California Pizza Kitchen, founded in Los Angeles in 1985, now has 265 locations… (Al Seib, Los Angeles Times )
After more than a year of searching for a buyer, California Pizza Kitchen said Wednesday that it would be acquired by the private equity firm Golden Gate Capital for $470 million.
If the deal is approved by CPK's shareholders, San Francisco-based Golden Gate will begin to buy out the restaurant chain's shares next month. Golden Gate has also purchased stakes in On the Border Mexican Grill and Romano's Macaroni Grill. It owns a number of retail chains, including Eddie Bauer, Express and J.Jill.
Under the proposed deal, CPK shareholders would be paid $18.50 a share.
"We have great respect for the California Pizza Kitchen brand," said Josh Olshansky, a managing director with Golden Gate, in a statement. "The business that the CPK team has built, with its great product offerings, makes it an ideal fit with our long-term-oriented approach to investing."
CPK founders and co-Chief Executives Larry S. Flax and Richard L. Rosenfield said in a statement that Golden Gate has "a proven track record as a value-added partner to its portfolio companies, and we believe that its significant commitment and experience in the sector will benefit all of our stakeholders." Flax and Rosenfield did not say whether they would be staying with the company. They did not respond to requests for an interview.
One possible complication to the proposed deal came shortly after it was announced Wednesday morning, when Clinton Group, an investment company that has been buying up shares in CPK stock recently, said Golden Gate should pay more.
"We're not completely discounting a private equity bid, but we want it to be the right price," said portfolio manager Joseph A. De Perio. He said that if Golden Gate was not willing to pay $20 a share, CPK should consider remaining a public company, buying back some of its stock to bolster the price.
If the deal goes through, CPK will be one of several publicly traded restaurant companies to be taken private in recent months, as the slow economy, high commodity prices and an onslaught of new competitors have battered older brands.
Nicole Miller Regan, restaurant analyst for Piper Jaffray & Co., said CPK has done a good job in capitalizing on its name recognition, selling its frozen-food line and franchising new outlets. She said the company had also done well with new products, including a line of small plates such as Korean barbecue tacos, similar to the ones pioneered by the famous Kogi food truck.
However, in a note to investors published Wednesday morning, Miller Regan said CPK faced challenges from its fast expansion and changing consumer preferences.
"They're battling food costs, they're battling labor issues," she said.
Competition is fierce in the restaurant sector. Several new chains have entered the fray in recent years, resulting in too many restaurants chasing too few customers, Miller Regan said.
CPK was founded in Los Angeles in 1985. It became known for developing gourmet pizzas that were unusual for chain restaurants, including a barbecued chicken pizza.
Positioned as a mid-priced option, the company thrived. Flax and Rosenfield sold the company to PepsiCo Inc. in 1992, and for a time gave up control. But after a series of private equity owners and a public offering, they were back at the helm, reversing such decisions as a move to replace fresh vegetables in some recipes with frozen ones.
With 265 locations in the U.S. and abroad, CPK has suffered in recent months from slow sales. Profit fell in the first quarter of this year, to $2.1 million, down from $2.5 million a year earlier.
Shares of CPK rose $1.76, or 10.5%, to $18.47 on Wednesday.