You have to wonder if equity firms rent a bus every quarter and drive down Restaurant Row, pointing to each chain brand and rattling out, “Got it. Got it. Want it. Got it. Don’t want it. Got it.” Their activity was particularly neck-reeling this week, with the whiplash factor spiking because of the parties involved.
T.G.I. Friday’s says, ‘Check, please!’
The granddaddy of casual dining still hasn’t confirmed a Reuters report that it’s about to be sold by Minneapolis’ Carlson family to a partnership of private equity firms TriArtisan Capital Partners and Sentinel Partners, who must have been sitting together on the bus. TriArtisan is an investment arm of Morgan Joseph TriArtisan, which probably owns the bus. It’s been a behind-the-scenes financier of many restaurant concepts, from Barnhill’s Buffet to the parents of Carl’s Jr. and Furr’s.
The deal could be a bellwether for other legacy brands in casual dining, which is looking like an old folks’ home these days. Lots of rocking, some fond reminiscing about the sector’s heyday, and plenty of crankiness about this new-fangled thing called fast-casual. Friday’s helped to create the sector and had a long run as the best in breed.
A price wasn’t mentioned in the Reuters exclusive. But Sentinel’s involvement suggests the check won’t be a whopper. The frequent restaurant bidder specializes in what it calls the “lower middle market,” or firms with an EBITDA of under $40 million. Its equity investments tend to run no higher than $125 million, though the suitors are working in partnership.
‘Show me pouty’
Cracker Barrel doesn’t stock Maxim magazine in its family-friendly gift shops, but the skin mag might be the homestyle chain’s favorite publication this week. Cracker Barrel’s nemesis for the last two-plus years, militant investor Sardar Biglari, veered out of the restaurant space to buy Maxim, no doubt because of the articles. The price was not disclosed, but Biglari did suggest in the announcement that his Biglari Holdings will divert some attention to its first media holding.
Biglari, a zealous thirtysomething follower of Warren Buffett, said he plans to “build the business on multiple dimensions.” Might a restaurant riff be one of them? After all, there have been Playboy and Penthouse-themed restaurants, and Hooters had a magazine that was very popular in the newsroom where I formerly worked.
Biglari’s G-rated holdings include the Steak ‘n Shake and Western Sizzlin’ restaurant chains.
Another ka-ching! from Warren Buffett?
He’s Biglari’s Obi-Wan Kenobi, but most restaurant executives know Warren Buffett as the owner of Dairy Queen, which he bought after regularly visiting a unit near his home in Omaha, Neb. (Want it!) Buffett’s latest missive to shareholders might have some operators wondering if they’ll soon be addressing the legendary investor as Boss.
In an annual letter that’s devoured by serious students of business, Buffett said this year that he and his longtime investment partner, 90-year-old Charlie Munger, are searching for more “elephants” to buy. He noted such 2013 trophy kills as H. J. Heinz, which Buffett’s Berkshire Hathaway bought in partnership with the Brazilian equity firm 3G Capital for more than $23 billion. 3G’s previous acquisitions include Burger King.
The restaurant industry abounds in pachyderms that even a blind big-game hunter could bag. Many are already in the investment community’s scopes because they’re lumbering more slowly these days.
A whale, not an elephant
Among the prey ambling through the big-game park is Red Lobster, which Darden Restaurant intends to divest. This week the parent company reaffirmed that it will either sell the chain or spin it off to Darden shareholders, the technique Wendy’s employed several years ago to unload Baja Fresh.
That re-announcement wouldn’t have moved the noggin of a bobble-head doll. But buried in the statement from Darden headquarters was a neck turner: “The sale process is well underway,” the communication specified. I may be no Warren Buffett, but I’m betting the divesture takes the form of a sale.
You can’t help but wonder if Buffett likes cheddar cheese biscuits.
That other Cerberus deal
Jaws dropped outside of the restaurant industry this week when news broke of Cerberus Capital Management’s deal to buy the Safeway supermarket chain. Cerberus, perhaps best known as the company that bought and ultimately gave away Chrysler, is paying more than $9 billion.
For some reason the buzz around that deal overwhelmed any chatter about Cerberus’ other pending transaction. The equity company’s Business Finance division won court approval this week to buy the bankrupt Fox & Hound and Champps sports-bar chains for $125 million.
The deal also reportedly calls for Cerberus to invest $10 million in the restaurant businesses.