Carl’s Jr. Chain May Go Private : Restaurants: Founder Karcher and unidentified investment group are discussing a joint buyout of fast-food operation.
Hamburger magnate Carl N. Karcher and an unidentified investment group are discussing a joint buyout of Carl Karcher Enterprises Inc., which most likely would take the fast-food firm private, the company said Friday.
The Anaheim parent company of the Carl’s Jr. restaurant chain, founded by Karcher more than 50 years ago, went public in 1981 when it sold stock in hopes of expanding nationwide. The expansion fell short of expectations.
The company said it disclosed the “preliminary discussions” between Karcher and the investment group because of heavy trading Thursday in the stock, which rose $1.37 a share to a 52-week high of $9.75. It closed slightly lower at $9.625 in Friday’s trading on the NASDAQ market.
According to a written statement from the company, Karcher was told by the investors that an offer would not be likely at a price higher than $10 a share. Analysts said that Carl Karcher Enterprises stock would be significantly undervalued at that price, despite the company’s lackluster performance in recent years.
“If (Karcher) is doing it at $10, he is stealing the company,” said Bill Davenport, a stockbroker for Kidder, Peabody & Co. in Newport Beach who follows the stock.
Karcher was traveling in Arizona on Friday and could not be reached for comment.
Karcher and his wife, Margaret, own about 6.2 million of the company’s 18 million shares outstanding, or 34.4%, according to the company’s April proxy statement.
Loren Pannier, Karcher’s chief financial officer, said that he was unaware of who was behind the heavy trading of shares Thursday and that the company is unaware of any other corporate suitors interested in it. The statement was issued, he said, “to quell the rumors.”
The statement comes at a time when Karcher Enterprises is at a crossroads. Chairman Karcher is 75, and a search has been underway for months to find a successor for President Don Karcher, Carl’s younger brother, who died earlier this year of cancer.
Analysts say the company’s lack of direction is reflected in its earnings, which have kept the stock in the $7 to $8 range.
“It’s basically frustrating,” said Doug Christopher, a Crowell, Weedon & Co. analyst. “You have a company with good locations, nice restaurants, technology and good food, and their average (meal price) ticket is a buck more than everybody else’s. Why can’t they make money?”
In addition, Carl Karcher Enterprises reported Friday that the company earned $3.2 million in the second fiscal quarter, down 17% from $3.7 million for the same period last year. The latest earnings included a one-time $1-million charge to cover costs of shutting down food manufacturing operations that are being turned over to independent suppliers.
Sales for the latest quarter, which ended Aug. 10, were $117.4 million, down 9% from $129.1 million a year earlier. Chairman Karcher said in a statement that the decrease reflected the conversion of company-owned restaurants to franchised operations.
