Jack in the Box to buy fast-food competitor Del Taco

Jack in the Box Inc. decided to buy Del Taco Restaurants Inc., a fast-food competitor that is popular with late night diners. The burger chain's shares slumped on the news.

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Jack in the Box will pay $12.51 a share in cash for Del Taco, a Mexican-inspired food brand based in the southwest U.S., representing a 66% premium over the closing price on December 3. The total transaction was valued at $575 million, including existing debt, according to a statement Monday.

The deal expands the reach of two chains that are largely in the shadows of larger rivals such as McDonald's Corp. and Yum! Taco Bell is owned by Brands Inc. Jack in the Box, which has embraced an outsider image and offers quirky promotions, including a $4.20 dinner, already offers cheap tacos on its menu.

Darin Harris, Jack in the Box's chief executive officer, said in a statement that this is a natural combination of two like-minded, challenger brands with outstanding growth opportunities.

Del Taco shares went up 65% to $12.39 at 9: 41 a.m. in New York. Jack in the Box fell by 7.3% since September of 2020, the biggest intraday decline since September of 2020.

The deal is expected to close in the first quarter. Jack in the Box will finance the deal through the issuance of notes under an existing program. It received a funding commitment from BofA Securities.

BofA Securities is serving as financial adviser to Jack in the Box and Gibson is serving as a legal adviser. Dunn Crutcher LLP is serving as a legal adviser. For Del Taco, Piper Sandler Co. is serving as financial adviser and McDermott Will Emery LLP is serving as a legal adviser.

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