Tilman Fertitta wants Joe’s Crab Shack.
Fertitta’s company, Landry’s, has emerged as a bidder for Joe’s Crab Shack owner Ignite Restaurant Group Inc., with a $55 million bid that Landry’s said should be given the inside track in the company’s sale process.
Ignite filed for federal bankruptcy protection earlier this month, with a stalking horse bid of $50 million from the private-equity firm Kelly Investment Group, owner of the Fox & Hound and Champps chains.
Yet Landry’s, long believed to be interested in acquiring Ignite, quickly stepped in and submitted a $55 million bid that it said should be selected as the stalking horse, according to bankruptcy court filings.
A stalking horse bid is an initial bid in a bankruptcy process, prior to an auction for the company being sold. Other potential buyers could make higher bids in an auction, but the stalking horse bidder gets the rights to breakup fees, meaning competing bidders have to pay that much more. In this case, Kelly’s breakup fee is $1.5 million.
As such, it is advantageous for a potential buyer to be the stalking horse bidder.
Landry’s said its bid is better, and the company has agreed to put a $10 million “good faith deposit” on its purchase — higher than the $2 million deposit from Kelly.
Landry’s knows Joe’s Crab Shack as much as anybody else. The company sold Joe’s to the private-equity group J.H. Whitney Capital Partners in 2006, for $192 million. J.H. Whitney took Joe’s Crab Shack public in 2012, under the Ignite Restaurant Group name.
Ignite began having problems almost from the get-go, but began losing money in 2013, after its ill-fated acquisition of Romano’s Macaroni Grill. Ignite ultimately filed for bankruptcy with $133.3 million in secured debt — and no buyers willing to acquire the company outside of the bankruptcy process.
But there are now multiple buyers who want to acquire Joe’s Crab Shack and Brick House Tavern + Tap out of bankruptcy, which would reduce debt and enable the closing of certain restaurants with costly leases.
The emergence of Landry’s promises that Ignite’s lenders would take less of a loss on that debt. Another company rumored to be interested in buying the chain out of bankruptcy was American Blue Ribbon Holdings.
To be sure, Fertitta is no stranger to acquiring companies in a bankruptcy process. In 2010, his company acquired the Oceanaire and the Claim Jumper chains in bankruptcy sales.
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