CKE’s Star Buffet Raises $36 Million in Stock Sale

ANAHEIM —  CKE Restaurants held an initial stock offering Thursday for a buffet-style restaurant company, with investors forking out $36 million for stakes in the new Star Buffet Inc.

CKE, the Anaheim-based parent company of Carl’s Jr. and Hardee’s burger chains, had owned all of Star Buffet. It sold 60% to investors and kept the remaining 40% of the company, which includes 16 HomeTown Buffets and two Casa Bonita restaurants.

The offering will allow Star Buffet to complete its acquisition of seven restaurants from North’s Restaurants Inc., a chain that operates in the Northwest.

Star Buffet currently operates its modestly priced restaurants in nine Western states but hopes to expand quickly into other regions, using some of the new capital to open restaurants and invest in or buy regional chains.

It already has struck a “strategic alliance” with one such chain, taking a minority position in Stacey’s Buffet, a Largo, Fla.-based chain with 24 restaurants.

The buffet segment of the restaurant business is dominated by Buffets Inc., an Eden Prairie, Minn.-based company with 355 restaurants in 34 states.

In disclosure material to investors, Star Buffet said there are more than 8,000 such buffet restaurants nationally, with more being added all the time.

Star Buffet described the industry, with an estimated $4.3 billion in annual revenues, as “fragmented.” It said it has aggressive plans to gobble up privately held regional chains without the resources to compete against larger regional and national chains.

A total of 3 million shares in Star Buffet were sold. Initially priced at $12, they closed at $14.88 per share in their first day of trading on the Nasdaq Stock Exchange.

The number of shares sold and the price were higher than CKE had estimated when it announced last July that it would create Salt Lake City-based Star Buffet.

CKE spokesman Loren Pannier said the reaction to the company’s informational sessions on the new company was strong, with investors convinced of the company’s ability to wring better profits out of small regional chains.

The new company can save money by forming buying alliances with CKE, centralizing administration of its various chains and applying successful elements of each to others, Pannier said.

Pannier said that, of the $36 million raised in the initial public offering, $7.2 million will go to CKE Restaurants, $3.6 million to the purchase of the North’s restaurants and the rest to the operation and expansion of Star Buffet.