Apollo to buy Chipotle rival for $305M

Apollo Global Management has agreed to buy Mexican restaurant chain Qdoba from Jack in the Box for about $305 million in cash. The deal is expected to close by April 2018, and funds from the transaction will be used to pay off the San Diego-based company’s outstanding debt.

Founded in Denver in 1995 and acquired by Jack in the Box in 2003, Qdoba has expanded over the years to more than 700 locations in the US and Canada. The Chipotle rival garnered more than $820 million sales in fiscal 2017, but sales at stores open for one year or more have reportedly dropped 1.4% over the same period. (Also hurting profit margins was the 50% increase in avocado prices, according to USA Today.) But Qdoba could be well positioned to capitalize off a bigger menu than Chipotle and lingering effects from the latter company’s outbreaks of foodborne illnesses such as E. coli, per Business Insider.

This type of deal is not common ground for Apollo. The firm has conducted just 6.2% of its deals in the restaurants, hotels and leisure sector since 2010, per the PitchBook Platform. More broadly, however, Apollo has been drawn back to B2C companies in recent years, with 25% of its deals this year in the sector, a 29.2% YoY increase and its highest mark since 2013.

However, what Apollo has lacked in frequency in this sector, it has made up for in size. While global PE activity in restaurants, hotels and leisure has declined, Apollo has struck billion-dollar deals in the space in each of the past two years. In September, the New York-based firm bought ClubCorp, an operator of more than 200 golf and country clubs, business clubs, sports and alumni clubs, for about $1.1 billion. The deal came a year after Apollo purchased Diamond Resorts, an operator of timeshare resorts, for roughly $2.2 billion.