Marriott’s Bid to Buy Denny’s Falls Through
Plans by Marriott, the owner of Big Boy restaurants, to buy Denny’s, the nation’s largest coffee shop chain, have fallen through--apparently because of a dispute over price, Denny’s confirmed Wednesday.
Executives at Denny’s, which is privately owned, last met with Marriott officials in the Los Angeles area two weeks ago but left with no agreement.
“We haven’t heard from them since we turned their offer down,” said Vern Curtis, Denny’s chairman and one of the company’s owners, in a telephone interview. “We don’t intend to call them. We’re happy as a private company.”
However, sources close to Denny’s, based in La Mirada, said the company’s directors have not formally received nor rejected the offer.
Marriott, with headquarters in Bethesda, Md., disclosed in late May that the two firms were discussing a merger, but that no definitive agreements had been signed.
On Wednesday, Marriott declined to say anything more. Spokesman Al Rankin said: “Our longstanding policy is not to comment on the status of negotiations.” Asked if that meant Marriott was still in talks with Denny’s, he refused further comment.
Although Marriott and Denny’s had not mentioned a possible purchase price, analysts had estimated that Marriott would have to pay more than the $753.4 million that Denny’s management paid to take the company private in a leveraged buyout in January, 1985.
Sources said Denny’s halted negotiations because Marriott’s actual offer fell short--reportedly $26 million--of management’s initial understanding that the offer would be somewhere between $820 and $880 million. (That price would have included Marriott’s assumption of Denny’s debt, which totals at least $600 million.) An $880-million price would have yielded Denny’s investors a $175-million profit, the sources said.
Some observers believe that Denny’s termination of the talks might be a bargaining ploy.
“I give 60-to-40 odds that the deal will go through,” said Joseph J. Doyle, analyst at the securities firm of Smith Barney, Harris Upham & Co. in New York. “They’ve taken their tough positions and they will get together and negotiate a price somewhere between.”
The proposed combination would have merged the nation’s two largest coffee shop chains. Marriott owns and operates 170 Big Boy restaurants, primarily in California and the Washington, D.C., area, and franchises another 729.
Denny’s has 1,200 Denny’s coffee shops nationwide and owns El Pollo Loco, a chain of specialty broiled chicken fast-food restaurants, as well as a 42% interest in Winchell’s doughnut houses.
Marriott stock closed at $39.50 a share, down 25 cents.
