Anwar Soliman’s Appetite for Restaurants : Master Deal Maker Hopes to Build a Company That Will Rival McDonald’s
For Anwar Soliman, a fall from Grace was anything but a disaster.
It was 14 months ago that Soliman departed as head of W. R. Grace & Co.’s restaurant division when his plan for a $775-million management buyout suddenly fell through. After 22 years at Grace, much of it helping the company amass restaurants like Del Taco, Coco’s, JoJos and Gladstone’s 4 Fish, he was out of a job. But not for long.
Within weeks, he had engineered a $275-million purchase of 330 restaurants from Marriott, including a string of well-known chains like Grandy’s Fried Chicken and Stuart Anderson’s Black Angus. The deal also included some trendy Los Angeles, Orange County and San Francisco eateries such as Prego, Harry’s Bar & American Grill, Chianti and Ciao.
These form the core of Soliman’s Newport Beach-based American Restaurant Group. But it may be just the beginning for the driven Soliman, a 49-year-old Egyptian immigrant.
Within the past few weeks, he has made an unsolicited takeover bid for Restaurant Associates Industries of New York, a firm with more than 100 restaurants and 150 newsstands. His proposed takeover would make Soliman’s company the nation’s 17th largest restaurant chain.
But so far his offer for Restaurant Associates has been rebuffed by the company, which is proceeding with a leveraged buyout led by a group of its top managers.
But the takeover efforts have turned the spotlight--as well as some criticism--on Soliman, an intensely private man who refuses to discuss his personal affairs and who has trouble remembering his age.
Headquartered in an ocean-view Newport Beach high-rise office building decorated with a framed picture of the Sphinx and a black plaster cat that Soliman says protects him from “the evil eye,” Soliman is a study in contrasts.
He regularly puts in 12-hour days and is known to friends as someone who “talks in numbers,” but he admits to reading steamy Hollywood novels edited by his estranged wife, a publishing executive.
He loves to gamble--a friend tells of Soliman betting $10 apiece on repeated coin flips during an airplane trip--but he is also known as an extremely well-prepared and cautious negotiator.
He is charming and soft-spoken in conversation, yet he has a reputation for being ruthless in pursuit of his goals. Associates say he portrays himself as a modest Egyptian of humble origins when arranging deals, yet he admits in an interview that he hopes his restaurant group will one day rival the mammoth McDonald’s chain.
Some acquaintances, though, say Soliman really may aspire to become the T. Boone Pickens of the restaurant business by arranging brash takeover bids such as his unfriendly offer for Restaurant Associates.
” I used to call him the Egyptian foot soldier,” said W. R. Grace’s chief financial officer, John F. Spellman. “He’d say, ‘Oh, you know me, I’m basically a bookkeeper,’ and that sort of nonsense. Buy that for a minute, and you’re in big trouble.”
Questions Raised by Analysts
His boundless ambitions--and the skepticism expressed by others--have become a Soliman trademark.
For example, Soliman is currently offering to pay Restaurant Associates stockholders $2 a share more than the company’s management group, or a total of about $120 million. But critics question whether his offer--which remains subject to financing and other conditions--is really worth the $20 a share he claims.
It’s the same sort of question raised by analysts regarding his purchase of the former Marriott restaurants for $775 million, some $40 million more than a rival bidder had calculated that the holdings were worth. (Marriott owned the restaurants only briefly. The giant hotel company acquired the restaurants as part of its purchase of Saga, the food service company then headquartered in Menlo Park.)
Marriott, however, provided $40 million in financing for the highly leveraged deal, and industry sources say that Soliman was able to obtain a loan with a long payback period and an unusually low interest rate.
And then there’s Soliman’s American Restaurant Group. It’s big--more than 360 restaurants--and it should gross $500 million this year, but is it profitable?
