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Grill Concepts details plan to go private

WOODLAND HILLS Calif. Daily Grill parent Grill Concepts Inc. said Tuesday it planned to take the company private by buying out smaller shareholders to reduce the number of stakeholders and then delisting its stock from the Nasdaq exchange.

The moves, already backed by the company’s board of directors but still pending shareholder approval, would save the company about $750,000 annually through the elimination of public-company reporting mandates. The shift to a private company also would allow management to focus on long-term growth for the operator of 31 restaurants under the Daily Grill, The Grill on the Alley and the In Short Order grab-and-go outlet.

Aspecial meeting of shareholders to approve the deal will be scheduled in the first quarter of 2009, the company said. It added that company officials continue to evaluate strategic options with financial adviser Morgan Joseph & Co., which could alter the going-private plan The company said in October it was exploring a possible sale of assets, recapitalization or merger.

Grill Concepts' going-private plan includes a reverse-forward stock split that essentially would cash out the company’s smallest shareholders to reduce the number of stakeholders to 300 or below, which would make it eligible for delisting. Grill Concepts said it would use a 1-share-to-35-share ratio in its reverse stock split, and then purchase the stakes below the 35-share mark for $1.50 each in cash. Stakeholders owning 35 shares or more would retain their number of shares following a subsequent forward stock split, which holds the same 1-to-35 ratio, the company said.

The $1.50 per share buyout is double the company’s closing share price of 75 cents on Monday. Today, Grill Concept’s stock fell 6.7 percent to close at 70 cents per share. It has traded between $6.63 per share and 61 cents per share during the past 52 weeks, but has closed above $1 only a handful of times during the past two months.

The company, like many in the casual-dining sector, has struggled with slowed sales and declining profit. In its latest quarter ended in September, same-store sales fell 8 percent. Its net loss widened to $11.1 million, from $598,000 a year ago on restructuring charges and increased income tax provisions.

Earlier this year, Grill Concepts’ top executives agreed to voluntary pay cuts as part of a companywide cost-saving measure. Executives at the vice president level or higher agreed to accept equity in the company in lieu of cash in an amount equal to a 10-percent pay cut. Officials also said they would temporarily halt new restaurant expansion to conserve capital, which would require breaking away from some new lease commitments next year.

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