Intermark Bids for Chain of Steakhouses
Intermark has signed a letter of intent to acquire Western Sizzlin Inc., a privately held, Augusta, Ga.-based restaurant franchise operation in a leveraged buyout valued at $95 million.
The deal would be Intermark’s largest single acquisition, according to Intermark Chairman Charles R. Scott. Intermark paid $46 million in 1986 for its 41% interest in Triton Group, a publicly traded La Jolla-based holding company.
Intermark, a La Jolla-based holding company, would acquire control of Western Sizzlin through a newly created entity that will be 51% owned by Triton and 49% owned by a management team that will operate Western Sizzlin.
The $95-million price is “reasonable” given the $466.2 million in 1987 revenue that Western Sizzlin’s 585 units--all owned by franchisees, not the company--generated during 1987, according to an associate editor at Restaurant and Institutions, a Chicago-based trade magazine. Intermark is acquiring the company from the widow and son of its founder, Nick Pascarella, who died several months ago.
May Be Moved to La Jolla
The new management team at Western Sizzlin includes Pizza Hut co-founder Frank Carney and Michael J. Stack, a restaurant consultant who recently was president of a company that held several Chi-Chi’s restaurant franchises. Carney would serve as Western Sizzlin’s chairman. Stack, now a La Jolla resident, would be its president. The new company might be based in La Jolla, according to Intermark Vice President Mitchell Woodbury.
“If we didn’t have the expertise and level of commitment that we have with Mike and Frank, it’s highly likely that we would not have done the (Western Sizzlin) deal,” Woodbury said.
Because of “heavy interest on behalf of bankers,” Intermark--through Triton--will only have to spend about $6 million in capital to complete the deal, Woodbury said Monday. Triton hopes to use bank loans to finance the rest of the deal. Western Sizzlin’s management team has contributed “slightly less” than $6 million in cash to the deal.
Expansion Plans
Intermark expects the new management team at Western Sizzlin to “substantially enhance” the chain’s growth, according to Scott. Western Sizzlin plans “an aggressive new franchise expansion and further penetration of existing markets,” Scott said.
Although not well known in California, Western Sizzlin, with 585 franchised restaurants, is the nation’s fourth-largest family steakhouse chain, according to Restaurants and Institutions magazine. The chain has restaurants in 29 states, with most scattered throughout 13 states in the Southeast.
Sizzler, a subsidiary of Los Angeles-based Collins Foods, dominates the highly competitive family steakhouse business. Its 574 locations generated $754.3 million in 1987 sales, according to the magazine.
Family steak restaurants offer more than just steak and potatoes. Increasingly, competitors have been broadening their luncheon and dinner offerings to include fish and chicken dishes and “food bars” that include a wide selection of salad and other items.
Western Sizzlin has a solid reputation in the Southeast, according to Restaurants and Institutions, and has consistently finished at the top of the magazine’s annual poll; it was rated the “most popular” family steak restaurant chain in the Southeast in 1987, a magazine spokesman said.
Western Sizzlin competes largely against Sizzler, Ponderosa, Bonanza and Golden Corral. Intermark learned about Western Sizzlin’s availability through Drexel Burnham Lambert, a New York-based investment firm.
TOP U.S. FAMILY STEAK RESTAURANTS
Chain Revenue Locations Sizzler $754.3 million 574 Ponderosa $730.4 million 693 Bonanza $529.5 million 605 Western Sizzlin $466.2 million 585 Golden Corral $445.8 million 542 Steak & Ale $225 million 160
SOURCE: Restaurants and Institutions Magazine, year-end 1987 figures for revenue TOP U.S. FAMILY STEAK RESTAURANTS
