Stock Slide Complicates GB Foods’ Acquisition Plan

GB Foods Corp.’s deal to buy a Minnesota steakhouse chain may unravel if its stock price doesn’t improve in the coming weeks.

Shares of the parent of the Green Burrito Mexican fast-food chain fell 19%, or $1.88, Tuesday, to $8.50.

Chief Executive Andrew F. Puzder said the company had no news to report and speculated that the sharp downturn may be tied to the death late Monday of Bob Martyn, a stockbroker at Pauli & Co. of St. Louis.

“He has been a big fan of the company for several years,” said Puzder on Tuesday, who added that Martyn recommended the stock to numerous investors.

Martyn, 58, died of a heart attack Monday evening after two intruders broke into his Clayton, Mo., home and held him and his wife hostage during a robbery. Pauli is the only brokerage firm that follows GB Foods, and has the company on its “accumulate” list.

“Bob will be missed the most by people in the restaurant industry,” said Dan Walton, a managing director at the firm. “When people heard something from Bob, they believed it because of his 30 years in the business.”

For GB Foods, Tuesday’s stock slide endangers its proposed acquisition of Timber Lodge Steakhouse Inc., a 16-unit chain based in Minneapolis.

Under terms of the deal, GB proposed to buy Timber Lodge by swapping each Timber Lodge share for 0.8276 of a share of GB. The day the deal was announced, that formula worked out to $32.6 million. Tuesday’s slide knocked the price down to $25.5 million.

Under the so-called “collar” provision of the transaction, the lowest price that GB shares can fall to is $8.875.

Puzder said he wasn’t too concerned about the downturn Tuesday, noting that the final price is based on the price of GB stock in the 10 days prior to its closing, and that the deal won’t be completed for at least a month. Timber Lodge executives couldn’t be reached for comment.

Martyn’s death might shake some investors’ confidence in GB, but “the stock is worth around $10 on its own merits,” Puzder said. “It’ll probably go back up in the next couple of days.”

Timber Lodge shares also fell Tuesday, slipping 5%, or 31 cents, to $6.25.