Newport Beach Restaurateur Loses Bidding War : Restaurant Associates Agrees to Buyout
A two-week bidding contest over a New York restaurant firm seemed to end Monday with the announcement that company directors had accepted a management buyout offer rather than a rival bid by a Newport Beach restaurateur.
Restaurant Associates Industries said it has accepted a cash buyout offer of nearly $90 million from a group of its top executives, apparently derailing Orange County businessman Anwar Soliman’s takeover bid of more than $100 million.
The New York-based restaurant and newsstand company said that the management group will launch an $18-per-share cash tender offer Thursday for the 2.1 million outstanding shares of Class A stock and 2.9 million shares of Class B stock not owned by management.
Members of the management group leading the leveraged buyout have agreed to accept $15 per share for their shares. According to the company’s last proxy statement, Restaurant Associates’ officers and directors owned about 358,000 Class A stock and 1.3 million shares of Class B stock.
The board accepted the sweetened management offer Saturday. Restaurant Associates operates more than 250 restaurants and 150 newsstands on the East and West coasts, including the Acapulco Restaurants chain, based in Long Beach.
Soliman, chairman of American Restaurant Group in Newport Beach, has offered to pay $19 per share for all of Restaurant Associates’ stock.
Wall Street reacted enthusiastically to the buyout announcement. Restaurant Associates shares hit record highs and were among the most active issues on the American Exchange Monday. Class A stock closed at $17.75 per share, up $2.625, while Class B shares closed at $17.75, up $2.375. Nearly 290,000 shares changed hands.
In a prepared statement, Soliman said Monday that he was “surprised and disappointed” by the board’s acceptance of the management buyout proposal and added that his $19 cash offer to the board remains in effect.
Leave It to Shareholders
“I’ll leave it up to the shareholders to make up their minds,” Soliman said in an interview. But he acknowledged that his offer must remain friendly to win board approval. “I never intended and never will be in a position to make a hostile tender offer,” he said.
“We never heard anything that was entirely convincing about how he expected to implement the transaction,” said New York attorney Kurt Koegler, who represents a special, three-member committee of Restaurant Associates directors appointed to evaluate the competing offers.
Koegler said the committee was skeptical about Soliman’s ability to actually win control of the company due to management’s one-third share ownership and voting clout. “Rather than lose a bird in the hand, (the board) decided to say yes to an $18-a-share transaction.”
Darwin C. Dornbush, a board member and attorney for the management group, said that Soliman “did not come to the board with a specific, formal offer.”
In its release, the company said the management buyout “is fair to the company’s shareholders . . . from a financial point of view.”
Even if Soliman, whose American Restaurant Group owns and operates more than 300 restaurants, loses the chance to become the 17th-largest U.S. restaurant chain, he will not walk away from the deal empty-handed.
In documents filed Monday with the Securities & Exchange Commission, Soliman revealed that on Sept. 2 he paid an average of $13.98 per share for 194,500 shares of Class A stock and an average of $13.90 for 17,700 Class B shares. Under the management buyout, he would reap a tidy profit of about $850,000 before expenses.
Soliman declined comment Monday on whether he will file a lawsuit against Restaurant Associates or its board of directors. But industry analysts and company sources acknowledged Monday that litigation is likely.
