• by Sarah Mahoney  @mahoney_sarah, October 27, 2020

Investors are salivating over news that Inspire Brands is mulling an offer to take Dunkin' private -- and many believe the coffee-and-donut chain is a brand built to outlast the pandemic.

After the New York Times broke news of the deal brewing between the two companies, Dunkin' confirmed the "preliminary discussions." And while the Canton, Massachusetts-based chain was clear no deal has been reached yet, investors greeted the news by promptly driving the stock up as much as 18%.

Besides the 13,000-plus Dunkin' restaurants, Dunkin' Brands also owns Baskin-Robbins, which has about 8,000 stores. And Wall Street analysts believe both brands have what it takes to keep up with consumers' COVID-changed appetites.

Inspire Brands is owned by Roark Capital, a private-equity firm with a long track record of investing in multi-unit franchise companies, including Arby's, Buffalo Wild Wings, Sonic and Jimmy John's.

Paul Brown, that company's chief executive officer, "has noted a desire to acquire additional scaled restaurant businesses over time," writes David E. Tarantino, who follows the company for Baird. "We believe Dunkin' would be viewed as an attractive asset by Inspire Brands and by Roark when considering the company's 100% franchised business model and visible growth opportunities in both the U.S. and international markets."

Morningstar analyst R.J. Hottovy calls the possible deal "excellent." With a reported price of $106.50 per share, the transaction would represent a valuation of $8.8 billion, a 20% premium to the Oct. 23 closing price of $88.79 per share.

"From an operations standpoint, we believe Dunkin' and Baskin-Robbins would complement Inspire's existing brand portfolio from a franchisee ownership (100%) and geographic perspective," he writes. "Dunkin could find potential franchisee partners from existing Arby's and Sonic franchisees in the South and West, and would be Inspire's second brand with a meaningful international footprint behind Arby's."

If it comes to pass, the deal would vault Dunkin' into the No. 5 spot of the world's largest restaurant system, trailing only Yum Brands, Subway, McDonald's and Restaurant Brands International, which owns Burger King and Tim Horton's, notes Hottovy.