Ralston Agrees to Sell Jack in the Box Unit
Ralston Purina said Friday that it has agreed to sell its Jack in the Box fast-food business for $450 million to the investment banking firm Gibbons, Green, van Amerongen and senior management of the San Diego-based chain. The proposed sale comes less than five months after another leveraged buy-out plan fell through.
Leading the management group is Jackson W. Goodall Jr., president and chief executive of Foodmaker Inc., the Ralston subsidiary that operates 800 Jack in the Box outlets in California, Texas and Arizona.
Ralston, headquartered in St. Louis, primarily makes food, pet and agricultural products. It had said earlier this year that it would sell the chain as part of its plan to get out of the restaurant business. In fiscal 1984, Foodmaker accounted for 12% of both Ralston’s sales and operating profits. Although the company did not disclose specific figures, it said earnings from the restaurant operations have declined in 1985.
Goodall, who was not available to comment on the deal with Gibbons, was part of the management group that in May joined Forstmann, Little & Co. in a $500-million bid for Foodmaker. That deal was terminated a month later because of downturns in the fast-food industry and in Foodmaker’s earnings.
About the same time, however, Foodmaker underwent a reorganization and centralization of its operations. It also began testing the proposed change of the outlets’ name to Monterey Jack.
Leonard Green, a Los Angeles-based partner of Gibbons, said financing for the leveraged buy-out has been arranged through a group of banks from around the country, led by an unidentified California institution. He declined to give details of the transaction but said it is expected to be completed next month.
New York-based Gibbons is a specialist in leveraged buy-outs, an acquisition technique that involves taking a company private by borrowing against its assets. Since 1979, Gibbons has completed buy-outs totaling more than $1 billion, including Coca Cola Bottling of New York, Trailways Bus and Purex Industries.
In fiscal 1984, Ralston’s restaurant group had operating profits of $61.4 million on revenue of $628.3 million. Both those figures include results of its dinner house operations that were sold in early 1984.
Ralston does not break out quarterly results for Foodmaker. However, in its report for the 1985 third quarter ended June 30, Ralston said, “Earnings of our fast-service restaurants decreased during the nine months, due principally to softness of the economy in our primary markets and an increase in competitive pressure.”
Green said: “We think the fast-food industry is an excellent long-term investment opportunity. We think Foodmaker’s management is one of the best in the industry.” He acknowledged the fast-food industry’s softness but said, “Everything is relative. The company’s (Foodmaker’s) profitability is excellent.”
RALSTON PURINA’S RESTAURANTS GROUP AT A GLANCE
In millions 1984 1983 1982 1981 1980 Revenue $628.3 669.3 624.1 578.3 512.4 Operating income 61.4 58.5 46.7 43.7 38.5
Includes full-service dinner house restaurants, sold in early 1984
