Hamburger Hamlets, the Southern California restaurant chain that began as a Sunset Strip takeout stand equipped with a hot plate, has agreed to be acquired by a New York investment firm for about $33.1 million, it was announced Tuesday.
Founders Harry and Marilyn Lewis will remain as consultants for five years and, after the transaction is completed, will buy back the chain's trendy Kate Mantilini restaurant in Beverly Hills for an undisclosed amount. Weatherly Private Capital Inc. will pay $9.20 for each of Hamburger Hamlets' 3.6 million outstanding common shares--70% of which are held by the Lewises.
"We got a very good offer," said Harry Lewis, president of the chain. "They intend to keep it exactly the same, and we're staying to see that it is kept that way." None of the 1,600 Hamburger Hamlets employees will be laid off, he said.
No Changes Planned
In over-the-counter trading Tuesday, Hamburger Hamlets shares closed at $7.50, up $1.
Lewis hinted that Weatherly might expand the Sherman Oaks-based chain, which has 24 restaurants in Southern California, Chicago and the Washington area. But officials at Weatherly were noncommittal.
FOR THE RECORD
Los Angeles Times Thursday December 24, 1987 Home Edition Business Part 4 Page 2 Column 6 Financial Desk 2 inches; 59 words Type of Material: Correction
A story Wednesday about the pending sale of Hamburger Hamlets misstated its number of common shares outstanding. The correct number is 3.17 million, making the purchase worth $29.2 million. The deal is still subject to financing, the signing of a definitive merger agreement and shareholder approval. Also, the current owners would buy the company's Kate Mantilini restaurant immediately after the sale is completed.
"We don't really have firm, definite plans to expand anything," said Michael Recca, a Weatherly official. "We don't intend to close anything," he said. "We plan to make no changes."
Weatherly Capital intends to buy Hamburger Hamlets through a leveraged buyout. In such a transaction, investors buy a company using borrowed money that ultimately is paid off from the company's operations or through the sale of assets.
Weatherly, a 5-year-old investment and securities firm, has specialized in buying low-tech companies, such as an ice-cream maker and a diaper manufacturer, said Thomas McFall, managing partner. "I'm not a restaurateur," said McFall, who indicated that the Lewises will continue to have a great deal of influence in running Hamburger Hamlets.
The pending sale comes two years after Hamburger Hamlets embarked on an $8-million expansion that saw the opening of four new restaurants. The new outlets were tonier versions of the standard Hamlets, known for their gourmet hamburgers and interiors featuring red-leather booths and dark-wood paneling. In contrast, the atrium-style Kate Mantilini offers a menu of items from frog legs to pork chops.
Although the new restaurants seemed to be doing well, the expansion ate away at company profits and increased debt. Net income fell to $508,700 in fiscal 1987 from $1.7 million in fiscal 1986. Sales grew to $44.8 million in fiscal 1987 from $38.9 million.
The chain was born in 1950 when Lewis, a former actor, and Marilyn, a one-time model and aspiring dress designer, invested $3,500 to open the first Hamburger Hamlet. The shop was named in honor of the Shakespearean character.
Although Hamburger Hamlets sold stock to the public in 1969, the Lewises have retained tight control of company ownership and operations. Marilyn Lewis, for instance, is in charge of developing menus and interior design. She also serves as chairman.
As the chain has grown, so have the Lewises' wealth and reputation. Newspaper and magazine articles have described a bikini-clad Marilyn Lewis conducting business beside the pool at the couple's Beverly Hills home. The Lewises hobnob with movie industry friends. On the East Coast, Hamburger Hamlets have attracted such customers as the Crown Prince of Morocco and teen-age sons of Egyptian President Hosni Mubarak.
The Lewises will now split their time between Hamburger Hamlets and the Mantilini restaurant. "It's the most wonderful place ever," Harry Lewis said of the Beverly Hills restaurant. "It will afford us a great deal of activity."
HAMBURGER HAMLETS AT A GLANCE
Sherman Oaks-based Hamburger Hamlets operates 24 restaurants in Southern California, Chicago and Washington, D.C. Founders Harry and Marilyn Lewis own 70% of the company's stock.
6 mos. Year ended Mar. 29 Sept. 1987 1986 Revenue (millions) $24.1 $44.8 $38.9 Net income (millions) 0.811 0.509 1.70
Shares outstanding 3.6 million
12-month price range $4 - $7.25
Wed. close (OTC) $7.50, up $1