Potbelly is getting bought by convenience store operator RaceTrac in a roughly $566 million deal as the sandwich shop chain looks to accelerate its growth from 445 to 2,000 locations.
Chicago-based Potbelly said Wednesday it reached a definitive merger agreement in which RaceTrac, headquartered in Atlanta, will commence a tender offer for all Potbelly outstanding stock at $17.12 per share in cash. The deal, expected to close in the fourth quarter, will have an equity value of about $566 million.
Potbelly, founded more than 40 years ago and known for its toasty sandwiches, has a fleet of company and franchise-owned shops in neighborhoods across the United States. Family-owned RaceTrac is one of the nation's largest privately held companies, operating more than 800 convenience stores across 14 states under the RaceTrac and RaceWay brands and about 1,200 Gulf-branded gas stations across the country. It’s the nation's 14th-largest convenience store chain, according to the National Association of Convenience Stores.
The deal is the latest of several sandwich shop acquisitions that give the chains financial backing from deep-pocketed buyers to supercharge their expansion. In 2023, private equity firm Roark Capital bought Subway for $9.6 billion. And Jersey Mike’s Subs was acquired last year by Blackstone for a reported $8 billion.
“We have positioned Potbelly for accelerated franchise-led growth in recent years, and this transaction fortifies our path while delivering certain and immediate value to our shareholders,” Potbelly President and CEO Bob Wright said in a statement. “With RaceTrac’s resources, we will unlock new opportunity for this incredible brand while staying true to the neighborhood sandwich shop experience that makes Potbelly special.”
More than 105 of Potbelly’s 445 shops are franchises. The company said its long-term goal is to have 2,000 locations.
“We are proud of Potbelly’s legacy as a beloved neighborhood sandwich shop,” RaceTrac Chairman and CEO Natalie Morhous said in a statement.
Convenience stores, meanwhile, are racing to grow real estate footprints across the United States by expanding into new states and designing larger buildings to accommodate a greater emphasis on food and beverage sales. Operators of all sizes, from powerhouses 7-Eleven and Murphy USA to smaller, regionally focused chains such as Weigel's, are plotting expansion strategies. Wawa this month said it opened its first store with amenities for truckers near Fayetteville, North Carolina.
Similar strengths
Potbelly and RaceTrac executives said the firms have complementary strengths as multiunit, multimarket businesses with core competencies in real estate, franchising, operations, food innovation and marketing.
“A combined RaceTrac and Potbelly are positioned to amplify their growth,” the sandwich chain said.
Wright told The Wall Street Journal that Potbelly and RaceTrac will operate as separate brands after the deal closes, with no plans to put Potbelly in "every" RaceTrac location.
Potbelly didn’t respond to an email from CoStar News seeking comment.
Under the terms of the merger agreement, Hero Sub, a subsidiary of RaceTrac, will commence a tender offer to acquire all outstanding shares of Potbelly for $17.12 per share in cash.
The $17.12 paid is about 47% more than Potbelly’s 90-trading-day volume-weighted average price as of Sept. 9.
For the record
BofA Securities acted as exclusive financial adviser, and Kilpatrick Townsend & Stockton served as legal adviser to RaceTrac. Piper Sandler was as financial adviser, and Kirkland & Ellis acted as legal adviser, to Potbelly.