HEATHROW Fla. Looking for other growth vehicles within the high-end sector, Ruth's Chris Steak House, Inc. said today that it would purchase 19 seafood restaurants and three steakhouses from Cameron Mitchell Restaurants LLC for $94 million.
The seafood restaurants operate under the names Mitchell’s Fish Market and Columbus Fish Market. The steakhouses bear the name Cameron’s Steakhouse or Mitchell’s Steakhouse.
The deal also includes two Mitchell’s Fish Markets that will open by January. Ruth’s Chris said the acquired group should have 2008 revenues of $98 million.
Craig Miller, chairman of the board, president and CEO of Ruth’s Chris, said he expects to grow the Mitchell’s brand nationally, and that there is a hole in the market for high-end seafood. “We feel our team’s expertise can help fill that hole in the niche,” he said. “Especially with our 42 years operating in the high end segment.”
The steakhouses will continue to operate under their current identities, Miller said. “Whether we do something with that brand long term, we have not decided yet,” he commented. Ruth's Chris said it would not intend to franchise the steak brands.
The deal has been in the works for about three months, since investment-banking firm Piper Jaffray approached him about the acquisition, Miller revealed.
He explained that Ruth’s Chris has always been on the lookout for a good strategic acquisition, but the market has been tough in the last couple years. “Valuations have been inflated due to all of the private equity deals going down, but currently the market is better,” he said.
The acquisition will be funded through Ruth’s Chris’ credit facility and is expected to close in the first quarter of 2008, subject to customary closing conditions.
Cameron Mitchell, founder and president of Cameron Mitchell Restaurants, will serve as a consultant to Ruth’s Chris on the acquired restaurants for three years, the buying company said. The deal trims Mitchell’s Columbus, Ohio-based company to 11 restaurants.
The existing Mitchell’s Seafood operating team will stay on with the chain, confirmed Miller, though they will be supported out of Ruth’s Chris Heathrow, Fla., headquarters.
“We don’t anticipate changes, though. This is a fully developed concept and the restaurants are extremely well run,” Miller said.
He added that the seafood restaurants are compatible to a Ruth’s Chris, 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.
Miller said that the plan is to add three to four Mitchell’s units next year, and to grow the acquired concepts by a combined rate of 15 percent to 20 percent annually. Most of the seafood restaurants are located in Midwestern states, but the company is opening a Jacksonville, Fla., location as well as one in Stamford, Conn., by year-end. The company also has a Tampa, Fla., location.
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.
Miller said the Cameron’s Steakhouses will not be converted into Ruth’s Chris steakhouses because the locations don’t compete in their markets with the buyer’s namesake brand. “These are successful in their own,” he commented. “We will learn from what they do.”
The consumer spending downturn affecting Ruth’s Chris and most other full-service chains had nothing to do with the company’s decision to buy other brands, Miller stressed.
“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.”
Ruth's Chris Steak House has 114 locations worldwide.
