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Fat Brands IPO

Fatburger owner kicks off ‘mini-IPO,’ uses funds to buy Ponderosa

FAT Brands to buy Homestyle Dining LLC for $10.5 million

FAT Brands Inc., the owner of Fatburger and Buffalo’s Café, has agreed to buy the owner of Ponderosa and Bonanza steakhouse brands for $10.5 million, the company said on Wednesday.

The announcement came on the day the company kicked off what’s known as a “mini-IPO,” pricing its newly minted stock at $12 per share in a bid to raise $24 million.

The proceeds will be used to fund the acquisition of Homestyle Dining LLC.

“The acquisition of Ponderosa and Bonanza will be one of many milestones as we take FAT Brands public, acquire other restaurant concepts, and expand our global reach,” FAT Brands CEO Andy Wiederhorn (left) said in a statement.

FAT Brands has long indicated its interest in acquiring other franchise brands and using an “asset light,” global-franchise-development strategy under a public company umbrella.

In Homestyle Dining, however, FAT Brands is acquiring a company in decline. At the start of 2013, its two chains operated 211 locations, 180 of which were Ponderosa units.

The deal announcement Wednesday indicated that the two brands operated 120 locations. Both brands are predominantly franchised.

FAT Brands is going public under a relatively new rule for initial public offerings known as Regulation A+ that was made possible by the 2012 JOBS Act. It’s the first significant restaurant chain to officially file for such an offering, which enables companies to crowdsource an IPO by selling stock directly to customers.

FAT Brands has already started publicizing its offering, both on its website, and on the online site Banq that is listing the IPO and is acting as the managing selling agent for the offering.

Once all shares are sold, FAT Brands will be listed on the Nasdaq stock exchange and will trade under the ticker symbol “FAT.”

The Los Angeles-based company says it plans to pay a quarterly dividend of 4 percent of the price per share of the offering, or 48 cents per share annually.

In addition to the acquisition, funds from the offering will be used for working capital, domestic and international expansion and to retire existing debt.

“Listing on the Nasdaq has been a major goal of ours since the beginning of our journey toward becoming a publicly traded entity,” Wiederhorn said, adding that the listing “will provide us with great visibility for the company” among potential shareholders, followers and the public, “who will soon be able to play a direct role in our continued growth.”

FAT Brands — which stands for “Fresh, Authentic, Tasty” — operates chains with 181 total locations in eight states and 18 countries.

After the offering is complete, Wiederhorn’s Fog Cutter Capital Group Inc. will own 80 percent of FAT Brands and investors the remaining 20 percent.

According to Banq, the company has a pre-IPO valuation of $96 million.

The company in 2016 generated $10.1 million in total revenue, up 5.3 percent from the year before.

But the company gets a lot of its revenue from the sale of franchises. About $6 million of its revenue last year came from royalties, and the rest, $4 million, came from the sale of franchises.

Net income, meanwhile, increased 20 percent to $4.2 million, or 42 cents per share. EBITDA, or earnings before interest, taxes, depreciation and amortization, was $6.5 million, up 2.9 percent from the year before.

In the quarter ended March 26, net income increased 3.4 percent to $1.66 million, but revenues fell 5 percent to $2.4 million.

Contact Jonathan Maze at [email protected]

Follow him on Twitter: @jonathanmaze

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