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Reuters: Monday Blue Plate Special–Restaurant M&A

It’s been a busy day on the restaurants M&A front already, Sbarro, which peHUB earlier covered, is bankrupt and, on the brighter side of the spectrum, Landry’s Restaurants has made a hostile bid to acquire McCormick & Schmick’s Seafood Restaurants Inc. in a deal valued at $137.3 million. Sbarro is just hoping it can eliminate more in debt than McCormick & Schmick’s is looking to take in an exit.

REUTERS NEWS: On Monday, Landry’s Restaurants Inc’s Chief Executive Tilman Fertitta launched a hostile bid for McCormick & Schmick’s Seafood Restaurants Inc , valuing the company at about $137.3 million. Shares of the company rose 30 percent to $9.25 in trading before the bell on Monday, matching Fertitta’s offer price.

Fertitta already owns about 10.1 percent of the restaurant chain, and is one of its biggest shareholders.

For Sbarro, on the other hand, it looks to eliminate about $200 million in debt. The Melville, N.Y.-based company is seeking court approval for a $35 million DIP loan with lenders from its first lien.

There are still more deals open in the middle market space for investors looking to buy into restaurants. Last month, peer Morton’s Restaurant Group said it was considering “strategic alternatives” including a possible sale and that it has the support of its top two shareholders.

Sbarro’s filing for bankruptcy would make the company the latest in a number of restaurant chains, including Fuddruckers and Charlie Brown’s Steakhouse, who have succumbed to the economic downturn and a drop in consumer spending. There are still potential deals remaining in the space; Morton’s Restaurant Group said it was considering “strategic alternatives” including a possible sale and that it has the support of its top two shareholders.

The company, which in January hired bankruptcy and restructuring advisers and lawyers, added that it is in discussions with lenders on terms of the proposed exit financing.

Sbarro’s lenders include Bank of America and private equity owner MidOcean Partners, which purchased the company through a more than $400 million buyout in 2007.

MidOcean Partners and Ares Corporate Opportunities Fund have agreed to backstop a $30 million rights offering and the proceeds will be used to repay the debtor-in-possession financing.

(Reporting by Nivedita Bhattacharjee and Renju jose; Editing by Gopakumar Warrier, Jarshad Kakkrakandy, and Jonathan Marino)