Del Taco, the fast-food chain founded in the Mojave Desert in 1964, will be acquired by a Chicago company in a two-step transaction valuing Del Taco at about $500 million.
Levy Acquisition Corp. said Thursday that it would change its name to Del Taco Restaurants Inc. and run the chain as a subsidiary with current management.
Restaurateur Larry Levy, chief executive of Levy Acquisition, called Del Taco an "iconic brand primarily on the West Coast with an extremely loyal and cult-like following."
"Customers are loyal for good reason — you cannot beat Del Taco's food, which is fresh, high-quality and at extraordinarily inexpensive prices," Levy said in an Internet investor presentation. "Del Taco has huge potential."
Del Taco, which is owned by private equity firms, was founded in Yermo, Calif., and has 547 locations in 16 states. Now based in Lake Forest, the company had $656.1 million in sales last year, the two companies said in announcing the acquisition.
In 2013, the chain updated its menu with lighter, fresher fare in an effort to keep up with changing consumer tastes.
Del Taco was ranked third in 2013 U.S. sales among Mexican fast-food restaurants, behind Taco Bell and Chipotle Mexican Grill, according to QSR Magazine, a trade publication. Taco Bell topped the list with $7.8 billion, followed by Chipotle with $3.1 billion. Del Taco's U.S. sales totaled $622 million in 2013.
Levy will become chairman of Del Taco. His sons, Ari Levy and Steve Florsheim, who are executives at Levy Acquisition, will join the Del Taco board. The chain's CEO, Paul J.B. Murphy, Executive Vice President Steven Brake and other executives will continue to run the restaurants.
In the first step of the transaction, the Levy family and other new investors will purchase $120 million of Del Taco shares, giving the group a 46% stake. Del Taco's current owners include Goldman Sachs Mezzanine Partners, Charlesbank Capital Partners and Leonard Green & Partners.
In the second part, a subsidiary of Levy Acquisition will merge into Del Taco, with the chain's shareholders receiving either all cash or cash and stock. In all, the deal puts a value of about $500 million on Del Taco, the companies said.
Levy has been in the food industry since 1978, when he co-founded Levy Restaurants, an international food service company. He sold the company in the 2000s.
Levy also founded a family investment business, Levy Family Partners, in 2003. The business has made more than 200 investments, more than half of which are in hotels, resorts, real estate and restaurants, including Blaze Pizza and Pollo Campero.
The Del Taco deal, expected to close in June, must still be approved by Levy Acquisition shareholders.