Marriott Offers to Buy Saga Corp. for $435 Million

Saga Corp., which owns the Stuart Anderson’s restaurant chain and operates a food service division that has fed millions of college students, said late Wednesday that Marriott Corp. has made an offer to purchase all of the company’s stock for $435 million in cash.

Headquartered in Menlo Park, Calif., Saga said the $34-a-share cash offer from the hotel chain was unsolicited. Saga has 12.8 million shares of common stock outstanding.

The offer was $4.50 a share higher than Saga’s $29.50-a-share closing price Wednesday on the New York Stock Exchange, where 128,700 shares traded.

A spokesman for Marriott confirmed the offer, saying it requires a response no later than 2 p.m PDT next Monday.

‘Extremely Well Positioned’

“Marriott is actively in the contract food services business,” explained Michael G. Mueller, an analyst who follows restaurants and lodging businesses for Montgomery Securities in San Francisco. “Saga is extremely well positioned in that area, with good market position in the faster growing segments that Marriott would find attractive. That would be what I see as the major fit between the two companies.”

Marriott, best known for its chain of hotels, operates a major food service division that provides airline catering, runs restaurants at airports and serves food to businesses, educational and health-care institutions. It also has a restaurant division that operates Roy Rogers, Big Boy and Howard Johnson.

Saga’s food service division--which accounts for 61% of its revenue and 48% of its profits--is the nation’s largest food service management company serving colleges and universities. It also supplies food service for corporations and health-care institutions in Canada and the United States.

Its restaurant and fast food outlets include the Velvet Turtle, Straw Hat Pizza, Grandy’s and Spoons.

Marriott has acquired several contract food companies since 1982, when it purchased Host International, which provides food service at airports. In the first quarter of 1985, it acquired two more food service companies, Service Systems and Gladieux.

Saga said the company’s board of directors, which was previously scheduled to hold a regular meeting on Friday, is expected to consider the Marriott offer then. Goldman, Sachs & Co., Saga’s financial adviser, has been hired to help the board evaluate the Marriott offer.

Analyst Mueller said Saga’s contract food service divisions has performed “spectacularly over the last few years,” but the profitability of the restaurant group has been hurt by overexpansion in a generally soft restaurant market.

Saga reported fiscal 1985 revenue of $1.3 billion and a profit of $29.1 million. Net income was down slightly from the year before because of high marketing, promotion and expansion expenses, the company said.

Bethesda, Md.-based Marriott had 1985 revenue of $4.2 billion and profits of $167.4 million.

Marriott’s contract food service division accounted for 37% of total sales and 31% of its operating income in 1985. Its restaurant group accounted 18% of total sales and 20% of operating income.

Marriott stock closed on the New York Stock Exchange at $168.50 a share, down $4, on a volume of 64,700 shares.