Dive Brief:

• Fertitta Entertainment and Fast Acquisition Corp., a special purpose acquisition company co-headed by Doug Jacob and Sandy Beall, have mutually terminated their merger agreement, which they originally entered into on Feb. 1, according to a press release.
• As part of the termination, Fertitta will pay up to $33 million through a combination of upfront and deferred payments. The settlement includes payments to the SPAC to be used to cover expenses associated with the terminated transaction and to replenish the SPAC's working capital account. 
• The merger would have taken Fertitta public, but owner Tilman Fertitta ultimately decided to keep the company private. Fast will continue to look for another operating company to combine with.

Dive Insight:

While going public through a SPAC would have given Fertitta access to additional capital, staying private allows the restaurant company to be spared from potential increased regulatory scrutiny associated with SPACs. Backing out of the deal comes with a significant downside, however: Fertitta won't receive $1.2 billion in institutional investments. Fertitta, which owns over a dozen fine and casual dining concepts, would have become one of the largest full-service dining restaurant groups to go public in recent years, and would have been valued at $6.6 billion once it became public.

Fast will also have to start over. The company has two years from its initial IPO date, which was in August, to find a company to merge with or will need to be dissolved. Fast previously raised $200 million as part of this IPO.

Staying private likely won't keep Fertitta from acquiring more companies. Prior to the pandemic, the company bought Del Frisco's Double Eagle Steakhouse, Del Frisco's Grille and Houlihan's in 2019. There will likely be opportunities to acquire additional companies, as this year has been particularly active for M&A  amid signs of recovery for restaurants.

The public market is also becoming more crowded, with newly minted restaurant IPOs. Krispy Kreme, Dutch Bros, First Watch, Portillo's, Sweetgreen, Panera Brands, Mod Pizza and Fogo de Chao are planning to take or have already taken their companies public. However, with this amount of companies going public in one year, there is a risk that investors could shy away from future public companies — especially if one of these stocks struggles.

SPACs have posed a successful way for restaurants to go public. BurgerFi used this path in 2020 and has since acquired another company. Panera Brands will work with Danny Meyer's SPAC USHG Acquisition Corp., which will become a cornerstone partner of Panera Brands after it goes public. Another large SPAC, Tastemaker Acquisition Corp., has also been on the hunt to take an emerging restaurant company public.