NEW YORK (CNNfn) - The "Golden Arches” are adding a home-style chicken chain to the roost.|
A subsidiary of McDonald’s Corp agreed Wednesday to buy most of Boston Chicken Inc. for $173.5 million in cash and debt, as the restaurant franchiser works to emerge from bankruptcy.
Oak Brook, Ill.-based McDonald’s (MCD), the world’s biggest fast-food chain, said its Golden Restaurant Operations division will purchase 751 restaurants and the rights to another 108 sites that are operated under the Boston Chicken and Boston Market names as part of the deal.
For McDonald’s, the deal offers a niche player in the market for home style entrées, in the segment known as the home-meal replacement market, said McDonald’s top executive in a statement.
"The [Boston Chicken] brand is well-established, with excellent employees, quality products, loyal customers and future growth potential,” said Jack Greenberg, chairman and CEO of McDonald’s.
But one analyst said the leading benefit for McDonald’s is the hundreds of Boston Market locations that are already zoned for restaurant use, which the fast-food giant can use as it sees fit - for either its eponymous restaurants or newly acquired Donatos Pizza or Chipotle Mexican Grill chains.
"It’s as close to a fire sale as possible,” said Paul Westra, an analyst at CS First Boston, adding that McDonald’s has little to lose. "At worst, these sites are going to be converted into McDonald’s, Donatos Pizzas or Chipotle Grills.”
In the take-out dining market, Westra added, "Boston Market isn’t the right business model to follow - because it’s bankrupt - but [McDonald’s] can learn a lot.”
Boston Chicken, which filed for bankruptcy protection last year, said its ability to draw the world’s best-known restaurant brand was a credit to its reorganization plan. Golden, Colo.-based Boston Chicken said it will announce further details about that reorganization plan later this month.
Boston Chicken said it has debt obligations of more than $900 million. Its 54-percent ownership stake in the Einstein/Noah Bagel Corp. chain is not included in the McDonald’s deal.
Shares of McDonalds, one of the 30 stocks in the Dow Jones industrial average, climbed 29/32 to 46-5/8 in Wednesday afternoon trading.