UPDATE 3-California Pizza mulls sale, ups quarterly view
* California Pizza confirms looking at alternatives
* Says sale, merger or other combination possible
* Sees Q1 EPS $0.10, previous view $0.05-$0.07
* Co-CEOs, CFO extend employment for three more years
* Shares up 2.3 percent (Adds analyst comments, analysts' 2010 view, updates shares)
By Jessica Wohl
CHICAGO, April 12 (Reuters) - California Pizza Kitchen Inc CPKI.O confirmed on Monday that it was exploring a sale of the company and said its first-quarter profit came in higher than expected, sending its shares up more than 2 percent.
The 25-year-old restaurant chain said it had hired investment bank Moelis & Company as its exclusive financial adviser to consider changes in its capital structure, a possible sale or other business combination.
On Friday, a source familiar with the deal said that California Pizza was seeking buyers. Private equity groups in particular have been looking into opportunities within the casual dining sector, as financing becomes more accessible and U.S. consumers show more willingness to eat outside the home. [ID:nSGE63B03A]
"I think it's going to be a sale rather than a change in capital structure or a merger," said MKM Partners restaurant analyst Stephen Anderson.
Anderson, who has a "neutral" rating on California Pizza's shares, said a private equity buyer is "probably the most logical candidate at this point," but declined to name any potential bidders in that space.
"The only potential buyer I would see at this point would be a Darden Restaurants (DRI.N), which has made no secret about its intention to expand in the upscale casual universe," he said.
Still, Anderson does not expect that Darden wants to pursue a deal yet as it works to pare down its debt and realize more efficiencies from its 2007 acquisition of RARE Hospitality.
A spokesman for Darden Restaurants Inc (DRI.N), whose chains include Olive Garden and Red Lobster, declined comment.
California Pizza is valued at just over $500 million based on Friday's closing share price of $20.74. Shares were up 47 cents, or 2.3 percent, at $21.21 after jumping as high as $22.92. The shares had already gained 14 percent late on Friday when news the company was considering a sale first emerged.
HIGHER QUARTERLY PROFIT SEEN, YEAR VIEW STILL BELOW STREET
The company, known for Barbecue Chicken pizza and other offbeat creations, reported preliminary results for the first quarter, saying it now expects to earn 10 cents per share, up from a prior target of 5 cents to 7 cents per share.
The forecast includes a benefit of about 3 cents per share to account for gift cards that have not been redeemed. It also stood by its full year outlook.
Revenue fell 2.7 percent to $156.7 million in the first quarter ended on April 4, the company said. Comparable full-service restaurant sales fell about 2.7 percent, posting a better performance than the drop of 3 percent to 4 percent that California Pizza forecast in February.
Analysts had forecast earnings per share of 8 cents on revenue of $156.95 million, according to Thomson Reuters I/B/E/S.
Co-Chief Executive Officers Rick Rosenfield and Larry Flax and Chief Operating Officer, as well as Chief Financial Officer Sue Collyns, extended their employment agreements for another three years through December 2012, the company said on Monday.
California Pizza said an earlier Easter and adverse weather conditions during the quarter crimped comparable sales by about 1.3 percent.
But overall, February and March comparable sales were better than expected due to a new call center for take-out orders, an expanded wine selection, catering programs and a new "Small Cravings" menu, the company said in a statement.
Comparable sales improved on both a quarter-over-quarter basis and sequentially across the dine-in, take-out, and delivery channels, they said.
The co-CEOs said that they remain confident in the company's full-year outlook. In February, California Pizza forecast 2010 earnings of 68 cents to 73 cents per share. Analysts currently expect earnings of 74 cents per share.
The company plans to release quarterly results on May 6. (Reporting by Jessica Wohl, editing by Michele Gershberg and Dave Zimmerman)
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