CKE to Purchase Summit Family Restaurants for $34.5 Million

CKE Restaurants Inc., which operates the Carl’s Jr. fast-food chain, said Friday that it will acquire Summit Family Restaurants, which has 126 restaurants in nine Western states, for $34.5 million in cash and stock.

CKE said it will sell most of those eateries to generate cash that will be pumped into the 668-unit Carl’s Jr. chain.

Summit operates or franchises 104 JB’s family-style restaurants, six Galaxy Diners and 16 HomeTown Buffet restaurants. None of the restaurants are in California.

But CKE has expansion plans for Summit’s fledgling ‘50s-style Galaxy Diner chain.

The deal, which must be approved by Summit stockholders, is expected to close early in 1996. CKE is offering about $3 in cash and $3 in stock for each share of Summit. CKE closed Friday at $17.125, down 25 cents, in New York Stock Exchange trading, while Summit rose by 53 cents to $5.53 in Nasdaq trading.

A San Diego-based company earlier had made a bid for Summit, which is based in Salt Lake City, but it was uncertain Friday whether the company, Stella Bella Corp. USA, plans to fight CKE’s proposed deal. Summit executives did not return telephone calls and a spokeswoman for Stella Bella, a coffee shop operator, said only that the company was studying its options.

CKE Chairman and Chief Executive Officer William P. Foley II said, however: “We’ve sealed a deal with Summit’s [board] . . . and would receive a significant break-off fee if the deal isn’t completed. I don’t see any fight.”

Stella Bella last month made an unsolicited $34.7-million offer for Summit. But Summit executives at the time said there was not “satisfactory evidence” that Stella Bella has sufficient cash to finance the deal. Stella Bella President Jack Brobert founded the JB’s chain in 1961 and took the company public in 1972. He left as chairman in 1990.

Foley described CKE’s proposed acquisition of Summit as a financial deal that will generate about $40 million in cash that the Anaheim company would use to fund growth of the Carl’s Jr. chain. CKE currently is spending millions of dollars to remodel the restaurants and add Green Burrito Mexican-style menu items to as many as 200 Carl’s Jr. locations.

Foley also said Summit has had preliminary meetings with an unnamed buyer who has expressed interest in the HomeTown Buffet locations, and other buyers are looking at “a significant number” of the JB’s restaurants.

CKE plans to add half a dozen Galaxy Diners during 1996 and might eventually expand the chain to about 20 locations. The Galaxy Diners would be built in rural areas, Foley said.