Del Taco/Naugles Bought by Managers : Fast Food: Changes promised by the new owners may heat up competition with Taco Bell.

Del Taco/Naugles Inc., the nation’s second-largest Mexican-style fast-food chain, was acquired Thursday in a management buyout that threatens to resuscitate the taco war with rival Taco Bell.

A four-member management group, headed by Chief Executive and President Wayne W. Armstrong, acquired the privately held chain from Newport Beach restaurateur Anwar Soliman for an undisclosed price. Industry analysts estimated the deal’s value at between $100 million and $150 million.

In announcing the transaction, Armstrong also said Del Taco/Naugles would return “to its traditional fast-food roots” by lowering prices and serving smaller portions. The company also plans to return to 24-hour service in many of its 350 outlets.

The acquisition comes less than two years after Soliman bought Del Taco and Naugles and upgraded their menus with more expensive and elaborate offerings.

The deal also coincides with efforts by Soliman to raise $100 million through the issuance of junk bonds to increase his stake in American Restaurant Group (ARG), which owns 360 restaurants, including the Stuart Anderson’s Black Angus chain.

Soliman wants to buy out a large stake that GE Credit Corp. holds in ARG, industry sources said. He has been unable to raise the money because of the slump in the junk bond market. Those sources said the sale of Del Taco/Naugles is probably designed to help buyout GE.

Soliman could not be reached for comment.

GE Credit financed the buyout by Del Taco management. Armstrong and three corporate vice presidents--John Crofton, head of operations; Harold Fox, marketing chief, and Paul W. Hitzelberger, chief of operations--are equal partners in the acquisition.

How much cash Soliman raised is unclear--the deal was structured so that Armstrong and his partners paid only part of the price in cash. Soliman also received notes, unspecified “other interests” and the right to develop and operate Del Taco and Naugles restaurants in Hong Kong, Thailand, Indonesia, Taiwan, Japan and South Korea.

Armstrong, who was president of Del Taco when Soliman bought the operation in March, 1988, and combined it with the smaller Naugles chain, said the new owners plan to make some quick changes in operations.

That could mean a resumption of the so-called taco war launched in 1988 when Soliman combined the two smaller chains and tried to challenge Taco Bell’s supremacy. But in rekindling the competition, Armstrong and his team are repudiating Soliman’s vision of an upscale fast-food chain.

The company’s return to its roots was launched over the weekend as new items--most of them down-sized versions of the larger and higher-priced items that have been on the menu for the past two years--were added to the menu boards of the 290 Del Tacos and 25 Naugles in California, the 34 Naugles in Utah, Nevada, Missouri and Arizona and the single Del Taco in Arizona.

Armstrong acknowledged Thursday that the chain had been losing customers to rival Taco Bell, which has lowered prices and introduced a line of 59-cent items.

Armstrong said the new owners plan to have most of the chain’s restaurants open 24 hours by the end of March. Most of the stores now close at midnight.

Currently, Del Taco/Naugles has estimated gross annual sales of $250 million. It has about 11% of the national market for Mexican fast-food restaurants.