Bunker Hill Beats Strategics For Steakhouse

Target: Smith & Wollensky

Price: $94.6 million

Sponsor: Bunker Hill Capital

Sometimes a strategic just can’t get it done alone.

That may be one of the snapshot lessons from the recent announcement that Smith & Wollensky (Nasdaq: SWRG) has agreed to be taken private for $94.6 million in a deal led by Bunker Hill Capital.

The upscale steakhouse operator had originally agreed to be acquired for $9.25 per share by Patina Restaurant Group, but then got topped by Rainforest Café owner Landry’s Restaurant Group. There was no private equity in either bid.

As the two suitors sparred—including accusations that Patina Restaurant improperly offered to sell certain assets to S&W founder Alan Stillman on the cheap—Patina CEO Nick Valenti turned to private equity firm Bunker Hill Capital, where he serves on the executive committee. The result was a revised $11 per share offer, in which Bunker Hill would own S&W, with Patina Restaurant serving as manager.

There is obviously no guarantee that S&W shareholders will accept the transaction (the Stillman issue remains), but Bunker Hill co-founders Mark DeBlois and Theresa Nibi expressed confidence that $11 per share was more than fair given that the company was consistently trading at below $6 per share until buyout talk began late last year.

If successful, Bunker Hill plans significant expansion for S&W, so that it has at least one restaurant in most major markets. Nibi recognizes that mass expansion could risk diluting the brand, but expressed confidence that one shop per location would not result in saturation. She added that Bunker Hill and Patina also will refocus certain existing locations, with the Columbus, Ohio facility to be used as a model.—D.P.