A management group withdrew its buyout offer Wednesday for Restaurant Associates Industries, removing a potential obstacle to a proposed $110-million acquisition by Newport Beach restaurateur Anwar Soliman.
Although the New York-based restaurant and newsstand company said it will cooperate with Soliman's request for financial data, Restaurant Associates Chairman Martin Brody said management still intends to vote its shares against any merger proposal.
Meanwhile, Restaurant Associates said in a statement that its board is "continuing to explore" alternatives to the management offer--including Soliman's unsolicited bid. Brody said the company has begun preparing to supply information to Soliman because "he's interested in making an offer to the company."
On Tuesday, the management group raised its buyout offer to $88 million, or $16 per share, but said the proposal would be withdrawn Wednesday unless approved by the company's board of directors.
"We said if it wasn't accepted immediately, we would withdraw (the offer)," said Brody, who is leading about 35 senior managers who proposed the buyout.
Asked whether the group would consider revising or increasing its offer, Brody said: "Anything is possible. We're not precluded from doing it."
Soliman proposed Tuesday to pay $110 million, or $19 per share, for the company, raising his earlier offer of $91 million.
In trading Wednesday on the American Exchange, Restaurant Associates' Class A shares closed at $14.75, up 50 cents. Class B shares, which have 10 times the voting power of Class A stock, closed at $15.125, up 75 cents.
Restaurant Associates operates more than 250 restaurants and newsstands. Its holdings include the 42-unit Acapulco Restaurant chain based in Long Beach, 27 Charlie Brown's dinner houses on the East Coast and 154 Eastern Lobby Shops in 11 cities.
Despite Wall Street's upbeat response, Brody on Wednesday dismissed Soliman's proposal as "just an intention to offer that's subject to a whole host of things," including obtaining financing, a review of the company's records and approval of a merger agreement.
He re-emphasized that management does not intend to sell its shares and "would not cast its vote in favor of a merger." The management group owns about 37% of the of the Class B shares and 13.5% of the Class A stock, giving it control of about a third of the company's total voting power.
But according to Soliman, chairman of American Restaurant Group in Newport Beach, "We've made a real offer, and it's on the table."
He confirmed that he has begun looking at Restaurant Associates' financial data and added, "Obviously, we'll talk" with directors of the company.
American Restaurant Group's 328 restaurants include Stuart Anderson's Black Angus, the Velvet Turtle and the Spoons chains.
With the management offer withdrawn, analysts Wednesday agreed that the outcome of Soliman's acquisition offer will hinge on his ability to gain financing and the willingness of both sides to arrive at a satisfactory compromise.
"We're talking some big money here, and each side can hold the other back from doing what they want," said Myron Cohn, an analyst with Fruntal & Co., a New York securities firm. "I think some deal probably will be struck."
"Management seems to have tried to buy the whole company for a steal . . . and now they're playing hardball," said Edward P. Grace III, a Rhode Island restaurateur who has been involved in past takeover battles.
"Management is saying, 'It's not going to be your way just because you have more money. You'll have to come to terms with us--with management contracts and a price that's right--or we'll make life miserable'," Grace said.