Newport Beach restaurateur Anwar Soliman on Tuesday increased his offer to buy New York-based Restaurant Associates Industries to $110 million, or $19 a share, despite management's belief that the company is virtually takeover proof.
At the same time Soliman upped his offer from $91 million, the restaurant and newsstand chain unveiled a sweetened management buyout offer valued at $88 million in cash, or $16 a share. Two weeks ago, management proposed to take the firm private for $77 million.
Restaurant Associates Chairman Martin Brody criticized Soliman's acquisition proposal, calling it "not much of an offer at all" because it is "subject to financing" and "conditional upon everything including the weather."
The company said the management buyout offer--led by Brody and Max Pine, president and chief operating officer--will be withdrawn if it is not accepted by today "to prevent any continued uncertainty."
Soliman, chairman of American Restaurant Group Inc. in Newport Beach, said Tuesday he is optimistic that the $3 per share premium he is offering shareholders will sway a Restaurant Associates board committee created to evaluate the two proposals.
"I'm trying to make an offer to shareholders that if approved by the board is a hell of a lot better than their offer," Soliman said.
The former head of the 690-unit restaurant division of W.R. Grace & Co., Soliman now manages a company with about 19,000 employees and 328 restaurants, including Stuart Anderson's Black Angus, the Velvet Turtle and the Spoons chains.
If he succeeds in buying Restaurant Associates, Soliman's company could become the 17th largest U.S. restaurant chain. Restaurant Associates' holdings include 42 units of Long Beach-based Acapulco Restaurants; 27 units of Charlie Brown's dinner houses on the East Coast and more than 36 other East Coast restaurants.
Restaurant Associates, traded on the American Exchange, has two classes of common stock. Its 2.6 million Class A shares have one-tenth the voting power of its 2.9 million Class B shares, and officers and directors of the company own nearly 40% of the Class B stock.
As a result, corporate insiders control about a third of the company's total voting rights. In fact, Brody said, management and its allies control close to 50% of the company's votes, even though they do not own a majority of its stock. "Friends and relatives of ours have indicated that they're unwilling to sell their shares if we don't sell our shares," Brody said.
In a telephone interview, Soliman discounted the effect of the two-tiered stock. The management group's control is overstated, he said.
Several analysts consulted Tuesday, however, think that Soliman faces a tough challenge. "His chances are slim to none," said Roger Lipton, a restaurant analyst with Ladenburg Thalmann & Co. in New York. "Brody and Pine have built this company over the last 20 to 25 years and they're not going to walk away from their baby. . . .
"And even if he got it, this prize might not be worth having. Trying to run a restaurant business long distance, especially (after) a hostile takeover, is a risky strategy."