The J. Alexander’s polished-casual chain has acquiesced to shareholders’ demands that it put itself up for sale, citing that option as one of several new routes for raising the value of investors’ holdings.
The broadened list of strategic alternatives also includes the acquisition of “complementary concepts” to increase the company’s revenues and profit potential, and the acceptance of a “strategic” large equity investment.
“Recent transactions for companies in the upscale casual-dining segment make this potential path more attractive now,” said Lonnie Stout, executive chairman and former CEO of the 48-restaurant operation.
In recent weeks, the private-equity arm of Ares Management Corp. agreed to make an investment in the 35-unit Cooper’s Hawk Winery & Restaurants polished-casual concept in a deal that values the chain at about $800 million.
L Catterton, the sizable private-equity firm that’s been a frequent buyer and seller of restaurants, agreed to buy Del Frisco’s Restaurant Group, an operator of four small polished-casual chains, for a deal that values the company at about $650 million.
In April, J. Alexander’s stakeholder Ancora Advisors offered to buy the company for $11.75 per share, or $172 million in total for the shares it does not currently own. Ancora CEO Fred DiSanto said at the time that J. Alexander’s was too small to attract the attention of most investors and should accept his company’s offer. J. Alexander’s rejected the bid as insignificant.
Other shareholders joined with Ancora about a month ago to vote against reseating two of J. Alexander’s directors. Ancora reiterated its demand at that time that the company be sold.
A change in J. Alexander’s ownership has been controversial since shareholders voted down a proposed merger about a year ago with Ninety Nine Restaurants, a holding of former J. Alexander’s owner American Blue Ribbon Holdings. The deal called for J. Alexander’s to pay Blue Ribbon about $197 million in stock, which would have returned control of J. Alexander’s to Blue Ribbon investor Fidelity National Financial, the finance company that spun off J. Alexander’s in 2015. Objectors complained that the actions would have in effect returned the company to Fidelity founder Bill Foley, the onetime owner of Carl’s Jr. and Hardee’s, without a premium. J. Alexander’s shareholders would see no premium, they alleged.
In addition, J. Alexander’s had been advised on the deal by a consulting company called Black Knight, which was allegedly controlled by Fidelity. The company paid Black Knight about $7 million in fees, according to Ancora’s DiSanto.
J. Alexander’s has since severed its connection with Black Knight.
J. Alexander’s announced its openness to a sale almost simultaneous with releasing financial results for the second quarter. Same-store sales for the company’s namesake brand rose 0.3% despite a 1.3% drop in traffic. Comps for its secondary concept, Stoney River Steakhouse and Grill, also rose by that amount, but on a 2.4% gain in customer counts.
The company also operates a third, small concept, Redlands Grill.
Net income rose $2.2 million, a 3% increase from the prior year, on revenues of $62.2 million, also up 3%.