Bondholders Push Bid to Sell Restaurant Enterprises’ Assets

Bondholders of Restaurant Enterprises Group are pushing the financially troubled company to sell most of its restaurant chains under a proposal that could put San Diego-based Foodmaker Inc. in a position to challenge Pepsico Inc. in its recently announced plans to build the first nationwide Mexican full-service chain.

As proposed, Foodmaker, parent of the Jack in the Box fast-food chain, said Thursday it would join two investment firms to acquire REG’s El Torito, Bob’s Big Boy, Charley Brown’s, Coco’s and Carrow ‘s restaurants in a deal valued at more than $700 million.

Although regional, El Torito is the nation’s second-largest Mexican sit-down restaurant chain. Foodmaker would fold its Louisville, Ky.-based Chi-Chi’s restaurant group, now the largest sit-down Mexican chain, into the new company in exchange for a 33% ownership stake. It would also operate the new company.

Joining Foodmaker in the deal would be the Los Angeles-based investment firm Leonard Green Partners and New York-based Apollo Advisors.

Howver, Irvine-based REG and W.R. Grace & Co., which controls the privately held restaurant company, have not agreed to the sale. REG and Grace spokesmen on Thursday would not comment on the plan.

Pepsi’s Irvine-based Taco Bell fast-food chain announced plans Tuesday to create a nationwide chain of 300 to 500 sit-down Mexican restaurants. It said it would acquire Chevys, a San Francisco-based chain with 37-units and build from that base.

Some restaurant analysts speculated Thursday that the proposal for REG’s assets would prompt a bidding war for the businesses that are viewed as profitable. “Maybe (Taco Bell President) John Martin will one-up Foodmaker with his own bid,” said Janet Lowder, a restaurant consultant based in Rancho Palos Verdes.

A majority of REG’s bondholders have already approved the proposal. “Bondholders are very pleased with the recovery that the agreement would provide to all REG security holders,” a spokesman said.