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Why Dunkin' Stock Soared 16% Today

By Howard Smith – Oct 26, 2020 at 11:06AM

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The parent of Dunkin' and Baskin-Robbins confirms it is in talks to be acquired.

What happened

Shares of Dunkin' Brands Group (DNKN) soared 18% at the market open today, and remain up 16% at 10:30 a.m. EDT, after it acknowledged it is in talks to be acquired and go private. Other than announcing that it is in preliminary discussions, the company said it would not comment any further unless or until an agreement is reached or talks are ended. 

So what 

The New York Times reported this weekend that Inspire Brands, the privately held owner of Arby's and Jimmy John's, may acquire Dunkin'.

dunkin' donuts, coffee and food displayed with brand on side of building

Image source: Dunkin' Brands Group.

The report says Inspire Brands would be taking Dunkin' private at a price of $106.50 per share, which represents a 20% premium to Friday's closing price. 

Now what

A deal would add to the Inspire Brands portfolio that also includes Buffalo Wild Wings, Rusty Taco, and Sonic. Inspire currently reports total annual sales of $14.6 billion, including franchised locations. Dunkin' Brands stores, which are all franchised, reported 2019 revenue of $1.37 billion.

The COVID-19 pandemic has impacted consumer discretionary spending patterns, but Dunkin' has said its business has navigated the change successfully. Though its comparable-store sales declined 18.7% in its second quarter ended June 27, 2020, sales improved sequentially throughout those months. 

The company introduced new menu items to reflect the change in business conditions, as it said customers were visiting locations later in the day during the pandemic. It maintained drive-thru and online ordering at most of its locations throughout the time period. It also announced plans to close about 800 of its least profitable U.S. locations. Dunkin' next reports earnings this Thursday, Oct. 29. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends Dunkin' Brands Group. The Motley Fool has a disclosure policy.

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