China-based hotelier invests in Kona Grill

China-based hotelier invests in Kona Grill

Grill brand is raising $5.6 million in new stock issue, eyes China expansion

Kona Grill Inc., the grill and sushi bar concept, is raising about $5.6 million in a stock issue to a China-based hotelier and Kona CEO Berke Bakay, the company said Wednesday.

Scottsdale, Ariz.-based Kona said it was issuing more than 3.1 million shares at $1.785 each, which was 2 percent above Tuesday’s close of $1.75 a share, to be purchased by Nanyan “Alex” Zheng, chairman of the Guangzhou, Guangdong-based Plateno Group, which owns more than 4,400 hotels.

As part of the deal, which is expected to close on Thursday, Zheng was named to Kona’s board and appointed as vice chairman, the company said.

“We are excited to partner with Alex Zheng on this strategic transaction,” said Bakay, who also serves as Kona president, in a statement. “Alex is well-respected within the travel and hospitality industry, with over 20 years of experience. He is a successful entrepreneur and can provide significant value to Kona Grill through his vast knowledge and business relationships.”

Zheng said he sees the likelihood of taking the casual-dining brand to China, and he and his partners have entered into Kona Grill master franchise agreement to do that.

“We see significant upside potential with both our investment in Kona Grill and the opportunity to bring the Kona Grill brand to China,” Zheng said. “We believe that Kona Grill’s global menu of contemporary American favorites, award-winning sushi, and specialty cocktails will be a great fit for the China market.”

Zheng is also a co-founder of Ocean Link, a private-equity firm focused on China's growing travel and leisure sector.

Bakay said Kona would use proceeds from the Zheng investment to pay down debt in 2018.

“The decision to invest additional capital allows me to retain my current ownership percentage while also showing my continuing support and belief in this brand,” Bakay added.

In the fourth quarter ended Dec. 31, Kona Grill narrowed its loss to $12.4 million, or $1.23 per share, from $16.6 million, or $1.58 per share, the prior-year period.  Revenue fell 2.5 percent, to $42.5 million, from $43.6 million the previous year.

Kona’s same-store sales in the quarter declined 6.5 percent, including an estimated 0.5-percent impact from the temporary closure of its Puerto Rico restaurant due to Hurricane Maria in late September and early October.

Kona Grill owns and operates 46 restaurants in 23 states and Puerto Rico. The company has three franchised units abroad.

Contact Ron Ruggless at [email protected] 

Follow him on Twitter: @RonRuggless

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