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Chili's Owner To Sell Majority Stake In Romano's Macaroni Grill

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The Associated Press

Published: August 19, 2008

NEW YORK - Brinker International Inc., the owner of the Chili's Grill & Bar chain, said Monday it will sell a majority stake in Romano's Macaroni Grill to a private equity firm.

Under the agreement, Brinker will sell most of its stake to Mac Acquisition LLC - a unit of San Francisco-based Golden Gate Capital - for $131.5 million in cash.

Brinker will then turn over $6 million to Mac Acquisition in order to hold onto a 19.9 percent stake in the brand.

"Brinker International will retain a minority ownership position in order to both maximize the value to Brinker's shareholders and contribute to the success of Macaroni Grill as a stand-alone entity," Brinker Chief Executive Doug Brooks said in a statement.
Golden Gate Capital declined to comment.

A Brinker spokesman said in an e-mail response to questions that the company decided to sell the brand to Golden Gate because the firm "is an experienced consumer and retail investor and has a proven track record of partnering with corporations to help grow established brands."

Investors were largely expecting the sale. Brinker's shares fell 59 cents, or 2.8 percent, to $20.20 in afternoon trading that was below the company's average trading volume.

When the company said earlier this month that it was in talks with a buyer to sell its majority interest, some analysts were disappointed that Brinker was not getting rid of the entire chain of more than 220 locations - as the company had originally planned.

In its last quarter, same-store sales at Macaroni Grill fell 5.7 percent. Same-store sales at Chili's, meanwhile, rose 3.4 percent. Same-store sales are a key indicator of restaurant performance since they measure growth at existing locations rather than newly opened ones.

On Monday, Stephens Inc. analyst Greg Ruedy said in a note to investors that he was pleased with the purchase price for the brand, but concerned that "operating results at Macaroni Grill could continue to deteriorate due to the challenging consumer macro environment and competitive forces."

Most restaurants have struggled to keep sales growing as consumers cut back on discretionary spending in order to have money for gasoline or groceries. The housing market in some areas also remains weak and credit has been harder to get, further restricting consumers' desire to spend their cash on a dinner out.

Besides keeping a minority interest in the chain, Brinker will provide "corporate support services" for a year with a one-year extension option.

KeyBanc Capital Markets analyst Lynne Collier said in a note that the stipulation could mean higher costs for Brinker "and will continue to distract management to some level from focusing on the core business and remaining brands."

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