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AREX Capital Management discloses 8.5% stake in Fiesta Restaurant Group Inc., parent of Taco Cabana and Pollo Tropical.

Fiesta Restaurant Group’s shares rise with AREX Capital interest

Hedge fund says it has acquired about 8.5% of Pollo Tropical-Taco Cabana parent’s stock

Fiesta Restaurant Group Inc.’s stock edge higher Friday after a hedge fund said it had acquired about 8.5% of the company’s shares.

At midday Friday, stock in Dallas-based Fiesta, parent to the Pollo Tropical and Taco Cabana fast-casual brands, was trading at around $11.33, up about 4% over Thursday’s close of $10.89 a share.

AREX Capital Management L.P. of New York, in Securities and Exchange Commission documents filed Friday, said its entities had acquired more than 2.3 million shares of the restaurant company and speaking or would seek to speak with Fiesta’s management.

AREX said it considered Fiesta shares “undervalued.” Over the past 52 weeks, Fiesta’s shares have traded between $8.23 and $16.85 a share.

Earlier this month, Fiesta announced it was closing 19 of its Taco Cabana restaurants in Texas.

For the third quarter ended Sept. 29, Fiesta swung to a net loss of $22.8 million, or 84 cents a share, from income of $2 million, or 8 cents a share, in the prior-year period. The loss included impairment charges. Revenues fell 6%, to $164.2 million, from $174.6 million in the third quarter 2018.

Same-store sales in the third quarter were down 3.8% at Pollo Tropical and down 4.8% at Taco Cabana.

As of Sept. 29, before the 19 closures were announced, Fiesta said it owned and operated 141 Pollo Tropical restaurants and 165 Taco Cabana units. All of the Pollo Tropical restaurants were in Florida, and all of the Taco Cabana restaurants were in Texas. Fiesta franchised 31 Pollo Tropical restaurants and eight Taco Cabana units.

Contact Ron Ruggless at Ronald.Ruggless@Informa.com

Follow him on Twitter: @RonRuggless

TAGS: Finance
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