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Slideshow: PE Firms Chowing Down on Restaurants

Private equity firms can barely stop licking their chops — at least, at first. One after another, they’re either scoring mega multiples on, or backing the proverbial truck up for, restaurant deals (sometimes, in the same transaction). Financial sponsors are gobbling up listed restaurants and private companies, taking fried chicken joints and steakhouses to improve and expand operations. Not every restaurant has the good fortune to be tethered to a pro basketball team, so it remains to be seen whether the personality of Gordon Ramsay or Julia Child will make the difference for peHUB’s most savory restaurant auctions and deals of 2011. And just because a franchise takes a trip to the block, it doesn’t necessarily mean there will be bidders—there are still some deals out there awaiting bids, it seems—but you’ll have to click through to find out who. Take a peek at our picks—but we strongly recommend you not do so on an empty stomach…

[slide title=”Bojangles”]

The Blue Plate Special: In July, Advent International struck a deal with Falfurrias Capital Partners to acquire all of the latter’s stake in revered southern fried chicken joint Bojangles’. One source who spoke with peHUB said the deal came with a 10X multiple attached, certainly an attractive number for Bojangles. So, why so high? The Boj’s chicken & biscuits, the Hub can testify, are delicious, and its small but tightly knit network of restaurants up and down the mid-Atlantic has a loyal clientele.

[slide title=”California Pizza Kitchen”]

The Blue Plate Special: Golden Gate Capital is no stranger to the restaurant biz. When the PE firm bought California Pizza Kitchen in May, it did so at a 30%-plus premium to the restaurant’s stock—and that was at a time when the Dow had soared past 12,000. The $470 million price tag was awfully high (clearly too high for American Securities Capital), but with experience investing in Romano’s Macaroni Grill and On The Border, the Golden Gate team clearly is out to identify top retail brands.

[slide title=”They’re Thinkin’ Arby’s”]

The Blue Plate Special: When Wendy/Arby’s decided to undo a clearly ill-advised merger, Roark Capital was there to step in on a deal. The PE firm, in June, took on $190 million in debt and paid $130 million to take Arby’s off Wendy’s balance sheet, adding it to its robust portfolio that already includes the Auntie Anne’s, Carvel Ice Cream and Cinnabon chains. Wendy’s stock actually sank in the months following the exit, but at least they’ve still got a piece of their former partner. According to the deal’s terms, the former Arby’s parent will retain an 18.5 percent stake valued at about $30 million and get an income tax benefit of about $80 million over the next few years.

[slide title=”It’s Time to Get il (Fornaio)”]

The Blue Plate Special: When Roark Capital gets the munchies, this PE firm gets hungry. Not content snacking on Arby’s, in June, the PE firm went back for seconds, gobbling up Il Fornaio and Corner Bakery Café. This one was a secondary sale, with Hal Rosser-less Bruckmann Rosser Sherrill dealing Il Fornaio Corp. after a decade-long hold. But BRS did it at the right time; combined proceeds from the sale of Il Fornaio Corp. and an earlier recapitalization represented a gross multiple of invested capital of approximately 5.7x and generated a gross IRR in excess of 22 percent.

[slide title=”No Roma?”]

The Blue Plate Special: Private equity firm Highland Capital Partners put its Tony Roma’s on the block in April, with Houlihan Lokey advising, sources told peHUB back in April. However, it isn’t clear where that sale has gone in the time since. Things certainly looked rosy enough a few months ago; the intrepid (and currently vacationing) Luisa Beltran heard both PE and strategics were eyeing Roma’s, with an EBITDA of less than $20 million. She also heard the deal, then supposedly in “mid-process,” would wrap by the end of June—which was clearly not the case.

[slide title=”Pricey Steaks Not Finding Buyers?”]

The Blue Plate Special: Castle Harlan and Lauren Crown Capital have been trying to exit upscale steakhouse Morton’s since March. Rosser Capital Partners, Hal Rosser’s new PE shop, was rumored to be among potential acquirers, along with Oak Hill Capital Partners. With 77 steakhouses, our Luisa Beltran reported, Morton’s then had a market cap of $120 million and $24 million in adjusted EBITDA—clearly, not too shabby. Still, one source described sponsors’ interest in the famous steakhouse as “lukewarm” at the time.

[slide title=”Benihana Chops Sale Process Short”]

The Blue Plate Special: While we’re still waiting to figure out what’s to come of some slowed sale processes, Benihana, which nearly a year ago, initiated a sale process and hired Jeffries (just like Morton’s…), bagged the act in May, and said it was—after 10 months—instead electing to stand alone, and pitching a plan to eliminate its dual-class common stock structure and terminate its shareholder rights plan.

[slide title=”Dave & Buster’s Awaits IPO, One Year after LBO”]

The Blue Plate Special: Well, that certainly didn’t take too long. After its 2010 $570 million buyout of Dave & Buster’s, PE shop Oak Hill Capital Partners turned around earlier this year and announced plans to take the company public, with the assistance of underwriters Piper Jaffray and Goldman Sachs, in a $150 million IPO. Of course, that was in July, right before markets kicked off a wild series of gyrations that left VCs and PE pros equally baffled and fearful. Now, no different than Zynga or Groupon, the equities market isn’t looking so super to Dave & Buster’s any more, we suspect.