A New England brand comes home again in $2.43b deal

Dunkin' Donuts, which grew from a single shop off a Quincy highway into a global chain run by British and French conglomerates, is back in Boston hands after a trio of private equity firms yesterday agreed to purchase the company for $2.43 billion.

Boston's two largest buyout companies -- Bain Capital and Thomas H. Lee Partners -- and Carlyle Group of Washington, D.C., said they finalized their winning bid yesterday for Canton's Dunkin' Brands, which includes Dunkin' Donuts, Baskin-Robbins ice cream, and Togo's sandwich shops.

The three firms are equal partners in the deal, buying the restaurants from Dunkin's parent company, French distiller Pernod Ricard SA. Pernod acquired them earlier this year after swallowing British spirits company Allied Domecq, which purchased Dunkin' Donuts in 1990.

The new owners plan to more than triple the number of Dunkin' Donut stores in the United States over the next 10 years to 15,000, giving the coffee-and-doughnut chain a bigger footprint to compete with java giant Starbucks Corp.

Consumers can also expect to see new store layouts, more advertising, and expanded menu options as Dunkin' attempts to break out of its breakfast-only identity. Morning sales account for about 65 percent of revenues, according to Dunkin'.

''We've been admiring Dunkin' for years. We've been waiting for this opportunity," said Anthony DiNovi, copresident of Thomas H. Lee Partners. ''This is a fantastic growth company with a great management team and great cash flow. There's no reason why what we have in New England can't be had across the whole country."

Mark Nunnelly, a Bain managing director, said, ''As a standalone company, Dunkin' will have the opportunity to more aggressively support the growth plans of more stores, more menu development, and branching out beyond the core market."

Bain, cofounded and once run by Governor Mitt Romney, owns Burger King and Domino's Pizza. Lee once owned beverage giant Snapple and Cinnabon cinnamon roll bakeries, while Carlyle's portfolio includes the Dr Pepper/Seven Up Bottling Group. Dunkin's new owners also are regular customers: Lee's DiNovi is a self-described fan of Dunkin's buttercrunch doughnut, and Bain's Nunnelly said he is a ''couple-of-cups-of-Dunkin'-a-day man."

Lee, Bain, and Carlyle beat out other private equity teams vying for the Dunkin' brands including Kohlberg Kravis Roberts & Co. and Trimaran Capital Partners, and Providence Equity Partners and JP Morgan Partners. Private equity firms raise money from investors and use the cash to purchase controlling stakes in existing businesses. The goal is to make the acquired companies more profitable.

After New York, Boston has the greatest concentration of private equity firms in the country. Usually, these buyout firms run companies for three to five years, then sell them or take them public.

''They are going to turn the heat on Dunkin, in terms of number of growth and expansion," said Ron Paul, president of Technomic Inc., a Chicago food-consulting firm. ''Dunkin' is one of those unique restaurant brands that is underdeveloped in terms of US locations. There are about 5,000 Dunkin' franchises across the country -- compare that to about 20,000 Subway sandwich shops in the United States. There's definitely room to grow."

The existing Dunkin' Brands management team, led by chief executive Jon L. Luther, will continue in their current positions. Dunkin' Donuts is widely viewed as the crown jewel of the three restaurant chains, with a 12 percent increase in sales last year and more than 6,000 locations worldwide. Collectively, Dunkin', Baskin-Robbins, and Togo's generated about $4.8 billion in revenue last year.

Luther said since he came to Dunkin' three years ago he has been approached by private equity firms interested in the brands. He described the consortium taking over as ''three players who have deep experience in this type of buyout. They understand our business, they understand franchising, and they understand what the management team has been trying to do."

Luther said he expects the firms to keep and expand Togo's and Baskin-Robbins. He said the new owners will also help the flagship Dunkin', which opened its first store in 1950, expand its menu, such as sandwich ''melts" and invest in store prototypes, such as one that opened last month in Pawtucket, R.I., featuring a self-service coffee and espresso station and two drive-thru windows to speed service.

Dunkin' Brands is one of the largest restaurant franchisers in the world, with franchisees having about $5 billion invested in roughly 4,500 stores and distribution centers in the United States.

''We look forward to growing the company but want to make sure that franchisee rights are not taken away," said Brendan P. VanDeventer of the investment banking firm Riparian Partners Ltd. in Providence, which represents a group of Dunkin' franchisees.

Pernod, which acquired the restaurants this year, said from the beginning it planned to sell the restaurants so it could focus on its spirits business, which includes Beefeater gin and Stolichnaya vodka.

''Under its new owners, Dunkin' Brands will be able to build on its solid platform, and we will focus our management skills on delivering top and bottom line growth and increased shareholder value from our core spirits and wine business," Patrick Ricard, Pernod's chief executive, said yesterday in a statement.

Pending regulatory approval, the closing of the Dunkin' transaction is expected to take place during the first quarter next year.

Jenn Abelson can be reached at abelson@globe.com.