Morton, Partners Sell Hard Rock Interest to Tune of $410 Million
Celebrity restaurateur Peter Morton, who pioneered the trend for themed eateries 25 years ago when he co-founded the Hard Rock Cafe, said Friday that he and his partners have sold their interest in the restaurant chain to the Rank Organisation of Britain for $410 million.
Morton’s share of the proceeds is about $300 million, with the remaining amount going to his numerous partners who were passive investors, including such well-known Hollywood figures as mogul Barry Diller and actor Tom Cruise. Sources said the investors came away with a staggering return, having invested only about $18 million total over the years.
Morton will keep his lucrative Hard Rock Hotel & Casino in Las Vegas, and he plans to expand further into the gaming business. He plans to add 400 rooms to the Las Vegas property, which he said has been operating at full occupancy amid the town’s latest boom. He is said to be close to announcing plans to build a Reno casino as well. Unaffected by the deal is his Morton’s restaurant in West Hollywood, one of the most popular eateries among Hollywood stars and executives.
The deal culminates about three months of talks between Morton and Rank, with investment bankers Leeds Group Inc. representing Morton and Schroder Wertheim & Co. Inc. representing Rank.
The deal announced Friday involves 13 restaurants that are controlled by Morton through Hard Rock America and four franchised cafes. Most of those restaurants are in the West, including cafes in the Beverly Center, Newport Beach, San Diego, San Francisco and a new one at CityWalk in Universal City that is a joint venture with MCA Inc.
Rank, a diversified entertainment, leisure and gaming concern, already owns 15 Hard Rock restaurants, with an additional 26 franchises, through a separately run operation called Hard Rock International.
The reason the ownership has been split between Morton and Rank dates to when Morton and his original partner, Isaac Tigrett, went their separate ways in 1985. Tigrett got the cafes and rights to develop them in the eastern U.S., and Morton received the same in the West. International rights were divided up as well.
Tigrett, who has since developed House of Blues, sold his interests in Hard Rock, with Rank eventually acquiring the former Tigrett interests in 1990.
Morton said he chose to sell his interests because he wants to do something different and also wants to devote his time to developing the casino business, which he said has proved highly profitable since the Las Vegas property opened last year. Morton estimates the value of his casino business at about $300 million.
James Berk, Hard Rock International chief executive, said the deal makes sense for Rank because combining the two operations allows the chain to consolidate functions as well as exercise more clout with suppliers. He said Rank is also free to fully develop such ventures as a Hard Rock record label, resorts and retail stores.
Hard Rock spawned a proliferation of entertainment-themed restaurants, including Planet Hollywood, Fashion Cafe and even a Bubba Gump restaurant based on the hit film “Forrest Gump.” Berk acknowledged that a saturation point may be nearing in the business, but added that he believes Hard Rock’s long-established brand name gives the chain a leg up on newcomers.