Newport Beach restaurateur Anwar S. Solimon has offered to pay more than $80 million for a New York company whose holdings include California's Acapulco Restaurants chain and the legendary Mama Leone's Italian restaurant in Manhattan.
Restaurant Associates Industries Inc., which owns and operates more than 100 restaurants and 154 newsstands, said Thursday it is evaluating an unsolicited merger proposal made by Solimon.
If completed, the proposed transaction would extend Solimon's privately owned company, American Restaurant Group Inc., into the East Coast market and could make it one of the nation's top 20 restaurant groups in total sales.
Solimon's offer comes one week after two Restaurant Associates executives--Martin Brody, chairman and chief executive officer, and Max Pine, president and chief operating officer--announced a proposal to take the company private through a leveraged buyout. Executives with Restaurant Associates were unavailable for comment Thursday.
A special committee of Restaurant Associates' board of directors met Thursday to review the management buyout proposal. Solimon is reportedly meeting with the committee today. The proposal from Solimon, chairman of American Restaurant Group Inc., offers $16.50 per share for all of the common stock of New York-based Restaurant Associates. A source close to the transaction said the acquisition would be "highly leveraged."
According to a prepared statement issued by Restaurant Associates, Solimon's offer is subject to financing arrangements, approval of the Restaurant Associates board and completion of an investigation of the company's financial records.
Restaurant Associates, traded on the American Exchange, has two classes of common stock. Its Class A shares, which have reduced voting rights, closed Thursday at $14.25 per share, up 87.5 cents. The company's Class B shares, which have 10 times the voting power of Class A stock, closed at $14.375 per share, up $1.
Nearly 40% of the 2.9 million Class B shares are owned by officers and directors of Restaurant Associates, making a hostile takeover of the company more difficult to accomplish. The company has 2.5 million shares of Class A stock.
Restaurant Associates operates restaurants through several divisions, including 27 East Coast dinner house units of Charlie Brown's; the R.A. Restaurant Group of more than 30 restaurants, including Mama Leone's in New York City; and a six-unit casual-theme restaurant chain in New Jersey.
The company receives nearly a fourth of its revenues from the 42 units of Long Beach-based Acapulco Restaurants, the second-largest Mexican restaurant chain in California. And in December, it acquired 10 Casa Vallarta restaurants in California that are being converted into Acapulcos.
The company's 154-unit Eastern Lobby Shops division is the largest operator of hotel newsstands in the country, with outlets in 11 cities.
Last year, Restaurant Associates reported earnings of $4.7 million on sales of $201.4 million. It is the 56th-largest U.S. restaurant group, according to an annual survey by Nation's Restaurant News, a trade publication.
Newport Beach-based American Restaurant Group was founded by Solimon last December to buy 328 restaurants from Marriott Corp., including the Stuart Anderson's Black Angus, Spoons and Velvet Turtle chains.
According to Nation's Restaurant News, Solimon's American Restaurant Group is the 23rd-largest U.S. restaurant chain, with projected revenue this year of $500 million, up 11% from last year's estimated revenue of $450 million.
If Solimon buys Restaurant Associates, the estimated combined sales of $700 million could make American Restaurant Group the 17th-largest in the nation, sources said.
Solimon, who resigned as group executive of W.R. Grace & Co.'s 690-unit restaurant division to head American Restaurant Group, could not be reached for comment.
Sources close to the company, however, were uncertain about the prospects of his buyout proposal in light of Restaurant Associates' two-tiered stock structure.
Restaurant Associates "is a closely held public company," said a source who asked not to be named.
"It will be difficult for (Solimon) to gain control without 100% cooperation of the key stockholders--but not impossible."
RESTAURANT ASSOCIATES AT A GLANCE Headquarters: New York.
Retail operations: 42 Acapulco restaurants, 27 Charlie Brown's restaurants, six The Office restaurants, 35 other restaurants, 154 Eastern Lobby Shop newsstands.
Assets: $119.1 million.
(in millions) 1986 1985 1984 Revenue $201.4 140.0 132.4 Netincome $4.7 3.0 1.7