Succession failed: Family business at Subway is coming to an end after 60 years, private equity firm finalises deal

Subway is selling itself to private equity firm Roark Capital after nearly 60 years of family ownership. The very private owners and heirs of the American fast food chain are about to feast on a footlong fortune coming their way all in cash. 

• Picture Succession's Pierce family trying to sell PGM, and that comes close enough to the Subway sale. Subway is plagued by a massive US footprint of restaurants, so much so that they started to cannibalise their own sales. 

• The Subway owners were trying to go for $10 billion, but private equity firms pegged the valuation lower given the saturated US market. 

The deal

• Roark Capital, which owns several fast food chains across the US including Dunkin' Donuts, Baskin Robins, Arby's, and Buffalo Wild Wings, has reportedly agreed to buy Subway for up to $9.55 billion, subject to financial performance in the coming few years. 
• Reuters and The Wall Street Journal reported that the deal includes an "earnout" structure, meaning that a part of the price tag depends on the chain meeting financial goals. 
• WSJ reported that owners will get at least $9 billion up front, with another $600 million tied in the earnout structure. 

• Subway started the auction in February, receiving interest from several private equity players, with Roark Capital coming out as the winner. 
• Roark reportedly faced stiff competition from TDR Capital and Sycamore Partners, whose final deal was $8.75 billion with an earnout structure or $8.25 billion without an earnout. 
• If the deal runs into trouble from anti-trust regulators, Roark Capital has agreed to pay Subway owners a break-up fee of about 4% of the deal's value. A break-up fee is a compensation in case the buyer backs out of a deal. 

Subway was founded in 1965 by 17-year-old Fred DeLuca and his family friend Peter Buck. Neither Fred nor Peter are alive today. 

Fred DeLuca left his 50% share of the company to his wife, Elisabeth DeLuca, who has one son Jonathan. 

On the other hand, Peter Buck donated 50% of his stake to his family foundation which shields his two possible heirs, his sons Christopher and William, from nearly a $2 billion tax bill.