize this deal as part of Shaich's return to the restaurant sector's limelight.

But that's all in the private sector now, assuming that Act III and CAVA are allowed to close this deal. Following Zoe's rough first-quarter report in May, its investors will be getting a quick 30% boost and a chance to walk away with their returns roughly where they were 52 weeks ago.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zoe's Kitchen. The Motley Fool has a disclosure policy.

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