Shareholders of Wichita-based Lone Star Steakhouse & Saloon just approved a cash buy-out by Dallas-based Lone Star Funds for $27.35 a share, which means Lone Star Steak will now officially emanate from the Lone Star State.
The price is a boost from the contested offer of $27.10 Lone Star Funds floated last August and values the company--which operates 217 Lone Star Steakhouse, 15 Sullivan's, five Del Frisco's, 23 Texas Land & Cattle, and one Frankie's Italian Grille restaurants plus 17 more Lone Star and one Del Frisco's restaurants under license -- at $586.1 million.
That's a $5.5 million bulge above the August offer, which was pooh-poohed as too low by investors such as Barington Capital Group, which owns 9.6 percent of the company. But after Lone Star let Barington peek at the books and view the wreck the company was becoming, they pounced on the quarter per share offered by Lone Star on November 30.
The company was afflicted by several adverse long-term trends sending comparable Lone Star Steak House sales tumbling 9.4 percent in the third quarter and 9.9 percent in the four weeks ending October 3. Lone Star says the performance anemia is due a casual dining sector squeeze resulting from demographic shifts, higher construction and renovation costs, pinched consumer disposable income due to higher gas prices and interest rates, over-saturation of the causal dining segment and the expected over-saturation of the upscale steakhouse segment.
Barington also savaged Lone Star's marketing thrust, especially its costly sponsorship of a NASCAR racing team and the scrubbing of its coupon program. The NASCAR hit: Lone Star sunk some $1.39 million in the third quarter for its NASCAR sponsorship and some $4.3 million in total sponsorship costs. It's rookie driver, David Stremme, finished 33rd in the 2006 Nextel Cup standings. That's gotta hurt. --Mark Stuertz
Get the Weekly Newsletter
Our weekly feature stories, movie reviews, calendar picks and more - minus the newsprint and sent directly to your inbox.
- My Memorial Day Vacation at the Trinity Beach in Downtown Dallas
- Hate Our New Comment System? Just Make a Burner Facebook Account.
- SCOTUS Talked about UT Admissions Behind Closed Doors Thursday. Tuesday We Learn What...