CKE Restaurants Weighs Sale or Spinoff of La Salsa

CKE Restaurants Inc. may consider selling its La Salsa Fresh Mexican Grills in the next three to five years after expanding the chain and remodeling restaurants, Chief Executive Andrew Puzder said Tuesday.

The company would also consider spinning off the unit, Puzder said in an interview. He first wants to grow the Mexican food chain to a “couple hundred” La Salsa locations from the about 100 in operation.

Initial public offerings of restaurants such as Chipotle Mexican Grill Inc. have been popular with investors this year.

Shares of Chipotle doubled on the first day of trading in January after McDonald’s Corp. took the fast-food chain public.

“We could spin off La Salsa at some point,” Puzder said. “It’s really not at the level that Chipotle was yet.”

Restaurant chains such as McDonald’s and Wendy’s International Inc. have been spinning off faster-growing units such as Chipotle and Tim Hortons Inc., the largest Canadian doughnut chain. Shares of Tim Hortons rose 22% in their first day of trading in March after the biggest North American IPO in nine months.

“They want to take advantage of the positive sentiment of the Mexican fast-casual environment,” said Conrad Lyon, an analyst at McDonald Investments Inc. in El Segundo. “This signals to shareholders that this may be a play in the future.”

On Monday, activist hedge fund Pirate Capital, which has the biggest stake in CKE at 12%, urged Outback Steakhouse operator OSI Restaurant Partners Inc. to sell or spin off some of its faster-growing restaurant concepts to help boost the company’s stock price.

CKE, based in Carpinteria, Calif., probably wouldn’t spin off its Green Burrito brand because it is paired with the Carl’s Jr. hamburger chain, Puzder said.

CKE purchased La Salsa in March 2002, when it acquired the Santa Barbara Restaurant Group Inc. CKE shares rose 16 cents to $16.83 on Tuesday.