Carl’s Jr. and Hardee’s parent company CKE agrees to buyout
The parent company of the Carl’s Jr. hamburger chain got a juicy buyout offer -- but it may not be nourishing enough for shareholders.
CKE Restaurants Inc. said Friday that it had agreed to be bought by a Boston private equity firm for $619 million plus the assumption of about $309 million in debt.
The $11.05 a share cash offer from Thomas H. Lee Partners represented a 24% premium over its closing price a day earlier.
But in an unusual move, the Carpinteria, Calif., company also said it would “actively solicit” competing bids from other would-be buyers through April 6.
Buyout deals normally are ironclad and are larded with hefty breakup fees to dissuade rival bids. The extended bidding period appeared to be a nod to the unexpected timing of the deal.
The share prices of many fast-food purveyors -- and especially CKE -- have been pummeled by the recession.
“People are questioning it because it’s coming at a time when the stock is depressed and the earnings are depressed,” said Anton Brenner, an analyst at Roth Capital Partners in Newport Beach.
The sector’s fortunes are expected to improve, but only gradually. CKE’s share price is down from nearly $23 in mid-2007.
In a sign that investors may expect either another bid to emerge or Thomas. H. Lee Partners to fork over more cash, CKE’s stock closed Friday at $11.37, 32 cents over the deal price.
“We believe this transaction provides excellent value to our shareholders,” CKE Chief Executive Andrew Puzder said in a statement. Spokesmen for CKE and Thomas H. Lee Partners declined to comment further.
The buyout offer would enrich Puzder. The value of his shares jumped almost $4.9 million to $22.5 million Friday. The chief executive took home total compensation of $7.35 million last year, according to a company filing with the Securities and Exchange Commission.
The buyout offer is the latest twist for a storied Southern California company that was founded by charismatic entrepreneur Carl Karcher.
The company suffered severe financial difficulties after the 1997 purchase of the troubled Hardee’s chain, which was beset by dirty restaurants and bland food. The current management team led by Puzder turned the company around.
More recently, CKE has relied partly on hormonally charged ads in which celebrities such as Paris Hilton gobble oversize burgers while sashaying around in bathing suits.
However, CKE’s financial situation has suffered as the recession has taken a bite out of its core audience of young males.
Sales at restaurants open at least a year plunged 5.2% at Carl’s Jr. for the fiscal third quarter. Sales slipped 1.8% at Hardee’s.
For the four-week period ended Jan. 25, sales nose-dived 8.7% at Carl’s Jr. while sinking 2.5% at Hardee’s, the company said this month.
CKE blamed the sales declines on the stagnant economy and high unemployment among its customer base, as well as the continuing “deep-discount burger wars” and severe winter weather.
“The fast-food industry was the last of the restaurant segment to really feel the pain of the recession,” said Dennis Lombardi of WD Partners, a Columbus, Ohio, restaurant design and development firm. “But when people start feeling less wealthy they’ll trade down in restaurant venues. And when they lose their job they trade out and don’t go.”
Fiscal-year revenue through Jan. 25 is down more than 4% to $1.08 billion, compared with $1.13 billion in 2009.
With two other private equity firms, Thomas H. Lee Partners owns Dunkin’ Brands Inc., the parent of Dunkin’ Donuts. The firms are credited with turning around the doughnut chain, a well-known regional brand whose luster had faded.
walter.hamilton@
latimes.com
