Karcher to Vote Trust Shares for Any Sale Offer
Fast-food czar Carl N. Karcher and his partner, a Los Angeles investment group, agreed Friday to extend their offer to buy Carl Karcher Enterprises and made a significant change in terms that could encourage offers from competing groups.
Karcher and partner Freeman Spogli & Co., which had set a deadline of Friday for acceptance or rejection of their offer to buy the publicly traded company for $9.50 a share, agreed to a new deadline of Dec. 18.
Karcher, 75, teamed up with Freeman Spogli to take the company private. The Carl’s Jr. chain, which Karcher founded in 1941 with a single hot-dog cart in central Los Angeles, now has more than 600 restaurants in California and several other western states. At the price offered per share, the value of the Karcher-Freeman Spogli offer announced Nov. 17 would be $171 million.
Freeman Spogli spokesman Bill Wardlaw said the extension was made at the request of the company’s outside directors, who are charged with reviewing the offers. The directors apparently wanted more time to study the offer and see if any other groups are interested, said Loren Pannier, Karcher’s chief financial officer.
In addition to agreeing to the extension, the Karcher-Freeman Spogli group made a crucial change in its bid. Now Karcher, through the Carl and Margaret Karcher Trust he controls with his wife, will be able to vote its shares for any bid put before the company. Under the previous arrangement, he pledged the trust’s support only for his own deal.
The change is significant because the Karcher trust controls 6.2 million shares, representing a third of the common stock outstanding. Any offer to take control of the company could have significant trouble without Karcher’s support.
The change could also help ward off any further lawsuits by disgruntled investors who think the Karcher offer, which has been below the stock’s recent selling price, is unfair. So far, at least six investor lawsuits have been filed, Wardlaw said.
The revised terms also let Karcher avoid any allegations of conflict of interest, said Doug Christopher, an analyst for Crowell, Weedon & Co. in Los Angeles.
In Friday’s trading on the NASDAQ market, the stock closed at $10 a share, up 37.5 cents.
Wardlaw said the stock price has been higher than the offer only because of speculation about a possible sale. Before rumors of the impending offer, the stock had topped $10 a share for fewer than 10 days during the past two years and had generally traded in a range of $6 to $7, he said.
But some analysts, like the disgruntled stockholders, also think the Karcher offer is too low.
“I always thought the stock was worth anywhere from $13 to $15,” said Dave Rose, an analyst for the brokerage L.H. Friend, Weinress & Frankson in Irvine.
Bill Davenport, a broker who follows the company for the brokerage Kidder Peabody & Co. in Newport Beach, said he has heard that the prime real estate controlled by Karcher Enterprises might by itself put the value of the company in that higher range.
Davenport said Karcher had to yield on the clause easing loyalty to his own offer because “it made him look dumb. So somebody offers you $17 (a share). You are going to say ‘no’?”
Even with that change, however, Karcher appears to have the upper hand. Analysts say that, while they hear rumblings about other contenders, they have been unable to identify an interested party.
“I feel comfortable that the deal is probably still going to go through,” Rose said. “I don’t see anyone (else) stepping up to the plate just yet.”
Davenport said that, while Karcher now has the option to vote his shares for any offer, “he doesn’t want to vote them any other way. . . . He wants this deal to go through.”
