* P.F. Chang's shareholders to get $51.50 per share
* Centerbridge to pay 30 pct premium to Monday's close
* P.F. Chang's can solicit better offers through May 31
* Shares up 30 percent
By Lisa Baertlein and Mihir Dalal
May 1 P.F. Chang's China Bistro Inc,
which has been fighting to recover from ill-timed price
increases, said on Tuesday it struck a deal to sell itself to
Centerbridge Partners for $1.1 billion; shares in the restaurant
chain soared 30 percent.
Centerbridge, a private equity firm that owns restaurant
holding company CraftWorks Restaurants & Breweries, will pay
$51.50 per share for P.F. Chang's -- a 30 percent premium to the
stock's closing price on Monday.
The deal sounded a note of confidence in the beleaguered,
full-service U.S. restaurant sector. P.F. Chang's and Darden
Restaurant Inc's Olive Garden chain have come under
increasing pressure from rivals like McDonald's Corp,
Chipotle Mexican Grill Inc and Panera Bread Co,
which all trumpet quality fare at lower prices.
P.F. Chang's shares jumped $11.77 to $51.46 on the Nasdaq
Tuesday afternoon. T he stock, which had fallen about 20 percent
over the year to Monday, last traded above $50 in February 2011.
"If you find a company that's been beaten up but there's no
structural damage to the company, this may be the time for a
deal," said Morningstar analyst R.J. Hottovy.
He added that the Centerbridge offer "looks like a fair
price", coming in at about 8 times trailing earnings before
interest, tax, depreciation and amortization (EBITDA)
That is where most deals in the last year have landed,
including Golden Gate Capital's July acquisition of California
Pizza Kitchen, Hottovy said.
Shares in other full-service restaurants, including
Cheesecake Factory Inc and Buffalo Wild Wings Inc
, moved higher on the P.F. Chang's news.
The announcement arrived in a week brimming with consumer
sector news: Microsoft Corp said it would invest $605
million over five years in Barnes & Noble Inc's Nook
e-reader and college business; Collective Brands Inc,
owner of the discount footwear chain Payless ShoeSource, signed
a deal to be bought by shoemaker Wolverine Worldwide Inc
and two private equity firms for $1.32 billion; and DineEquity
Inc found a buyer for 39 of its Applebee's restaurants
P.F. Chang's Chief Executive Rick Federico said going
private would give his company greater flexibility to pursue its
long-term strategy to increase traffic and improve performance.
P.F. Chang's, which operates namesake Bistro restaurants and
the smaller Pei Wei quick-service chain, is free to solicit
superior proposals through May 31, the parties to the deal said.
"Although we do not anticipate any other potential suitors
now, we think any potential buyer will pave the way for greater
cost scrutiny, potential closures of underperforming units and a
more rapid turnaround," Miller Tabak restaurant analyst Stephen
Anderson wrote in a note to clients.
P.F. Chang's move to pass on higher food and labor costs to
customers last year resulted in market share losses and
same-store sales declines.
On Tuesday the Scottsdale, Arizona-based company also
reported a 42 percent drop in first-quarter profit to $6.3
million, missing Wall Street expectations.
Revenue was $318.9 million, little changed from a year
earlier. Sales at its established Bistro and Pei Wei restaurants
fell due to fewer guest visits, disappointing Wall Street
The deal with Centerbridge, expected to close by the end of
the third quarter, must receive anti-trust approval and the
minimum tender of about 83 percent of the P.F. Chang's common
shares, among other things.
Goldman Sachs and DLA Piper LLP are advising P.F. Chang's,
while Centerbridge is being advised by Wells Fargo Securities,
Deutsche Bank Securities and Weil, Gotshal & Manges LLP.
Centerbridge's CraftWorks Restaurants & Breweries operates
Rock Bottom Restaurants and Gordon Biersch Brewery Restaurant