How were the transaction costs associated with the acquisition of Del Taco funded?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
were excluded from the purchase price. The awards which are subject to continued service will be recognized ratably as stock-based compensation expense over the requisite service period.
The acquisition of Del Taco was funded by cash on hand and borrowings under our 2022 Class A-2 Notes and 2022 Variable Funding Notes. The Company recognized transaction costs of $12.3 million in fiscal 2022. These costs were associated with advisory, legal, and consulting services and are presented in "Other operating expense, net" in the consolidated statement of operations.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, the acquisition of Del Taco was funded through a combination of existing cash reserves and new debt. Specifically, Jack in the Box used cash on hand and proceeds from its 2022 Class A-2 Notes and 2022 Variable Funding Notes to finance the purchase. In fiscal year 2022, Jack in the Box recognized $12.3 million in transaction costs related to advisory, legal, and consulting services, which were categorized as "Other operating expense, net" on the consolidated statement of operations. Additionally, Jack in the Box funded $7.1 million of seller transaction costs related to Del Taco.
To facilitate the acquisition, Del Taco's existing debt of $115.2 million related to a syndicated credit facility was repaid. Del Taco then entered into a new syndicated credit facility with an aggregate principal amount of up to $75.0 million, maturing on February 28, 2025. Jack in the Box also secured commitments for a bridge financing facility of up to $600.0 million, though no amounts were drawn under this facility, as it was terminated following a securitization refinancing transaction. The company expensed approximately $2.1 million for the unamortized issuance costs associated with the bridge commitment, which is presented as "Interest expense, net" in the consolidated statement of operations.
For a prospective Del Taco franchisee, this financial restructuring highlights the level of investment and financial activity involved in the acquisition. The details about debt repayment, new credit facilities, and transaction costs provide insight into the financial obligations and strategies of the parent company, Jack in the Box. Understanding how the acquisition was financed can help franchisees assess the financial stability and long-term commitment of Jack in the Box to the Del Taco brand. The franchisee should also note that the unaudited pro forma financial information may not be indicative of future results due to various factors, including cost savings, synergies, and integration costs.