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Investors seek bite of Smashburger ahead of IPO

by Demitri Diakantonis  |  Published September 1, 2013 at 9:00 AM

Smashburger-LG.jpgFast food burger chain Smashburger Master LLC hired North Point Advisors LLC and Bank of America Merrill Lynch to look for backers, according to a source familiar with the situation.

Mainly, Smashburger is seeking growth capital as it prepares for its eventual public debut.

However, the company that markets itself as selling a gourmet version of the humble burger and fries combo, backed by Denver-based Consumer Capital Partners, is leaving all options on the table, including a majority stake sale, the source added.

Smashburger, also based in Denver, will go public within the next two years, the source predicted.

"They want to bring a world class investor in," the source said. "A lot of great companies bring on investors. This is a great time for them."

The last restaurant chain to go public was Broomfield, Colo.-based pasta chain Noodles & Co. pricing its shares at $18 on June 27 and raising $96 million. Noodles' stock has consistently been trading at over $40 per share as investors are betting on the chain's aggressive growth plans.

One of Smashburger's main rivals, Five Guys Enterprises LLC, the operator of Five Guys Burgers and Fries has been mentioned as a possible IPO candidate by industry watchers.

Smashburger is talking to more than 20 investors and potential buyers with most of those being private equity firms, the source said.

Another industry source estimated Smashburger's trailing 12 month Ebitda at around $15 million and predicted the chain could fetch north of 10 times multiple in an auction process.

Smashburger, founded in 2007, operates more than 200 restaurants globally.

Other burger chains have been getting bites from private equity firms this year. For instance, in June, Sun Capital Partners Inc. acquired Aliso Viejo, Calif.-based Johnny Rockets Group Inc. for undisclosed terms after the chain spent five months on the auction block with assistance from North Point. In February, Los Angeles-based Umami Burger operator Umami Restaurant Group LLC received a $20 million investment from New York's Fortress Investment Group LLC.

Spokesmen for North Point and Smashburger declined comment on Tuesday.

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Tags: Bank of America Merrill Lynch | Consumer Capital Partners | Five Guys Enterprises LLC | IPO | Johnny Rockets Group Inc. | Noodles & Co. | North Point Advisors LLC | Smashburger Master LLC | Umami Restaurant Group LLC

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Demitri Diakantonis

Reporter: Middle Market



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