Landry’s could unravel deal for Crab Shack
Landry’s makes bid for restaurant group, topping another company’s offer
Landry’s makes a bid for the troubled restaurant group that owns Joes Crab Shack, potentially unseating another company’s offer in an attempt to regain a brand it once lost.
Houston-based Landry’s has bid to acquire Ignite Restaurant Group, potentially unseating the California restaurant operator that agreed earlier this month to acquire the distressed company.
Landry’s has offered $55 million for the company, bankruptcy filings show. The offer tops a $50 million bid by KRG Acquisitions Co., an affiliate of a San Diego-based private equity firm called Kelly Cos.
Ignite, which operates Joe’s Crab Shack and Brick House Tavern + Tap, filed for Chapter 11 bankruptcy protection earlier this month to facilitate the sale of the company. KRG offered to pay cash for both of its brands.
Landry’s argues that its higher bid aligns with Ignite’s obligation to secure the best sale price for its creditors. A hearing to schedule an auction will be held later this month.
Landry’s, owned by Tilman Fertitta, operates more than 50 brands including Landry’s, McCormick & Schmick’s and Morton’s The Steakhouse. The com-
pany could not be reached for comment.
Ignite did not respond to a request for comment.
Kelly Cos. operates more than 100 restaurants in 22 states, including Fox & Hound, Champps, Baileys and Grady’s BBQ.
The Landry’s offer prolongs an apparent bidding war between the two companies that culminated earlier this month when Ignite struck a deal with the California firm.
In filings with the federal bankruptcy court in Houston, Landry’s identified itself as a jilted bidder that had offered $60 million to acquire Ignite before requesting a $10 million price reduction in early June. Ignite “cryptically demanded” the original offer, Landry’s said.
While Landry’s considered its options, Ignite struck the $50 million deal with the Kelly Cos. affiliate. It didn’t revisit the Landry’s offer, the court filings say.
Landry’s learned of the competing bid through the bankruptcy proceedings, the company wrote.
It called Ignite’s supposed refusal to renegotiate “truculent retaliation” for its refusal to pay the $60 million it had originally offered.
“In a fit of apparent pique, (Ignite) maintained a nonnegotiable demand for Landry’s to stay at $60 million,” the company wrote. “And when that unreasonable demand did not immediately work, (Ignite) ran off with KRG.”
Landry’s new bid includes a $10 million deposit, higher than the $2 million deposit included as part of KRG’s offer.
If the Landry’s bid is ultimately approved in court, the company will once again own a chain it operated for years. In 2006, it sold Joe’s Crab Shack to Ignite through a private equity firm that paid $192 million.
Both of Ignite’s brands have lost considerable value since then amid declining foot traffic. The company has posted four consecutive annual losses.
Last year, Ignite closed 18 Joe’s Crab Shack locations and one Brick House Tavern + Tap. Those chains logged respective samestore sales declines of 7.3 percent and 7.7 percent during that period, according to securities filings.
Joe’s Crab Shack, founded in Houston in 1991, is the more troubled of the two brands. The chain recorded a $16.6 million operating loss last year even as Ignite attempted to boost sales.
Landry’s initially requested a price reduction because of Ignite’s “admittedly bad results,” it wrote in court filing.
Ignite hired Piper Jaffray & Co. to explore options for the company late last year and announced it would pursue a sale of the business this spring.