Fund presses on $325M buy of Nor­walk eatery

Greenwich Time - - BUSINESS - By Alexan­der Soule

Months after Del Frisco’s Res­tau­rant Group spent $325 mil­lion to ac­quire Barteca, a hedge fund is press­ing Del Frisco’s to sell off the Nor­walk-based owner of the Barcelona Wine Bar and Bar­taco chains, ac­cord­ing to the Wall Street Jour­nal.

New­port Beach, Calif.based En­gaged Cap­i­tal has built up a nearly 10 per­cent stake in Irv­ing, Texas-based Del Frisco’s, whose shares are down by more than half this year giv­ing it a mar­ket cap­i­tal­iza­tion of about $225 mil­lion. On Wed­nes­day, Del Frisco’s an­nounced a “poi­son pill” plan de­signed to fore­stall any in­vestor pur­chas­ing shares that would push their to­tal hold­ings to more than 10 per­cent of all shares out­stand­ing.

In Au­gust, Del Frisco’s sold stock worth $98 mil­lion and found a buyer for its Sul­li­van’s Steak­house chain in a $32 mil­lion deal, us­ing the pro­ceeds from both ac­tions to pay off debt. Ear­lier this year, the com­pany closed a Del Frisco’s Grille in down­town Stam­ford after a three­year run, with Black­stones Steak­house tak­ing over the space.

Barcelona and Bar­taco contributed $40 mil­lion in rev­enue to Del Frisco’s in its fis­cal third quar­ter end­ing in Septem­ber, and earn­ings of $10.2 mil­lion be­fore taxes and other non-op­er­at­ing ex­penses. Del Frisco’s recorded a $67.1 mil­lion loss for the quar­ter on rev­enue of $105 mil­lion.

Del Frisco’s has been ex­pand­ing both Barcelona and Bar­taco with three new restau­rants in North Carolina, as well as lo­ca­tions in Mas­sachusetts, Texas and Wis­con­sin, while clos­ing Bar­taco lo­ca­tions in Ten­nessee and Alabama.

“We re­al­ize that there is a great deal of skep­ti­cism around the new (Del Frisco’s Res­tau­rant Group) given the risk of in­te­gra­tion (and) our

el­e­vated debt lev­els,” said CEO Nor­man Ab­dal­lah, speak­ing in mid-Novem­ber on a con­fer­ence call with in­vestors. “It is also worth not­ing, how our brands per­formed dur­ing the last ma­jor re­ces­sion in 2008 through 2009 . ... Barcelona had pos­i­tive same-store sales de­spite the re­ces­sion, as the brand ben­e­fited from guests trad­ing down from higher-priced con­cepts; we would an­tic­i­pate a sim­i­lar ef­fect at Bar­taco with its lower-price menu items.”

Ab­dal­lah said staff of Barteca’s have moved to Irv­ing, while con­tin­u­ing to op­er­ate the Barcelona and Bar­taco brands au­tonomously. He added Barteca co-founder Sasa Mahr-Batuz re­mains an ad­viser, with Mahr-Batuz launch­ing Barcelona in 1996 with Andy Pforzheimer, who to­day is on the fac­ulty of the Culi­nary In­sti­tute of Amer­ica in Hyde Park, N.Y.

On the same call, Del Frisco’s fi­nance chief said that busi­ness plunged a year ago at a Bar­taco res­tau­rant in Port Ch­ester, N.Y., after a brief clo­sure fol­low­ing an em­ployee be­ing di­ag­nosed with hep­ati­tis A. The Port Ch­ester res­tau­rant’s rev­enues re­main down 30 per­cent to­day on a year-over-year ba­sis, ac­cord­ing to Neil Thom­son, chief fi­nan­cial of­fi­cer of Del Frisco’s, but still re­mains “above av­er­age” in Ab­dal­lah’s words for both sales and prof­its.

Bar­taco’s North­east lo­ca­tions were also im­pacted by rain­fall this year that lim­ited use of its out­door pa­tios, Ab­dal­lah added.

Hearst Connecticut Me­dia file photo

Barteca’s flag­ship Barcelona Wine Bar & Res­tau­rant in Nor­walk. Del Frisco’s Res­tau­rant Group an­nounced May 7 plans to ac­quire the res­tau­rant’s Nor­walk-based par­ent com­pany for $325 mil­lion, and ex­pan­sion plans for be­tween 50 and 100 more lo­ca­tions.

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