Jack in the Box to Acquire Del Taco for $557 Million

This is an English adaptation of a FoodBud historical article originally published on December 7, 2021.

Jack in the Box said it would acquire Del Taco, the second-largest Mexican fast-food chain in the United States, in an all-cash transaction valued at $557 million. The company planned to pay $12.51 per share, with the deal expected to close in early 2022.

Following the announcement, Del Taco’s share price rose 66%, while Jack in the Box shares fell 4% to $80.50.

Why Del Taco Fits Jack in the Box

Jack in the Box began in 1951 as a roadside restaurant. By 1960, it had established Foodmaker Inc. as a holding company and had grown to 180 restaurants, mainly in California. It began franchising in 1968 and became a public company in 1987, when it had 897 locations.

The brand originally competed more directly with McDonald’s, but from the 1980s expanded beyond burgers into items such as burritos, tacos, salads and sandwiches.

Jack in the Box has grown to more than 2,200 restaurants across 21 U.S. states. Del Taco has around 600 restaurants and is the second-largest Mexican fast-food chain after Taco Bell.

Together, the two companies said the combined system would have more than 2,800 restaurants across 25 U.S. states, giving it greater scale to compete with larger chain operators.

Drive-Thru Was a Key Deal Rationale

Jack in the Box had previously acquired Mexican fast-food chain Qdoba in 2003, but later sold it to Apollo Global Management for $305 million in 2017, with the transaction completed the following year.

Jack in the Box CEO Darin Harris said Del Taco was a better fit than Qdoba, largely because Del Taco’s stores include drive-thru lanes, which became especially important after the pandemic. At the time, 99% of Del Taco restaurants had drive-thrus, compared with 90% of Jack in the Box restaurants.

Digital, Loyalty and Integration Plans

Jack in the Box expected to reach a 4% annual restaurant growth rate by 2025.

Both companies had already made progress in digital and loyalty programs. On Jack in the Box’s latest earnings call, the company said fiscal 2021 digital sales increased 90.6%, while its loyalty program helped lift app downloads by 61%.

Jack in the Box also expected to establish a joint management office with members from both companies to study how the two brands could share resources.

Part of a Wider Portfolio Expansion Trend

The acquisition came as several restaurant groups were expanding their brand portfolios. Restaurant Brands International, owner of Burger King, Popeyes and Tim Hortons, had recently agreed to acquire sandwich chain Firehouse Subs. FAT Brands, owner of Johnny Rockets and Fatburger, had also announced plans to acquire Native Grill & Wings.

Note: acquisition, share-price and 2025 target figures are historical, based on the article’s December 2021 reporting.