Dive Brief:
- Private equity firm L Catterton has agreed to acquire Del Frisco's Restaurant Group for $650 million, which equates to $8 per share for shareholders, according to a press release.
- The transaction is subject to shareholder approval. Engaged Capital and its affiliates, which own 10% of outstanding shares and has been critical of the company, entered into voting agreements saying it would vote in favor of the acquisition. The agreement was unanimously approved by the board of directors after it reviewed several strategic alternatives.
- Upon closing, L Catterton plans to run bartaco and Barcelona Wine Bar separately from De Frisco's Grille and Del Frisco's Double Eagle Steakhouse.
Dive Insight:
Del Frisco's sale is no surprise. A deal was rumored to be in the works several weeks ago when reports suggested Ruth's Hospitality, Darden and Landry's were potential buyers, which would have kept the company public. It was later revealed that Darden had no intentions to buy the company, according to Restaurant Business. It has also been under pressure from activist investors, especially since its acquisition of bartaco and Barcelona added $325 million in debt to the company, according to Restaurant Business.
The transaction will provide a 22% premium on shares compared to where shares were priced Dec. 19, around the time the company also started its review of strategies and was under pressure by Engaged Capital to sell the company. Since then, it provided plans to lay off 12% to 15% of its administrative staff, which would generate $3 million in savings this year.
Turning private has been a growing trend among not just public restaurant groups, but also public companies at large. Becoming private takes a company away from shareholder scrutiny. The number of public listings decreased by 50% from 1996 to 2016. One of the largest companies to go private following an acquisition was Panera, a move that followed several threats from activist investors. And during the last two to three decades, private equity firms have grown to 6,000. Activist investors have also been targeting other full-service restaurants as well. Red Robin deployed a poison pill in early June to try and stave off a hostile takeover while J. Alexander's rejected an offer from an investor to buy the company.
L Catterton's acquisition fits well within its restaurant appetite, and it has invested in Bloomin' Brands, Cheddar’s Scratch Kitchen, P.F. Chang's, Uncle Julio’s, among others. The firm plans to operate Barcelona and bartaco alongside the company’s growing brands, which includes Uncle Julio’s. Considering the firm’s long-time interest and experience in restaurants, Del Frisco’s is likely in good hands.
