Rhône to gobble up Fogo de Chão, while THL doubles its money

After more than five years, Thomas H. Lee Partners LP will double its money with the sale of Fogo de Chão Inc.

Rhône Capital said Feb. 20 that it would buy Fogo in a deal valued at $560 million. Rhône is paying $15.75 a share cash for the Dallas restaurant chain. THL owns about 60 percent, or 17.1 million shares, of Fogo. This means the buyout shop stands to make $270.1 million from the sale to Rhône.

Founded in 1979 in Brazil, Fogo de Chão — which means “campfire” or “fire on the ground” in Portuguese — specializes in fire-roasting meats using a centuries-old Southern Brazilian cooking technique called churrasco. Fogo operates 38 restaurants in the U.S., nine in Brazil, two joint venture restaurants in Mexico and two JV restaurants in the Middle East.

THL, one of the oldest private equity firms, acquired Fogo de Chão in July 2012 in a deal valued at $400 million. The THL-led group invested $172.1 million equity into the deal, SEC filings indicate. Fogo has not paid out any dividends.

Fogo de Chão went public in 2015. THL did not sell shares in the IPO.

In the roughly two years since Fogo has been public, THL sold stock only once, SEC filings said. In April 2017, the buyout shop sold 4.5 million shares in a secondary, along with 675,000 shares in a green shoe, at $14.90 each. THL made $77 million from the sale.

Including the sale to Rhône, and the secondary from 2017, THL will make $347.1 million. This means the buyout shop founded by Thomas H. Lee stands to reap 2.01x on its investment after more than five years.

THL’s investment in Fogo came from its sixth fund, which closed at $8.1 billion in 2007. Its seventh fund collected $2.6 billion in 2015. The firm is fundraising for its eighth fund, which is seeking $3 billion, the Wall Street Journal reported.

Rhône, of New York and London, invests in PE and real estate, PitchBook said. In October, Rhône teamed up with WeWork Cos to buy the Lord & Taylor building on Fifth Avenue for $850 million, Bloomberg reported. The firm is investing out of its fifth fund, which closed on $2.88 billion in 2015, PitchBook said.

THL declined comment. Fogo could not be reached for comment.

Action Item: Contact Anthony J. DiNovi, THL co-president, at +1 617-227-1050

A chef prepares meat at the Fogo de Chao Brazilian steakhouse, where food is prepared in the traditional gaucho way, in Sao Paulo on April 15, 2014. Photo courtesy Reuters/Paulo Whitaker