HEATHROW FLA. Cameron Mitchell Restaurants LLC for $94 million, Ruth’s Chris Steak House is wisely diversifying its high-end market position with an aquatic foray as sales at the company’s namesake concept have grown sluggish, industry analysts assert. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
The deal, which is expected to close in the first quarter of 2008, would give 114-unit Ruth’s Chris an established stake in the upscale-seafood category by adding to the company’s portfolio restaurants that operate under the names Mitchell’s Fish Market and Columbus Fish Market. The three steakhouses bear the names Cameron’s Steakhouse or Mitchell’s Steakhouse. The deal also includes two Mitchell’s Fish Markets that would open before year-end. Ruth’s Chris said the acquired group should have 2008 revenues of $98 million. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
Once the deal is consummated, Columbus, Ohio-based Cameron Mitchell Restaurants still would operate 11 restaurants in nine states under such names as Cameron’s American Bistro, Molly Woo’s, Martini Italian Bistro, M, and Marcella’s. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
“As a public company, the overall objective is to grow the brand, but Ruth’s Chris’ engines stalled in the last year,” said Craig Weichmann, a veteran restaurant analyst and owner of the Dallas-based investment boutique Weichmann & Associates. “So the best move was to add a growth vehicle. Craig [Miller] smartly did so, paying a reasonable price of seven times earnings. It is a good fit size-wise, too—not too big, not too small.” —With the purchase of 19 upscale seafood restaurants and three steakhouses from
Craig Miller, chairman, president and chief executive of Ruth’s Chris, said the Heathrow-based chain long has been on the lookout for a good strategic acquisition—even before sales slowed at Ruth’s Chris—but the market has been tough in the last couple of years. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
“Valuations have been inflated due to all of the private-equity deals going down, but currently the market is better,” he said, noting that the deal had been in the works for about three months, since investment-banking firm Piper Jaffrey approached him about the acquisition. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
“The opportunity presented itself, so we went for it,” he said. “Look, we go through economic cycles, and this one has a lot of pressure on consumers. But looking in the long run, demographics look positive towards the higher-end dining experience. [The market] lacked a high-end national player in seafood, and we think we can be part of that solution.” —With the purchase of 19 upscale seafood restaurants and three steakhouses from
Cameron Mitchell, president and founder of his namesake company, said that while four or five other interested parties had bid on the seafood restaurants, it was clear early on that Ruth’s Chris represented the best strategic fit. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
“Our seafood restaurants were clearly ready for national expansion, and we couldn’t do that and focus on building other brands,” Mitchell said. “Ruth’s Chris is the one to take [the Fish House group] national.” —With the purchase of 19 upscale seafood restaurants and three steakhouses from
Mitchell will serve as a consultant to Ruth’s Chris on the acquired restaurants for three years, the buying company said. The existing Mitchell’s Seafood operating team will stay on with the restaurants, although they will be supported out of Ruth’s Chris headquarters. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
“We don’t anticipate changes, though,” Miller said. “This is a fully developed concept, and the restaurants are extremely well-run.” —With the purchase of 19 upscale seafood restaurants and three steakhouses from
Miller said the seafood restaurants are compatible with Ruth’s Chris units, with average annual sales volumes of $4.3 million per unit. Sales at Ruth’s Chris restaurants average $5.7 million annually at company-operated units and $5.3 million at franchised outlets. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
According to Miller, Ruth’s Chris will add three to four FishMarket restaurants next year, and grow the acquired concept by a combined rate of 15 percent to 20 percent annually. Most of the seafood restaurants are located in the Midwest, but the company expects to open a Stamford, Conn., location as well as one in Jacksonville, Fla., by year-end. The seafood chains already have two Florida locations. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
Ruth’s Chris does not plan to add more seafood to the menu of its namesake steakhouses as a result of the deal, Miller said. However, he acknowledged that there could be some seafood purchasing synergies between the chains. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
The acquired Cameron’s steakhouses will continue to operate under that identity, Miller said, adding that it was undecided whether Ruth’s Chris would expand that brand. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
“They are already in markets we operate Ruth’s Chris restaurants in, but they are complementary, not competitive,” he said. “They are successful in their own right. We will learn from what they do.” —With the purchase of 19 upscale seafood restaurants and three steakhouses from
The acquisition is to be funded through Ruth’s Chris’ existing credit facility, the company said. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
Mitchell, who retained Piper Jaffray in early June to find a buyer for the seafood group, said its management will benefit from the sale to Ruth’s Chris. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
“This will give them the opportunity to achieve their full potential and will give them increased career opportunities,” he said. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
Mitchell acknowledged that despite “depressed values” in the restaurant marketplace, he feels the $94 million was an excellent price for the restaurants. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
“We got the premium price we feel was deserved of a premium brand, ” he said. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
John Glass, a restaurant securities analyst with CIBC World Markets, said in a report about Ruth’s Chris deal to acquire the Mitchell’s holdings that it makes sense strategically, although he expressed concern about the timing. He also noted that the acquisition suggests that Ruth’s Chris management believes its namesake concept may be more mature than previously admitted. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
Ruth’s Chris reported a decline of 20 percent in third-quarter net income to $1.8 million, or 8 cents per share, compared with $2.3 million, or 10 cents per share, a year earlier. Corporate revenue for the three months ended Sept. 30 rose 20.5 percent to $70.2 million, from $58.3 million a year ago. Company-owned restaurants’ same-store sales dipped 0.4 percent, while those of franchised units declined 0.5 percent. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
Weichmann said he believes that the turmoil in the credit markets could be beneficial to Ruth’s Chris. “Right now, restaurant stocks are in the dog house,” he said. “Multiples had gotten bloated. Before we were seeing eight, nine, [or] 11 times earnings [as merger prices], so Ruth’s Chris is taking advantage of a break in the market. This is a sweetheart of an acquisition and gives the steak chain a great resource—with 20-percent margins—to grow the business.” —With the purchase of 19 upscale seafood restaurants and three steakhouses from
He noted further that higher-end dining has insulation from the economy that doesn’t exist in the middle, boding well for the post-merger future of Ruth’s Chris and Mitchell’s Fish Market. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
“Both of these brands are dependent on business travel, and expense account dining out tends to go on regardless of the way the economic winds blow,” he said. “There is something to be said for the predictability of the higher end.” —With the purchase of 19 upscale seafood restaurants and three steakhouses from
Mitchell predicted that if the credit crunch, energy prices and other factors continue to hurt the economy, the pains felt by the casual-dining sector ultimately could affect higher-end consumers. —With the purchase of 19 upscale seafood restaurants and three steakhouses from
“I think that demographic’s disposable income might come under pressure,” he said. “But I’d rather be at this end of the market, as there has been a constant flight upward to higher-end dining. We’ve had nice 3-percent same-store sales growth, and we expect that to continue under the Ruth’s Chris brand.” —With the purchase of 19 upscale seafood restaurants and three steakhouses from