Benihana Goes Up for Sale, Middle Market PE Likely Interested

We now have the next public restaurant deal.

Benihana, which just settled a proxy fight, has hired Jefferies & Co. to sell the company. But don’t expect any big PE firms, like KKR or Apollo Management, to be interested.

This is a smaller play geared more to middle-market buyout shops. Miami-based Benihana is pretty small. In August, the company reported that first quarter revenue increased by 5% to $100.8 million for the period ended July 18. Income from operations stood at $2.5 million while net income was $1.3 million for the time period. The company’s market cap is currently $108.2 million.

Founded in 1964, Benihana operates a chain of Japanese themed restaurants that will be likely be a hard sell to other restaurant companies. “Strategic interest will be limited because it’s so nichy,” says one banker. PF Chang’s may look at Benihana, the source says.

The possible sale of Benihana comes as several deals have been clinched in the restaurant sector this year. Kelso & Co. agreed in August to buy Logan’s Roadhouse from a trio of PE shops including Bruckmann Rosser Sherrill, Black Canyon Capital and Canyon Capital Advisors. Lee Equity Partners bought Papa Murphy’s, Mill Road Capital acquired Rubio’s Restaurants and Dave & Buster’s was sold to Oak Hill Capital Partners. Apollo Management bought CKE Restaurants, which runs the Carl’s Jr. and Hardee’s chains, while Golden Gate Capital acquired On The Border.

There’s also been some blow ups. Claim Jumper, earlier this month, filed for Chapter 11 bankruptcy protection. Over the summer, American Securities Capital was in talks to buy California Pizza Kitchen and then the PE shop pulled out.

One of the bigger deals came earlier this month. 3G Capital agreed to buy Burger King for about $4 billion. TPG Capital, Goldman Sachs Capital Partners and Bain Capital own a combined 31% of BK.

Some expected the BK sale to open the floodgates to more sales but that likely won’t happen. 3G Capital was a bidder that had a unique angle, the banker said. “There were not a lot of people looking at [Burger King],” the source says.

Don’t expect many restaurant deals for the remainder of 2010, the source says. “Things are better, but that’s because they were so bad last year,” the banker said. “It’s still bumpy for a lot of folks. There are a greater number of companies getting positive same stores but there are still a lot with negative same store sales.”