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 Landry's Restaurants Inc., which last year tried and failed to acquire the iconic steakhouse chain Smith & Wollensky Restaurant Group Inc. (see more below), is itself weighing its options and has tapped Cowen & Co. LLC to advise it.
The Houston-based company, whose restaurants include the Rainforest Cafe and Vic & Anthony's Steakhouse, is fielding an offer revealed in late January from its chairman, president and CEO Tilman Fertitta. OVERDONE Meanwhile, in bankrupt steakhouse news, Buffets Inc., the largest steak buffet restaurant in the U.S., won final court approval in February for access to its entire $385 million debtor-in-possession package, but trimmed it by $100 million to appease creditors. Eagan, Minn.-based Buffets is majority-owned by New York private equity firm CI Capital Partners LLC. The company sought Chapter 11 protection in January to restructure its debt after missing payments. And a Florida judge in December 2007 granted Roadhouse Grill Inc. an extension for the third time on its iterim DIP financing. The company went through a reorganization in 2002 and came out of bankruptcy before its restaurants suffered a series of hurricanes in 2004. CUTTING THE FAT Meanwhile, Sydney-based private equity firm Pacific Equity Partners put the Sizzler steakhouse chain up for sale and hired Houlihan Lokey Howard & Zukin to hunt down a buyer, a statement said Feb. 8. The Sydney-based firm took Sizzler private in 2005, acquiring it from Worldwide Restaurant Concepts Inc., and expects to sell the chain within six months. Back in October 2007, Del Frisco's Restaurant Group LLC filed for an initial public offering worth up to $100 million, which would offer Lone Star Funds some liquidity. Del Frisco operates 22 restaurants in 14 states under the Double Eagle Steak House and Sullivan's Steakhouse chains. The chains were part of Lone Star Steakhouse Inc., which Lone Star Funds acquired in December 2006, at which time they were split from the downmarket Lone Star chain. (See more below.) Del Frisco's has yet to float. CHOWING DOWNAdding red meat to its menu of seafood and Italian, Darden Restaurants Inc. said Aug. 16 it would acquire Capital Grille and LongHorn Steakhouse parent Rare Hospitality Inc. in a $1.4 billion deal. The offer will enable Darden to add the two steak houses to its portfolio -- which includes the Red Lobster and Olive Garden chains -- and at $38.15 per share, the bid carries a rich, 39% premium to the target's close a day earlier, proving once again, there is demand for choice beef. The next month Darden entered into two new credit agreements to help finance the $1.4 billion acquisition with Bank of American NA serving as lead arranger for loans totaling $1.9 billion. Unlike other steak house buyouts, the Darden deal didn't turn into a long, bloody battle. The deal came nearly two months after Bain Capital Partners LLC and Catterton Management Co. LLC took the parent of Outback Steakhouse private in a $3.5 billion, or $41.15 per share deal. Six months after reaching a $40 per share, $3 billion-plus deal for OSI Restaurant Partners Inc., the bid group was forced in May to better its offer by $1.15 per share to appease stakeholders hungering for a juicier return. It was just one example at the time in which shareholder activism led to a bump in the buyout price and marked the then-latest development on the steak house buyout front, where investors were actively biting. Meanwhile, shareholders at Smith & Wollensky officially ended a messy bidding war on Aug. 20 when they approved a $95 million deal with Patina Restaurant Group LLC. The battle began in March, when Landry's bettered by 50 cents a share an agreed-to $9.25 a share buyout proposal from Patina and its own, $7.50 a share offer launched in January. The bidding caused Smith & Wollensky's stock price to nearly double, from nearly $5 a share in January to $9.76 Friday afternoon, March 16, when Landry's came forward with a juicier bid. The new offer equated to nearly $84 million, or $9.75 a share. In May, Smith & Wollensky amended its agreement with Patina, which bumped the offer price to $11 per share and assigned its rights and obligations under the agreement to a bid group that included Nick Valenti, Joachim Splichal and Bunker Hill Capital LP. Lone Star Funds raised its agreed-upon offer for Lone Star Steakhouse by nearly $5 million on Nov. 30, 2006, to $605 million. The modest price increase, some say, wasn't a move to appease shareholders who've called the buyout price too low, but instead a move to buy management more time to garner support for what looks to some like a raw deal. A shareholder vote followed on Dec. 12, and the deal gained approval after months of back and forth. So, what was that beef all about? FANNING THE FLAMES Hedge fund Barington Capital Group LP, with 9.4% of Wichita, Kan.-based Lone Star Steakhouse & Saloon Inc. came out guns blazing Oct. 31, 2006, with a letter to the restaurant chain against the company's pending buyout. Lone Star retaliated with a letter of its own Nov. 7 in defense of the sale, but the debate marked the second time the hedge fund publicly aired its grievances with the company in as many months. Barington, which first took a stake in Lone Star in May 2006, asserted that the $27.10 a share acquisition price undervalues the company, its real estate assets and upscale restaurant brands, in particular. Maybe it encouraged Lone Star to rethink the deal. The buyout shop then upped its offer by a whopping 25 cents a share.
ALL SAUCED UP Meanwhile, other hungry dealmakers rounded out 2006 with a spate of activity.
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I am situated in South Florida and will be willing to act on behalf of anyone wishing to enter the market through acquisition. I put together the RHG deal and have done deals with Darden, CRO, Landry's, Carlson and a host of independent operators both with leashold and fee deals. I specialize in Restaurants. 561 622 5010