June 30, 2016 / 12:11 AM / 3 years ago

Exclusive: Sandwich chain Jimmy John's to hit the auction block - sources

(Reuters) - Jimmy John’s Franchise LLC, the popular U.S. gourmet sandwich chain which explored an initial public offering (IPO) last year, is now seeking to sell a major equity stake to private investors, according to people familiar with the matter.

Jimmy John’s is speaking to private equity firms about a potential deal it hopes will value it at more than $2.3 billion, including debt, the people said this week. Before exploring the IPO, the company also sought such a stake sale in 2014 but could not attract offers that would meet its valuation expectations.

Private equity firm Weston Presidio is looking to sell its entire 30 percent stake in Jimmy John’s, the people said. The chain’s founder, Jimmy John Liautaud, who owns the remainder, is considering divesting a stake of between 10 percent and 15 percent, the sources added.

Liautaud would only consider handing majority ownership of Jimmy John’s to an outside investor that he would have a lot of confidence in, one of the people added.

Jimmy John’s has 12-month earnings before interest, tax, depreciation and amortization of around $150 million, the people said.

The sources asked not to be named because the matter is confidential. Jimmy John’s and Weston Presidio did not respond to requests for comment.

“Fast casual” restaurants, which offer diners quick meals made of quality ingredients, had a spate of IPOs in 2014 and 2015, including El Pollo Loco Holdings Inc (LOCO.O), Zoe’s Kitchen Inc ZOES.N and Shake-Shack (SHAK.N). Their shares have since underperformed, as they struggle to meet investors’ growth expectations.

Jimmy John’s, founded in 1983 by Liautaud in a converted garage, sells premium subway sandwiches known for their high-quality ingredients. The restaurant chain is popular with diners who increasingly seek food fresher than traditional fast-food chains offerings.

The Champaign, Illinois-based has about 2,400 franchises in 46 states, including about 20 in New York and 274 in Illinois, according to its website. Weston Presidio has been an investor in the company since 2007.

Last week, Jimmy John’s agreed it will not enforce agreements signed by employees barring them from working at other sandwich shops, following a 2014 investigation by New York Attorney General Eric Schneiderman into the practice.

Reporting by Greg Roumeliotis, Lauren Hirsh and Mike Stone in New York; Editing by Bernard Orr

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