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Jenny Craig, Jerry's Deli Privatizations Sought

California

June 06, 2000|INDRANEEL SUR | TIMES STAFF WRITER

Major shareholders in Jenny Craig and Jerry's Famous Deli said separately Monday that they want to take their companies private, joining a growing list of investors who are seeking shelter from volatile stock market that has bashed shares in recent months.

Shares of Jenny Craig rose nearly 80% on Monday after Chief Executive Sidney Craig and his wife, Jenny, the company's vice-chairwoman, said they would offer to buy the outstanding public stake for $25.6 million. The Craigs, who own 67% of the company's equity, said they would offer $3.75 per share for the remaining stock.

On the New York Stock Exchange, Jenny Craig's shares rose $1.38 to close at $3.13. It is off from a 52-week high of $4.50.

Reduced popularity of its weight-loss program forced the company, which owns and franchises 659 diet centers in the U.S. and overseas, to close 86 U.S. centers in November and to trim its corporate staff. It lost $672,000 for the year ended September 1999, compared with net income of $2.1 million the year before.

In April, Jenny Craig's stock market capitalization dropped below the $50-million listing requirement level, and the NYSE warned that the stock could face delisting. Taking the company private would save executives from the potential embarrassment of being delisted.

"Mr. Craig says that the public market really has not provided any advantages to the company and its stockholders," said Jeanne McDougall, a spokeswoman for the La Jolla-based company.

Also Monday, two Los Angeles groups who own a combined 6.8% stake in Studio City-based Jerry's Famous Deli said in a Securities and Exchange Commission filing that they are seeking a buyout.

Mitchell Equity Investments said in the 13-D filing that it and the nonprofit Edward D. and Anna Mitchell Family Foundation "desire to seek privatization" of Jerry's. The investors said there are no agreements or discussions with other shareholders to go private at this time.

Jerry's founder and CEO Isaac Starkman said in a statement that the restaurant operator will decide how the Mitchells' proposals "fit into the company's ongoing evaluation of all potential strategic alternatives." He said a committee of independent directors has been formed to evaluate the plans.

The Starkman family owns 51.6% of the company's shares, according to an SEC filing.

Jerry's, which runs 10 New York deli-style restaurants in Southern California and Florida, raised $9.2 million in its 1995 initial public offering and promptly spent the money to open new restaurants, including one in Pasadena. That restaurant was later closed because of losses.

The company had net income of $910,000 in 1999, contrasted with a loss of $264,000 the previous year, and its net income for the first quarter of 2000 was up 57% from the year-ago period. But its stock price has stagnated, leading to frustration among executives.

"The stock market continues to present a difficulty without a solution," Starkman said in the April 25 earnings announcement.

Shares of Jerry's rose 25 cents, or 8%, to close at $3.25 on the Nasdaq SmallCap Market. The stock is off from a 52-week high of $6.63.

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