Lone Star acquires steakhouse chain

The Texas-based private equity firm has bought the previously unaffiliated Lone Star Steakhouse chain for $600m.

Lone Star Funds has acquired Wichita, Kansas-based Lone Star Steakhouse & Saloon for more than $600 million (€465 million).

The Dallas-based private equity investor will pay $27.10 per share for the restaurant chain, a 15 percent premium over the stock’s August 17 closing price. The deal is expected to be completed in the fourth quarter of this year but is subject to shareholder approval.

The restaurant company owns and operates 222 of its flagship Lone Star Steakhouse & Saloon eateries across the US, as well as 40 others under different brand names including the Sullivan’s, Del Frisco’s Double Eagle and Texas Land & Cattle steakhouse chains.

Despite growth in the steakhouse sector outpacing overall restaurant industry growth, same store sales at the chain’s flagship had fallen 2.2 percent so far this year.

“We have a history of buying well-known brands and we believe Lone Star Steakhouse & Saloon is a great addition to our portfolio,” said Len Allen, president of US operations for Lone Star Funds, in a statement.

Lone Star Funds has previously invested in other troubled restaurant chains – selling off Nashville, Tennessee-based family restaurant chain Shoney’s to Tennessee-based Centrum Equities, an affiliate of Chicago-based Centrum Properties, for an undisclosed sum in July. Lone Star had bought the foundering restaurant chain and its affiliate Captain D’s seafood eateries in 2002 for $18 million and the assumption of $255 million in debt.

Lone Star Funds subsequently slashed the number of Shoney’s outlets by nearly a third and sold-off the growing seafood chain to Sagittarius Brands, an acquisition platform for private equity firms Grotech Capital Group, Charlesbank Capital Partners and Stockwell Capital, some of the same investors who led the late 1990s turn-around of seafood chain Long John Silver’s.

As for the Lone Star Steakhouse chain, the company had agreed to a buyout by investment firm Bruckmann, Rosser, Sherrill & Co. for $579 million in cash in 2002. That deal, which would have led to the exit of founder and chief executive Jamie Coulter, fell through after some stockholders were critical of the offer, and he remained aboard.

Coulter called the offer from Lone Star Funds “in the best interests” of the company’s shareholders, according to a statement.

Lone Star Funds have raised more than $13.3 billion in private equity funds since 1995.