Private equity firm Vintage Capital Management LLC made a formal offer Thursday to buy Red Robin Gourmet Burgers Inc. for $40 per share, according to a regulatory filing.
The Vintage offer comes more than a month after the private equity firm called for an auction and said it would buy Red Robin at $40 a share. The firm, which has an 11.6% stake in the Greenwood Village, Colo.-based casual-dining brand, said it made the offer following recent discussions with the Red Robin leadership.
“We are pleased we have begun a constructive dialogue. We hope that this dialogue continues, as we are confident that our proposal is in the best interest of the company’s stockholders,” Vintage wrote in a letter addressed to Red Robin interim CEO Pattye Moore.
Red Robin’s board and management team said they “will carefully review and consider the proposal to determine the course of action it believes is in the best interests of the company’s shareholders.”
Vintage said the transaction would be structured as a merger of a newly formed entity controlled by Vintage. The purchase price represents a premium of 57% based on the company’s share price of $25.46 as of June 12, 2019, Vintage said.
The deal would be funded through a mix of debt and equity, including using a revolving line of credit and $450 million term loan, Vintage said.
“We believe the Company is well-positioned for future growth, and we believe that many members of the Company’s existing management are critical partners in the future success of the business,” Vintage wrote in the letter to Moore. “We intend to discuss the future roles and responsibilities of the Company’s senior management team with each of them individually at the appropriate time.”
Vintage said if Red Robin fails to “meaningfully engage on this proposal” or explore an auction where Vintage can participate, then the private equity firm plans to pursue its prior request to convene a special meeting of stockholders to discuss sale of the company.
For the first quarter ended April 21, Red Robin reported a 3.3% decline in same-store sales. On May 31, the 570-unit company closed 10 underperforming restaurants. Seven were in enclosed mall locations.
Eroding guest counts, problematic for the entire industry, have also plagued Red Robin. In the first quarter, traffic dropped 5.5%. That followed a 4.4% decline in the fourth quarter.
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Update, June 18, 2019: This story has been edited to include Red Robin's response.