Hospitality and entertainment company Landry's Restaurants, Inc. (LNY) said Monday that it agreed to be acquired by Fertitta Holdings, Inc. for a revised offer of $21.00 per share in cash. Fertitta is a newly formed entity wholly owned by the company's CEO and original founder Tilman Fertitta. The company's stock is currently up more than 13% in the regular trading session.
The total value of the transaction is about $1.3 billion, including about $885.0 million of debt. The offer price represents a premium of approximately 37% over the closing share price of the company's common stock on April 3, the last trading day before disclosure of the revised offer made by Fertitta to acquire the company. Fertitta beneficially owns approximately 39% of the company's outstanding shares of common stock.
Landry's board of directors, on the recommendation of a special committee, has approved the merger agreement, including the fully financed commitments consisting of Fertitta's equity contribution and the debt financing commitments of the lenders. Further, the board has recommended that the company's stockholders vote in favor of the merger.
Fertitta has received debt-financing commitments from Jefferies Funding, LLC, Jefferies & Company, Inc., Jefferies Finance, LLC and Wells Fargo Foothill, LLC to fund the acquisition.
The merger agreement includes a "go-shop" provision under which the special committee with the assistance of its independent advisor will actively solicit superior acquisition proposals from third parties for about 45 days following the signing of the merger agreement. The company noted that no assurances could be given that the solicitation of superior proposals would result in an alternative transaction.
The transaction is expected to be completed in approximately four months, subject to regulatory approvals and other customary closing conditions and performance criteria, including no material adverse effect on the company's results or operations prior to closing.
In accordance with the terms of the merger agreement, Houston, Texas-based Landry's said it would stop the payment of its regular quarterly dividend of $0.05 per share while the transaction is pending.
King & Spalding, LLP provided legal advice to the special committee, while Cowen and Co. served as its financial advisor and rendered a fairness opinion in connection with the proposed transaction. For Landry's, North Point Advisors, LLC served as financial advisor and Haynes and Boone, LLP served as its legal advisors.
Olshan Grundman Frome Rosenweig & Wolosky LLP is serving as Fertitta's legal advisors, while Jefferies & Company, Inc. is serving as the financial advisor.
In April, Landry's said that its board received a letter from CEO Fertitta with a lower buyout offer of $21.00 per share in cash compared to his previous offer of $23.50 per share. In the letter, the CEO said that the he was revising the offer due to the downward trend of the economy and poor prospects of the credit market.
Fertitta's letter noted that since nearly two months from the date of his initial offer, the credit market conditions have significantly worsened, making it far more costly to obtain the debt financing required to proceed with the transaction.
Owing to the deterioration of the credit markets, banks have been reluctant to finance merger deals as they themselves grapple with massive losses and write-downs on subprime mortgages.
Landry's operates restaurants under the names Rainforest Cafe, Saltgrass Steak House, Landry's Seafood House, The Crab House, Charley's Crab, and The Chart House. As of the end of 2007, the company owned and operated approximately 179 full-service and limited-service restaurants in 28 states. The company was founded in 1980.
In Monday's regular trading session, LNY is trading at $19.10, up $2.31 or 13.76% on a volume of 0.89 million shares. The stock has been trading in a range of $14.18-$32.30 in the past 52 weeks.
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