CKE Restaurants Inc., in an ongoing attempt to reduce debt, said Wednesday that it will sell its Taco Bueno unit for $72.5 million to Jacobson Partners, a closely held New York investment firm.
Anaheim-based CKE, which also operates the Carl's Jr. and Hardee's fast-food hamburger chains, said proceeds from the cash sale should shave its debt, which once stood at a whopping $300 million, to less than $100 million.
The sale of the Taco Bueno chain, which is expected to be completed in May, is CKE's latest move to unload assets and reduce its debt load. Taco Bueno operates 125 restaurants in Texas and Oklahoma.
"With our focus on the Hardee's turnaround and debt reduction, we believe the sale of Taco Bueno at this time serves its interests as well as CKE's," Chief Executive Andrew F. Puzder said in a statement.
CKE's stock closed Wednesday at $3.02, down 10 cents, on the New York Stock Exchange.
CKE, which operates more than 3,700 quick-service restaurants, has been struggling with sagging sales and mounting debt as a result of its attempt to absorb the sprawling Hardee's chain, which it acquired in 1997.
Executives have said that Hardee's posed a bigger-than-anticipated challenge for the company because many of the restaurants were poorly run and needed costly remodeling.
To right itself, the company last year began selling Hardee's and Carl's Jr. restaurants, shifting more company-owned stores to franchisees. In the last 18 months, CKE has sold about $175 million worth of assets to pay down bank debt, Senior Vice President Loren Pannier said Wednesday.
CKE would like to sell more Hardee's restaurants, trimming its company-owned units to 600 to 800 eateries, from the more than 900 it now owns, Pannier said.
In all, there are 2,660 Hardee's restaurants in 37 states and 11 foreign countries. CKE also operates 977 Carl's Jr. restaurants in 13 Western states and Mexico.
The company has been trying to boost Hardee's sales by improving restaurant service and cleanliness.
But the remodeling has hurt CKE's bottom line. In December, the company posted a larger-than-expected operating loss of $7.4 million, or 15 cents a share, for the fiscal third quarter. Analysts had anticipated a loss of about 9 cents a share. CKE cited lower sales and high costs at Hardee's. Hal Sieling, a restaurant industry consultant in Carlsbad, said Hardee's remains "a colossal problem" for the company.
The Taco Bueno sale "is a small piece in the puzzle," he said. "This is nothing compared to getting Hardee's straightened around."
Jacobson Partners holds interests in companies in a variety of industries, including health care and manufacturing, as well as restaurants.