M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Tuesday, May 8, 2007

Mmmm . . . . Steak

The bidding war for Smith & Wollensky Restaurant Group reached another milestone yesterday when a consortium consisting of Nick Valenti and Joachim Splichal, and the private equity firm of Bunker Hill Capital, L.P. (known as the Patina Restaurant Group) raised their offer to $11 per share, or approximately $95 million.  The new offer beats a competing bid from Landry's Restaurant Inc., owner of the Rain Forest Cafe among other restaurants, by $1.25 per share and is $15 million more in value than the Patina group's original offer in February of $79.6 million, or $9.25 per share.  S&W, on the recommendation of their board special committee, has accepted the revised offer and the parties have amended their pending merger agreement to incorporate these terms. 

S&W Chief Executive Alan Stillman and owner of 16.6% of the company has agreed to vote in favor of the consortium offer.  He will, in connection with the purchase, also acquire two of S&W's New York City restaurants -- Quality Meats and Park Avenue CafĂ©, and enter into management contracts for the S&W steakhouse on Third Ave. down the street from Shearman & Sterling and Simpson Thacher, the Post House and Maloney & Porcelli (the last is home of the Crackling Pork Shank).  Interestingly, the Third Avenue restaurant is not owned by S&W and has always been held by an independent partnership.  Mr. Stillman will pay approximately $6.8 million for the two restaurants and assume debt.  The amount is approximately $1.5 million more than in the original Patina agreement.

The deal proves the proposition that the smaller the deal, the more complicated it is.  It's also muddied by Stillman's involvement -- and again highlights the possible perils of management buy-outs.  The proxy for the consortium deal still hasn't been filed so Stillman's exact pay-out with respect to the acquisition is still an unknown.  Still S&W hasn't been doing that great and growth prospects are low according to this recent New York Observer article. Its stock has fallen 41 percent according to the Houston Chronicle and it has had five consecutive years of losses.  In fact, it has never been profitable since selling shares to the public in 2001.  So, it appears to be a good offer.  According to the Chronicle, Landry's is still in the running for a potential counter-bid, so it may get even better.

Note to Landry's when considering your counter-bid:  The amended Patina agreement has not yet been filed but the old agreement had a $2,464,600 termination fee plus reimbursement of expenses up to a maximum of $600,000.


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