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Tilman Fertitta wants to back out of his SPAC merger

Fertitta Entertainment, including Landry’s, has notified Fast Acquisition of its intent to terminate the deal. But the blank check company is pushing back.
Landry's SPAC merger
Photograph: Shutterstock

Tilman Fertitta is apparently getting cold feet about his merger with the SPAC Fast Acquisition Corp.

The restaurateur’s Fertitta Entertainment Inc. has notified the special purpose acquisition company, or SPAC, of its intent to break their merger deal, according to a federal securities filing on Thursday.

The company, through its attorney, cited a provision giving it the right to back out if a deal hadn’t been completed by Dec. 1.

In response, Fast Acquisition has sent a letter to Fertitta saying the company cannot, in fact, break the deal, blaming the delay on Fertitta’s company failing to provide financial information early enough. Garrett Schreiber, Fast Acquisition’s CFO, demanded that Fertitta go through with the merger.

“We intend to take all necessary steps to protect the SPAC and its investors,” Schreiber wrote. “You are hereby on notice of breach and that should your breach not be immediately remedied, we intend to initiate litigation.”

A SPAC is a publicly-traded shell company that takes money from public investors and uses it to merge with another, usually private company. In the process, the merger takes that private company public. Such SPACs were popular late last year and earlier this year, both in and out of the restaurant industry.

Ruby Tuesday Founder Sandy Beall founded Fast Acquisition last year, initially with the intent of buying a fast-food chain. But the firm ultimately announced a deal with Fertitta, whose Houston-based companies comprise typically full-service restaurants along with casinos. Fertitta ultimately increased the size of the deal, adding more restaurants.

The restaurant mogul, who is known for his aggressive deals and tough negotiating tactics, in February said the go-public deal was about the ability to make more acquisitions. He told CNBC in January that he’d lost deals to public companies that could pay higher multiples.

Fertitta pondered an initial public offering late last year, but ultimately changed his mind and reached the deal with Fast Acquisition.

In his letter, Schreiber said Fertitta Entertainment was required to provide Fast with financial information in March. It didn’t come until July, which was “unquestionably the primary cause of the failure of the closing to occur by the termination date.”

The dispute highlights one of the concerns with blank-check companies: Deals may not actually get complete. SPACs have two years to complete a deal, otherwise they are dissolved.

Several SPACs are targeting restaurant companies. The Fast-Fertitta deal was one of only two announced agreements between blank check companies and target acquisitions. The other one was Danny Meyer’s USGH Acquisition Corp., which plans to invest in Panera Brands as it goes public.

At the same time, however, a renewed market for traditional IPOs could have sapped some of these SPACs of potential targets. Five restaurant chains have gone public thus far this year and three others, including Panera, are planning offerings.

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