The U.S. Federal Trade Commission is investigating Roark Capital’s proposed $10 billion buyout of Subway, according to Politico, which cited several anonymous sources. The investigation is reportedly evaluating whether Roark’s purchase would lead to a sandwich chain monopoly, since Roark also owns Arby’s, Jimmy John’s, McAlister’s Deli and Schlotzsky’s under Inspire Brands.
Roark entered a definitive agreement to buy Subway in August after the sandwich chain was on the market for several months. Subway has deployed several strategies to help bolster sales and grow unit counts, including investing $80 million to install deli meat slicers in 20,000 restaurants as part of its fresh-sliced deli meats menu. It also shifted its focus from single-unit owner/operators to multi-unit franchisees, and has reinvented its menu. Roark, which has $37 billion in assets under management, would provide additional capital to support Subway’s growth plan, so an investigation will slow down the sales process.
The investigation likely started early this month and a resolution could be months away, according to Politico. The FTC could “sue to block the merger, reach an agreement with the companies that alleviates its concerns, or take no action at all,” Politico reports. The FTC will review if segment competition will be harmed by this deal. Subway is the top sandwich chain in the country based on sandwich sales, but Jimmy John’s, Arby’s and McAlister’s Deli are also in the top 10.
The FTC has been investigating other large deals of late, including the $24 billion-plus Kroger/Albertsons merger.