Soliman says yes, but observers of his privately held company aren’t so sure. Although it may be too early to gauge the restaurant group’s success, they say Soliman’s track record at W. R. Grace is sufficient cause for skepticism.
“With Grace, he put together a division with $1 billion in sales in a short time that never really made any money,” said a former colleague who asked not to be named. “The illusion was big business . . . but there’s a real question in the industry as to whether or not Anwar Soliman can make money out of his acquisitions.”
In 1985, the last year for which figures are available, the W. R. Grace division reported operating income of $17.9 million for its 845 restaurants, a disappointingly low profit margin for a group generating $1 billion in sales.
Even so, the division eventually was sold in a management-led leveraged buyout for a profit of about $250 million last December, six months after the Soliman-led buyout attempt faltered for reasons not publicly disclosed.
W. R. Grace’s restaurant division had been built almost from scratch by Soliman, working with the encouragement of chief executive Peter Grace. Former associates say Grace and Soliman developed an almost father-son relationship, cemented by near-maniacal working hours and a mutual drive to build a major-league restaurant group.
No Theme to Acquisitions
Soliman, one insider recalled, “was willing to do most anything that needed to get done to get what Grace wanted, and Mr. Grace insisted on some inane things.”
Soliman said his first acquisition for Grace was a group of 22 El Torito Mexican restaurants in 1976. Over the next eight years, acquisitions arranged by Soliman included 25 Casa Gallardo Mexican restaurants, 27 Darryl’s dinner houses, 40 Hungry Tiger seafood outlets, 90 Carrow’s and assorted Houlihan’s Places, Coco’s, Jojos, Reuben’s, Gladstone’s 4 Fish, and Baxters units. He also negotiated the right to build 181 Del Taco units outside of California.
Soliman’s acquisitions may have lacked a consistent theme, but the restaurant group he assembled was unquestionably large and impressive.
“It sometimes seemed (Soliman) was just buying companies to create a larger enterprise, rather than having some strategic fit,” said one competitor. The industry insider, who characterized Soliman as a “financial wizard,” added, “No one in the industry could understand some of the acquisitions Anwar made.”
His fascination with making deals may have detracted from the profitability of the restaurants he acquired.
“They made all those acquisitions, then never had time to digest anything they acquired over the years,” said Stephen Rockwell, a restaurant industry analyst with Alex Brown & Sons in Baltimore.
“Grace is primarily a chemical company,” added Harvey B. Storch, an analyst with Derby Securities Inc. in New York. “It was a big empire, but frankly, they knew very little about (operating restaurants), and it wasn’t a great operation.”
Industry sources say the group’s results were mixed. While the El Torito units, for example, did very well, others, such as Jojos, were financial disasters.
Despite the unanswered questions about the operating record of his restaurants, virtually all observers are impressed with Soliman’s skill at wheeling and dealing.
“He’s a great negotiator,” said one of the participants in the eventual buyout of the Grace division. “He loves to make deals, and as soon as he’s finished with one, he wants to start another. . . . In the old Grace, the problem was too many different deals because both Anwar and Peter Grace loved to make deals.”
Pullout Hit Like ‘Bombshell’
And they usually got what they wanted.
“You get the impression he really wants to make the transaction work,” noted Del Taco president Wayne Armstrong, who has sat across the bargaining table from Soliman. “He walks in knowing what points he’s willing to compromise on and which ones he’s not able to. With preparation and motivation, he makes it work.”
Soliman, however, may have gotten in trouble himself after receiving approval from Grace’s board of directors to lead a $775-million leveraged buyout of the company’s restaurant operations.
Although details of what happened are unclear, there was apparently a falling out between Soliman and his mentor, Peter Grace, reportedly over how much control the company would retain. Soliman’s sudden withdrawal from the deal that he had orchestrated hit the division’s Irvine headquarters like a bombshell.
“People were running all over the country, back and forth. . . . It was like a political assassination or something,” said one industry source.
