Why Buffalo Wild Wings Stock Soared Today

What happened

Actions of Wild buffalo wings (NASDAQ:BWLD) were up 25.2% as of 12:30 p.m. EST Tuesday after the sports restaurant chain received a spicy takeover offer. According to a report (may require subscription) from The Wall Street Journal This morning, private equity firm Roark Capital recently offered to acquire Buffalo Wild Wings for more than $150 per share in a deal worth more than $2.3 billion.

IMAGE SOURCE: WILD BUFFALO WINGS.

So what

That represents a premium of at least 27% over Buffalo Wild Wings’ closing price on Monday. But it also remains well below BLWD’s 52-week high set last December at just over $175 per share. The stock has plunged over the past year due to several quarters of soaring wing costs and declining same-restaurant sales.

It’s also no surprise that Roark Capital wants to pounce when Buffalo Wild Wings is hot. In June, activist investor Marcato Capital began exerting its influence over the company, pushing for cost-cutting initiatives and an ambitious refranchising effort after winning enough votes to name three new representatives to its board of administration. Then, late last month, B-Dubs stock soared after its third-quarter 2017 results beat expectations thanks to these initiatives.

Now what

Buffalo Wild Wings has yet to return to comparable sales growth. Although revenue last quarter rose a modest 0.5% year-over-year, that growth was entirely driven by new locations, with revenue falling 2.3% and 3.2% at company-owned restaurants. company and franchisees, respectively.

But it also creates a delicious opportunity. When Buffalo Wild Wings finally returns to sustained, profitable growth, both through positive comps and restaurant expansion, its shares will reward patient investors accordingly. So don’t be surprised if Buffalo Wild Wings rejects Roark Capital’s offer or wants to come back to the table and get an even higher buyout premium.

Either way, before hitting the “sell” button, shareholders would do well to sit tight and see how Buffalo Wild Wings management reacts.

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Steve Symington owns shares of Buffalo Wild Wings. The Motley Fool owns and recommends shares of Buffalo Wild Wings. The Motley Fool has a disclosure policy.