SCOTTSDALE Ariz. Kona Grill Inc. on Tuesday rejected a buyout bid by its second largest shareholder, Mill Road Capital LP, saying the offer was too low.
In May, Mill Road offered to pay $4.60 for each of Kona's approximately 6.5 million outstanding shares in a deal the firm valued at $27.9 million.
However, earlier this month Kona made a rights offering that gave shareholders the option to buy one share for every 2.5 shares held, which the company said resulted in an additional 2.1 million shares.
Kona board member Mark Zesbaugh said Tuesday that Mill Road's offer now had an "implied" value of $3.67 per share, which “materially underprices the intrinsic value and prospects of the company and its common stock in any potential sale of control transaction.”
Kona Grill's stock price closed Tuesday at $3.64, down 1.6 percent. Over the past year, the company's stock has traded between $1.10 and $8.49 a share.
Mill Road owns about 10 percent of Kona shares. The company’s largest shareholder is William Blair & Co., which holds about 13.5 percent of stock.
Kona operates 22 upscale American grill-sushi restaurants. For the quarter ended March 31, Kona reported a net loss of $1.1 million, or 17 cents a share, compared to a net loss of $673,000, or 10 cents a share, in the year-earlier quarter.
Contact Ron Ruggless at [email protected].