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Restaurateur From East Acquires 5% of Rusty Pelican

October 28, 1986|ROBERT HANLEY | Times Staff Writer

The head of a Rhode Island restaurant management company disclosed Monday that he acquired more than 5% of the outstanding shares of Rusty Pelican Restaurants Inc. and has requested a seat on the board of directors.

In documents filed with the Securities and Exchange Commission, Edward Grace III, president of the Phelps-Grace Co. Inc. of East Providence, R.I., said he purchased 146,000 shares of Rusty Pelican in several open-market transactions during September and October.

Grace, who last week informed company officials of his stake, now is the fourth-largest holder of Rusty Pelican stock, according to T. Randolph Howatt, the company's president. The company's single largest holder is its founder, Louis (Pete) Siracusa, who owns a 30.6% share of Rusty Pelican's 2.8 million outstanding shares.

Collectively, company officers and directors hold 40.8% of Rusty Pelican shares.

In a telephone interview late Monday, Grace said he also notified Rusty Pelican officials last week that he will seek a seat on the company's board of directors "to help improve profits." Despite that bid, Grace said in the SEC filing that his stake in the Irvine-based company is solely for investment purposes.

During the fiscal year ended Aug. 3, Rusty Pelican lost $256,000 compared with net earnings of $2.3 million a year earlier. However, sales rose to a record $59.8 million from $53.7 million during the prior year.

Grace, whose firm manages a chain of restaurants on the Eastern Seaboard, said Rusty Pelican could be profitable "with the right management." The company, he said, should easily post at least $10 million a year in net earnings.

'Diagnose the Patient'

"I'd try to diagnose the patient first and find out what's going on. Basically, I'd ask Pete Siracusa and Randy Howatt, 'What's the problem, boys?' " he said. "They have got 20 beautiful restaurants and they're not making money."

In his SEC filing, Grace said he purchased his stake in Rusty Pelican over the course of 53 separate transactions, paying between $6.12 and $8.25 a share.

The document also states that Grace sold more than 39,000 shares in late September and early October at between $5 and $5.50 a share. No explanation was furnished for his selling the stock at a loss. However, Grace said in the interview that he sold the shares to raise cash in order to increase his stake in BankAmerica stock, which he valued at about $3 million.

Rusty Pelican, which traded for as much as $15.375 a share this year, has been weak in recent months as increased competition in the restaurant industry had taken its toll. Traded over-the-counter, Rusty Pelican closed Monday at $7.75 a share, up from its recent low of $5.25 a share, reached in September.

Rusty Pelican officials said Monday that they knew little about the company's new shareholder. Siracusa said he believes Grace has purchased the stock strictly as an investment.

However, Grace said that while a takeover is "not my intention at this point," he expects Rusty Pelican to take his request for a board seat and a say in the company's operations seriously.

"My intention is to work with Siricusa and Howatt because they are the largest shareholders," he said. "If they decide not to work with me, I'll have to do what I can to protect my interest, even if that includes increasing my stake or making a tender offer."

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