CARPINTERIA Calif. CKE Restaurants Inc., the parent to the Carl’s Jr. and Hardee’s chains, said Friday it has agreed to a $928 million acquisition offer from private-equity firm Thomas H. Lee Partners.
The deal includes the assumption of $309 million in debt, leaving the cash price tag at $619 million. CKE shareholders will receive $11.05 in cash per share, which represents a 24-percent premium over CKE's closing price Thursday of $8.91.
On news of the deal Friday, shares of the fast-food company shot up 27.6 percent to close at $11.37 per share, which skimmed the company's 52-week high of $11.52 per share and placed the stock above the pending purchase price.
The stock's reaction has sparked speculation among stock watchers that higher bids for CKE will come in during the next few weeks. Under the agreement, CKE will solicit additional buyout proposals through April 6.
"We believe this transaction provides excellent value to our shareholders and represents an exciting opportunity to continue the growth and development of CKE Restaurants in partnership with THL," Andrew F. Puzder, CKE's chief executive, said in a statement.
The deal with THL Partners is expected to close in the second quarter, pending approval from CKE shareholders and regulators. As is the case with almost any large merger, several law firms have already started to investigate the potential for shareholder litigation. At least three were announced this weekend.
The CKE buyout announcement is the first major acquisition deal in some time in the restaurant industry, which has suffered significantly during the recession as consumers cut spending.
“Restaurant M&A activity has been relatively quiet in recent years and the industry has not seen an IPO since 2006,” analyst Jeffrey Bernstein of Barclays Capital said in research note Friday. “With that said, perhaps we will see a return to such activity in 2010.”
Already this year there has been reports and speculation surrounding a deal for Hooters, and many financiers and consultants have pointed to weak operations that may be snatched up by hungry private-equity firms looking to make investments.
Both of CKE's brands have seen falling sales in recent months. Same-store sales at Carl's Jr. declined 8.7 percent in January, while Hardee's same-store sales slipped 2.5 percent. Both brands specialize in premium burgers, and CKE has been reluctant during the economic downturn to use the same deep-discounting practices of rival chains like McDonald's and Burger King.
Its stock price had fallen as low as $5.65 per share during the past year, from trading above $15 in 2006 and 2007, prior to the economic downturn and subsequent recession.
THL Partners, along with two other private-equity firms, purchased Dunkin' Brands Inc. for more than $2 billion in 2006. It also was part of a consortium that purchased foodservice and management firm Aramark in 2007.
"THL's proven history of success as an investor and value-added partner to its portfolio companies, coupled with its deep financial expertise and experience in the consumer sector, will also benefit all of our stakeholders, including our franchisees and our employees," said CKE’s Puzder.
CKE operates or franchises 1,221 Carl's Jr. and 1,913 Hardee's restaurants.