The parent of the STK high-end steakhouse chain has struck a deal to acquire the 26-unit Kona Grill polished-casual chain for about $25 million in cash and the assumption of $11 million in working capital liabilities.
The deal includes 24 company-operated Kona restaurants in the United States and the franchise contracts to two international branches, in Dubai, U.A.E., and Vaughan, Ontario. The stores generate about $100 million in annual revenue, according to the buyer, One Group Hospitality Inc. Kona has secured debt of $33 million, separate from the working capital liabilities, according to securities documents.
Kona has been operating under the supervision of the federal bankruptcy court since filing for Chapter 11 protection at the end of April.
One Group indicated that it intends to maintain and expand the Kona brand rather than reflag the restaurants as STKs or one of the company’s other concepts, which include Bagatelle and Radio.
Both One Group and Kona are publicly owned.
“Through this transaction, we believe we can leverage our corporate infrastructure and operating expertise, particularly our bar-business know-how and Vibe dining, to drive improved performance in many of the same ways we have substantially improved comparable store sales and overall profitability at STK,” Manny Hilario, One Group’s CEO, said in a statement.
The buyer said that it expects the assimilation should take about 12 months.
The deal is subject to the approval of a federal bankruptcy court. In July, the court approved the sale of the 24 restaurants to Williston Holding, the multiconcept company run by former Kona CEO and co-founder Marcus Jundt, for $20.3 million. Williston subsequently withdrew the offer.
Piper Jaffray, Kona's financial advisor, said 67 parties expressed interest in buying Kona after the chain put itself up for sale in March. But Williston's bid was the only one received during the auction that followed Kona's bankruptcy filing, prompting the court to call off the process. Williston's offer was approved, but the multiconcept operation alerted the court days later that it would not proceed with the purchase.
Kona has been struggling to right itself after expanding rapidly, cutting costs and repeatedly changing its leadership. About 16 domestic stores have closed this year, according to One Group.
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