The claws were out, but Landry’s triumphs
Restaurant chain owner Fertitta wins the battle for ownership of the parent of Joe’s Crab Shack and Brick House
LANDRY’S won Ignite Restaurant Group’s assets in a bankruptcy auction, a preliminary victory in a monthslong effort to retake ownership of Joe’s Crab Shack by acquiring its distressed operator.
Tilman Fertitta’s restaurant and entertainment empire offered $57 million for Houston-based Ignite, which also operates Brick House Tavern + Tap. It edged out a shell company that offered $56.9 million in the next highest bid, according to bankruptcy filings.
Though the court must approve the sale later this month, the win culminates a testy back-and-forth between Landry’s and Ignite, which had fiercely resisted Feritta’s pursuit of a chain he operated for years. Landry’s sold Joe’s Crab Shack to Ignite in 2006 through a private equity firm that paid $192 million.
Landry’s has grown substantially since then and now operates more than 50 brands, including Landry’s, McCormick & Schmick’s and Morton’s The Steakhouse. The company reported $3.4 billion in revenue last year, up $100 million from 2015, and took the No. 3 spot on the Chronicle’s annual list of the largest private companies based in the Houston area.
In a statement, Landry’s said it might sell Brick House Tavern + Tap and revamp the Joe’s Crab Shack chain by cutting underperforming stores. It’s considering converting some of the locations into other Landry’s concepts.
“We are open to the challenge of restoring Joe’s Crab
“We are open to the challenge of restoring Joe’s Crab Shack.” Landry’s owner Tilman Fertitta
Shack,” Fertitta said in the statement.
He could not be reached for further comment Wednesday.
Ignite has for years been closing restaurants and posting losses. It offloaded its Macaroni Grill brand for $8 million in 2015, and the Nasdaq Stock Market delisted the company’s stock earlier this year after its market value fell below the required minimum for trading.
Joe’s Crab Shack, founded in Houston in 1991, has posed the greatest challenge for the company. The chain recorded a $16.6 million operating loss last year even as Ignite attempted to boost sales with all-youcan-eat shrimp specials and a revamped lunch menu.
The company, which did not respond to a request for comment Wednesday, began exploring a possible sale earlier this year. It recently reported $285.3 million in assets and $224 million in liabilities in bankruptcy filings.
Landry’s came forward with a $60 million offer for both brands. But it dropped the bid to $50 million in early June, arguing that it couldn’t justify a higher price for two restaurant chains that had for years been losing customers.
Ignite insisted in court filings that 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 a $50 million deal with KRG, an affiliate of a San Diegobased private equity firm called Kelly Cos., and filed for Chapter 11 bankruptcy protection in June to facilitate the sale. Landry’s doubled back and appeared in court with a $55 million offer, arguing it was jilted at the negotiating table.
The competing offer triggered a series of sharp exchanges between attorneys for Landry’s and Ignite. An attorney for Landry’s argued that Ignite had an obligation to its creditors to accept the higher bid and called its supposed refusal to renegotiate “truculent retaliation” for Landry’s departure from the $60 million it originally offered.
“In a fit of apparent pique, (Ignite) maintained a nonnegotiable demand for Landry’s to stay at $60 million,” he wrote. “And when that unreasonable demand did not immediately work, (Ignite) ran off with KRG.”
Ignite for weeks stood its ground, insisting that Landry’s played hardball to cut the price before the bankruptcy filing, thinking it was the only bidder in play. An attorney for the distressed company maintained that Landry’s would have the chance to bid alongside other companies in a court-supervised auction prior 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,’ ” he wrote.
The court-supervised auction gave other companies a chance to bid for the two restaurant chains. A sale hearing will be held Aug. 17 in Houston.