Earlier in the month, Lake Forest, California-based Del Taco Holdings Inc. and Chicago-based Levy Acquisition Corp. announced that they have entered into a definitive merger agreement whereby Del Taco will become the sole direct subsidiary of LAC. Immediately following the Merger, LAC intends to change its name to Del Taco Restaurants Inc. and will continue to trade on the NASDAQ stock exchange. Prior to the merger, Restaurateur Larry Levy’s family and other new investors will make a private investment of $120-million in the equity of Del Taco. Upon the closing of LLI’s equity investment and prior to Del Taco’s merger with LAC, Levy will become Chairman of the Del Taco Board of Directors and partner with management to oversee the company’s growth and brand building. The LLI purchase price is based on a $500-million enterprise value for Del Taco, excluding transaction costs.
At the merger, a subsidiary of LAC will merge into Del Taco so that Del Taco becomes a wholly-owned subsidiary of LAC. LAC will acquire Del Taco at the same implied enterprise value as that reflected in LLI’s purchase price. The completion of the proposed business combination is subject to LAC stockholder approval and a limited number of other closing conditions. LAC expects the merger will be completed in June 2015.
Larry Levy, Chairman and Chief Executive Officer of LAC, commented, “We have been searching to acquire a growing restaurant brand for over a year and when we focused on the iconic Del Taco, we knew it was perfect. The Del Taco brand is well known in Southern California, where it originated in 1964. Del Taco and its franchisees now operate approximately 550 Mexican-American restaurants in 16 states, with the largest concentration of stores in the Pacific Southwest. Del Taco owns just over 300 of the stores with the balance of its system owned and operated by franchisees.”
Paul Murphy, President and Chief Executive Officer of Del Taco, said, “We are very excited to be partnering with Larry Levy and LAC. We have always offered the food people crave at a great value but in the last few years we changed the conversation to showcase our working kitchen, our fresh ingredients, and the amount of food preparation that takes place in every store every day – from grilling fresh marinated chicken and chopping vegetables to grating cheese from 40-pound blocks of Cheddar and slow-cooking whole pinto beans from scratch. The results to date have surpassed our expectations with growing average unit volumes and substantial margin improvement. In Del Taco’s company-owned stores, we have posted ten consecutive quarters of positive same store sales driven by balanced traffic and check growth.”
The Del Taco brand offers long-term growth opportunity with significant expansion possibilities in both established and emerging markets with a potential long-term footprint of 2000 restaurants. System-wide sales in 2014 were $656.1-million, a 5.4 percent increase over the previous year and same-store-sales were up by 5.2 percent. System-wide average unit volume was $1.2-million.
Restaurant industry veteran Larry Levy is expected to serve as the Chairman of Del Taco’s Board of Directors beginning in March. Levy co-founded Levy Restaurants in 1978 and grew it from a single Chicago delicatessen into an international food service company that generates over one billion dollars in revenue today. He sold Levy Restaurants in two stages, in 2000 and 2006. He founded Levy Family Partners LLC in 2003, a family investment business run alongside two of his sons, Ari Levy and Steve Florsheim. Since inception, Levy Family Partners has made over 200 investments, with more than half in the restaurant, hotel, resort and real estate areas. Notable restaurant operations include Blaze Pizza and Pollo Campero.
Del Taco Holdings Inc. – 25521 Commercentre Dr., Lake Forest, California 92630 (949/462-9300 www.deltaco.com)
Levy Acquisition Corp – 444 North Michigan Ave., Suite 3500, Chicago, Illinois 60611 (312/267-4190)