Sandwich shop Potbelly to be acquired

Throughout its 40-year history, Potbelly Sandwich Works has grown to 445 units—including more than 105 franchised shops—with the ultimate goal of expanding to 2,000 units.

That goal seemed far fetched until now. With an acquisition agreement signed by Potbelly’s board of directors this week, the sandwich chain can eventually more than quadruple its unit count but under new ownership by RaceTrac, Inc., one of the largest privately held companies in the United States and a leading convenience store operator.

Under the terms of the agreement, Hero Sub Inc., a wholly-owned subsidiary of RaceTrac, will commence a tender offer to acquire all outstanding shares of Potbelly in cash at a 47% premium to Potbelly’s 90-trading-day average share price. All of Potbelly’s directors and executive officers have agreed to tender their shares, representing approximately 11% of Potbelly’s outstanding common stock.

Potbelly first went public in 2013. As of the announcement, Potbelly brings to the deal signed agreements with franchisees to open 371 additional units notwithstanding the acquisition.

Hero Sub, Inc. is not an operational sandwich shop, but rather a temporary subsidiary that RaceTrac created for its acquisition of Potbelly. Upon completion of the acquisition, Hero Sub will merge into Potbelly, and Potbelly will continue to operate as a separate restaurant brand but as a wholly-owned subsidiary of RaceTrac.

RaceTrac operates more than 800 c-stores across 14 states under the RaceTrac and RaceWay brands, as well as operating approximately 1,200 Gulf-branded gas stations across the United States and Puerto Rico.

Potbelly President and CEO Robert "Bob" Wright told The Wall Street Journal, which first broke the story, that their strategy isn’t necessarily to put a Potbelly in every RaceTrac. RaceTrac appears to be moving away from a pure-play c-store operator and becoming more of a conglomerate of consumer brands.

Read more: Sandwich chain Potbelly looks to fuel expansion with new owner RaceTrac (CoStar News)