Fight over restaurants intensifies
Landry’s tries to dislodge the buyer Ignite prefers
Tilman Fertitta’s quest to acquire the Joe’s Crab Shack chain takes a turn when the bankrupt Ignite Restaurant Group files a Chapter 11 plan that confirms another group as the preferred bidder.
Ignite Restaurant Group has filed a Chapter 11 reorganization plan that confirms a California private equity group as its preferred bidder, intensifying a derisive court battle with Tilman Fertitta’s restaurant empire in its quest to once again own Joe’s Crab Shack.
In the plan, Houston-based Ignite reaffirmed its intent to sell its restaurant chains, which also include Brick House Tavern + Tap, to KRG Acquisitions Co. The company, an affiliate of a San Diego-based firm called Kelly Cos., agreed last month to pay $50 million for both brands.
The bid evoked ire from Landry’s, Tilman Fertitta’s privately held restaurant and entertainment operation. The company, which pursued Ignite before its bankruptcy filing early last month, has attempted to unseat KRG with a $55 million offer for both restaurant chains.
The higher bid is a move by Landry’s to repurchase Joe’s Crab Shack, which it sold to Ignite in 2006 through a private equity firm that paid $192 million. Ignite has repeatedly resisted the takeover, insisting that KRG’s proposal offers the best value.
Neither Ignite nor Landry’s could be reached for comment.
Landry’s now operates more than 50 brands, including Landry’s, McCormick & Schmick’s and Morton’s The Steakhouse. Kelly Cos. operates more than 100 restaurants in 22 states, including Fox & Hound, Champps, Baileys and Grady’s BBQ.
The bidding war between the
two companies has bred snarkiness and acrimony amid the formalities of bankruptcy court.
It started in May, when Land ry’ s offered $60 million for both of Ignite’s brands. Landry’s then dropped its bid to $50 million in early June, arguing that it couldn’ t justify a higher price for restaurant chains that had been losing money for years.
Ignite insists it attempted to renegotiate with Landry’s, only to be snubbed by Fertitta when it suggested a higher price.
“The day I sold Joe’s Crab Shack was one of the happiest days of my life,” Fertitta allegedly said .“Good luck .”
Ignite then struck the $50 million deal with KRG and filed for bankruptcy to facilitate the sale. Landry’s soon appeared in court with its current $55 million offer, arguing it was jilted at the negotiating table.
“In a fit of apparent pique, (Ignite) maintained a non-negotiable demand for Landry’s to stay at $60 million,” an company attorney wrote in court filings. “And when that unreasonable demand did not immediately work, (Ignite) ran off with KRG.”
Ignite, meanwhile, insists Landry’s played hardball to cut the price, thinking it was the only bidder in play. Ignite has since resisted the advances, arguing Landry’s will have the chance to bid alongside other companies in a court-supervised auctionprior to the final sale.
“After engaging in substantial gamesmanship prior to the (bankruptcy filing), Landry’s should not now be permitted to ‘jump the line,’ ” Ignite’s attorney wrote.
Landry’s has stood its ground in court, arguing it should replace KRG as the preferred bidder because its higher offer meets Ignite’s obligation to find the best value for its creditors. In its latest argument, the company’s attorney borrowed a line from “Jurassic Park,” the classic Steven Spielberg thriller in which raptors terrorize their creator and his guests.
“Debtors have ‘spared no expense’ to defeat and reject a better deal from Landry’s that has been theirs for the taking,” he wrote. He then added a footnote: “Quoting John Hammond from Jurassic Park I, and we saw how thatturnedout.”
In its re organization plan, Ignite wrote that it believes KRG’s bid will maximize value for creditors. It expects the sale to yield $42 million after administrative claims and other expenses are paid.
The company listed about $148.4 million in assets and $184.8 million in liabilities at the start of the year.