Private equity consortium acquires Del Taco

The parent company of Nashville-based Captain D’s Seafood, co-owned by Charlesbank Capital Partners, Grotech Capital Group and Stockwell Capital, will buy the second largest Mexican fast-food chain in the US and “co-brand” it with the seafood chain.

Sagittarius Brands, the parent company of Nashville-based Captain D’s Seafood, says it will buy Lake Forest, California-based Del Taco, a chain of 461 Mexican fast-food restaurants located mostly in Western states. Terms of the deal weren’t disclosed.

Sagitarius was formed as an acquisition platform in late 2004, when Captain D’s was bought by private equity firms Charlesbank Capital Partners, Grotech Capital Group and Stockwell Capital. The firms announced they planned to grow the restaurant by acquiring other restaurant chains and operating multiple brands under one roof.

Leonard Green & Partners has joined the other private equity firms in contributing to the acquisition of Del Taco.

Sagittarius Brands is led by Sid Feltenstein and Ron Powell, who have led Charlesbank and Grotech to previous success in their management of a similar investment in the late 1990s, Long John Silvers. The two led an effort to integrate some Long John Silvers with Taco Bell Restaurants, and the firms say they were pleased with the results.

“Mexican co-brands well with seafood,” said Charlesbank managing director Andrew Janower. “Cobranding allows you to generate a lot more cash flow from the same assets. But, it’s hard to do operationally because it’s difficult to integrate the menus at the speed and quality the consumer demands.”

Janower said Feltenstein and Powell will use their previous experience integrating Mexican and seafood in combining the Captain D’s and Del Taco brands under one roof. He said the first experiments in this realm will occur either in the Southeast, which is Captain D’s geographic base, or in the Southwest, where Del Taco operates.

Since acquiring Captain D’s Janower and Feltenstein have pursued aggressive growth at the company. Captain D’s opened 20 new restaurants last year and now has more than 600 locations. Del Taco, previously owned by Lone Star Funds, has also been growing. The chain opened 34 restaurants last year and has secured franchise agreements to add 338 new restaurants in the next five years. Founded in 1964, Del Taco is currently the second-largest Mexican fast-food restaurant in the US, behind Taco Bell.