“Peter had apoplexy,” said an insider. “His feeling was, ‘After all I did for (Soliman)’ . . . and with Peter, you’re either for him or against him.” Grace last week declined to comment about Soliman.
But it was not the first time Soliman had to start from scratch.
Soliman, in an interview last week, said he arrived in the United States in 1962 on a Fulbright scholarship after earning an MBA from Alexandria University in Egypt. He grew up in Alexandria along with 13 other siblings in a “comfortable” household, he said, but “there’s a big difference as to what’s comfortable there and in the U.S.”
Comfortable or not, Soliman said he had only $45 when he arrived in America, and about a third of that was spent on his first Manhattan taxi ride.
After a period on Texas--where he learned to speak English with a drawl--he returned to Manhattan and eventually earned a Ph.D. in business administration from New York University.
Rose Through the Ranks
Soliman signed on with Grace as an assistant manager in 1964. By 1978, he was a vice president and head of the company’s new restaurant group. He became an executive vice president in 1981.
His long experience with Grace apparently paid off. When Soliman suddenly found himself on his own last year, he was able to put together the same sort of acquisition for himself that he’d been arranging for years for Grace.
Soliman’s restaurant roster includes 114 Stuart Anderson Black Angus dinner houses, 107 Grandy’s fast-food fried chicken outlets, 21 Velvet Turtles, nine units of the Spoons chain, and the small but prestigious Spectrum Foods group, including Prego, Harry’s Bar & Grill, Chianti, and Ciao.
Soliman won’t disclose the value of the Marriott deal, but he says his company should gross $500 million this year.
But will that include a significant profit?
“It’s done extremely beautifully,” Soliman replies. “Overall, sales and profits have increased dramatically. The profit increase is unbelievable.”
Industry observers, however, remain unconvinced. Black Angus, for example, last year made a relatively modest profit of $18 million on sales of $200 million, industry sources say.
“It’s a difficult business because the chain steak-house business is really tough right now, and one of the things that made Black Angus successful is the liquor business, where sales are down,” said one analyst.
Additionally, sources say five of the 14 Spectrum restaurants are reportedly running in the red for the first time.
There is also skepticism about Soliman’s continuing campaign to acquire Restaurant Associates, which Soliman said he began after reading about the management group’s initial buyout offer for the company. He said he decided to make his own bid because he thought the company was undervalued.
But Soliman’s offer, observes Restaurant Associates President Martin Brody, is contingent on “everything including the weather.”
Motives Unclear
The many strings attached to Soliman’s offer make some observers wonder how serious he really is about acquiring the company.
“He could be pumping the price higher to make money on the stock he owns,” said Kurt Koegler, a New York attorney with Skadden, Arps, Slate, Meagher & Flom, which is representing an independent committee of Restaurant Associates directors.
“Maybe he wants to sue,” Koegler said. “Or he could be interested in raising the price so management will go away. Then he can do his due diligence and drop his price. It can be any number of things.”
Soliman insists the offer--which should net him at least $850,000 on the sale of stock he has already acquired--is legitimate. “You never really go into anything unless you want to win,” he said.
The questions, however, remain, and Soliman’s penchant for hyperbole doesn’t help. In a recent interview, for example, he recounted at length how he skillfully acquired for Grace the landmark Buena Vista bar in San Francisco--an Irish coffee mecca by the bay at the end of a cable car line--from an owner who, he claimed, had no intention of selling.
Several independent sources, however, including the bar’s former owner, disputed Soliman’s version of the story and say the bar was for sale before he arrived on the scene. Soliman later insisted that it was the bar owner must have been confused about what happened.
Nevertheless, Soliman’s tenacious methods and engaging personality will serve him well in either continuing to pursue Restaurant Associates or in other moves toward expansion, his boosters say.
“He’s smart and an extremely thorough analyst and he believes he’s capable of doing something significant in this world,” noted Grace CFO Spellman. “And I agree.”
