Apollo nears deal to buy Qdoba from Jack in the Box-sources

(Reuters) - Private equity firm Apollo Global Management LLC APO.N is nearing a deal to buy Qdoba Mexican Eats from restaurant chain Jack in the Box Inc JACK.O for more than $300 million, people familiar with the matter said on Wednesday.

The deal would be the culmination of a strategic review that Jack in the Box initiated in May, after stating that the chain was not a good fit with the rest of the company’s dining portfolio.

Apollo’s deal for Qdoba could come as early as next week, the sources said, cautioning that negotiations could still end without a deal.

Apollo also owns children’s pizza and arcade chain Chuck E. Cheese, which it took private for $1.3 billion in 2014. The New York-based buyout firm does not plan to combine Chuck E. Cheese with Qdoba, the sources said.

The sources asked not to be named because the matter is confidential. A spokesman for Apollo declined to comment, while a spokesman for Jack in the Box could not immediately be reached for comment.

Jack in the Box shares jumped 3 percent on the news and were up 1 percent at $103.57 in afternoon trading in New York, giving the company a market capitalization of around $3 billion.

San Diego-based Jack in the Box acquired Qdoba for $45 million in 2003. The restaurant chain initially enjoyed fast revenue growth but has struggled in recent quarters, reporting only 1.4 percent comparable store sales growth in 2016.

“It has become more apparent since then that the overall valuation of the company is being impacted by having two different business models,” Jack in the Box Chief Executive Lenny Comma said in May.

Founded in 1951, Jack in the Box is known for its eponymous burger franchise, which operates 2,200 restaurants in 21 states and Guam. Qdoba is its only subsidiary.

Activist hedge fund Jana Partners LLC disclosed a small stake in Jack in the Box earlier this month.

Qdoba has more than 700 restaurants in 47 states and Canada.

Dealmaking in the restaurant space has been active in recent months, as struggling food chains have been snapped up by competitors.

Higher wages, including a higher minimum wage in many parts of the United States, has also put pressure on restaurant margins.

Recent restaurant deals include Darden Restaurants Inc's acquisition of Cheddars Scratch Kitchen, Restaurant Brands International Inc's QSR.TO deal for Popeyes Louisiana Kitchen and JAB's purchase of Panera Bread.

(Corrects day of the week to Wednesday from Friday in first paragraph)

Reporting by Andrew Berlin and Greg Roumeliotis in New York; Editing by Chris Reese and Cynthia Osterman