UPDATE 3-Fertitta adds McCormick & Schmick's to seafood empire

Tue Nov 8, 2011 12:30pm EST

* Deal for $8.75/share

* Offer is 29 pct more than MSSR's Monday closing price

* Deal to close deal by late Dec 2011 or early Jan 2012

* Shares up 28 pct

By Meenakshi Iyer

Nov 8 (Reuters) - Landry's Inc owner Tilman Fertitta finally struck a $131.6 million deal to buy out seafood chain McCormick & Schmick's , ending a months-long pursuit that had seen the restaurant magnate go hostile with his bid.

The deal sees Fertitta, the biggest shareholder in McCormick & Schmick's with a near 10 percent stake, snap up the seafood chain for less than his $137.3 million offer in April.

"(Fertitta) is a very brutal operator. He probably sees a lot of fat that he could cut out of McCormick & Schmick's cost structure," Capstone Investments analyst Stas Kislev told Reuters.

McCormick & Schmick's, which owns over 80 restaurants in the United States and Canada under more than 11 brands, has not been performing as well as other fine dining restaurants but is seen to be a good fit for Fertitta's seafood restaurant empire.

Last year, Fertitta bought out seafood restaurant chain Landry's for $1.4 billion in cash, and the 54-year-old Texan has been busy ever since -- picking up chains like Bubba Gump Shrimp, Oceanaire Seafood and Claim Jumper.

On Tuesday, McCormick & Schmick's Seafood Restaurants Inc, which has now missed market estimates for seven straight quarters, posted a third-quarter loss compared with analysts' expectations for a profit, as it faced falling sales and rising operating costs.

A BIRD IN HAND?

Fertitta's offer of $8.75 a share is 29 percent higher than McCormick & Schmick's closing price on Monday.

The company's stock traded in the mid-to-high $20s in 2007 but nosedived over the next few years as it struggled to stem steady declines in same-restaurant sales.

The chain, which traces its roots to the 110 year old Jake's Famous Crawfish Restaurant in Portland, Oregon, has seen its stock shed more than 30 percent of its value since Fertitta's first outlined his plans to buy the company in April.

"McCormick & Schmick's fell victim to the need to grow and located some restaurants in secondary markets which were adversely impacted to a greater degree by the economic downturn," Fertitta said in a statement.

Analyst Kislev reckons McCormick & Schmick's management wanted to take the deal that was already out there rather than wait for a more meaty opportunity.

Landry's plans to fund the deal through both cash and debt. It expects the deal to close by late December or early January next year.

Shares of McCormick & Schmick were trading up at $8.65 on Tuesday afternoon on Nasdaq.

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