SAN DIEGO — Vicorp Restaurants of Denver Tuesday completed the sale of its San Diego-based specialty restaurant subsidiary to a group of management-led investors in a deal worth about $112.5 million.
The leveraged buy-out of San Diego-based Vicorp Specialty Restaurants (VSR) is led by Vicorp Chairman Gordon H. Miles, VSR President Thomas W. Doan, and the investment banking firm of Donaldson, Lufkin & Jenrette.
Terms of the buy-out call for VSR to pay Vicorp $81 million in cash, $10 million in 15% subordinated debentures and $7.5 million in various other notes. In addition, VSR will assume about $14 million in existing debt and capitalized lease obligations, Vicorp said Tuesday.
The deal will yield a $20-million gain for Vicorp.
VSR has been preparing for the leveraged buy-out for several months; it was originally scheduled to close Oct. 26.
The company operates Piret's, Boat House, Carlos Murphy's and Hungry Hunter restaurants at 87 locations.
In the past two weeks, VSR has closed Piret's in Grossmont Center and its commissary in the Rose Canyon area of San Diego.
In addition, VSR said it might close its La Jolla location and will, in January, transform the Piret's site in the Imperial Bank building in downtown San Diego into a Boat House.
The changes are part of a cost-cutting maneuver that typically accompanies leveraged buy-outs, whereby the acquiring entity pays for the deal by borrowing against the company's assets.
The leveraged buy-out "gives us flexibility," according to Bill Seckinger, VSR vice president of marketing. There are no major cuts planned for the firm's 2,500 employees, he said.
Founders' Financial Problems
Vicorp bought the Piret's chain of fashionable eateries in May, 1984, after owners George and Piret Munger experienced both rapid growth and associated financial problems.
The rest of VSR's restaurants were purchased by Vicorp in January, 1984, from San Diego-based Foodmaker Inc., then a subsidiary of Ralston Purina Co.
The Mungers, who were in Japan for most of the past month, still work for VSR as consultants.
In Denver, Vicorp will use the proceeds from the sale to complete the remodeling of the 170 outlets of bankrupt Sambo's restaurants it purchased last year.
Those outlets are being reopened under the names of either Village Inn or Baker's Square.