Grace Co. Sells Units to Group

W.R. Grace & Co. said Friday that it has completed the sale of a majority interest in its 690-unit restaurant division to an Irvine-based group of Grace restaurant officials.

The investors’ company, Restaurant Enterprises Group, raised $536.7 million in a leveraged buyout to purchase a 53% equity interest in the Grace division. In addition, the investment group will assume $239.3 million in existing restaurant division debt that will be removed from Grace’s books.

The purchase price is subject to an adjustment based on the new company’s performance over the next five years, said Fred Bona, vice president of communications with W.R. Grace.

As part of the transaction, New York-based Grace bought the new company’s preferred stock for $50 million and paid $50 million more for subordinated debt and warrants to purchase up to 47% of the new company’s common stock beginning in December, 1991.

Additionally, Drexel Burnham Lambert Inc. and other institutional investors that provided financing for the deal obtained warrants for a total of up to 29% of the new company’s common shares outstanding, exercisable in five years. The restaurant group, with annual sales in excess of $1 billion, operates more than 800 restaurants, 339 of them in California. Included in the leveraged buy-out are the Coco’s, Carrows, jojos, Darryl’s, Baxter’s, Reuben’s, Charley Brown’s and the Gladstones 4 Fish restaurant chains.

Also included in the transaction is El Torito Restaurants, Inc., which operates 190 Mexican dinner houses nationwide. Company officials expect El Torito to be merged into a subsidiary of the new company in early 1987.