From
Sarah E. Lockyer, Nation's Restaurant News: Steak 'n Shake Co. and Western Sizzlin Corp., two
restaurant companies led by one-time activist investor Sardar Biglari,
plan to merge, with Western Sizzlin set to become a subsidiary of Steak
n Shake, the companies said Thursday.
The net
transaction value payable to Western Sizzlin shareholders is about $23
million. The deal still is subject to shareholder approval, and neither
company had filed as of press time any deal materials or proxy
information.
Steak n Shake, based here,
operates or franchises 486 family-dining restaurants that together
tally systemwide sales of about $700 million. Western Sizzlin, based in
Roanoke, Va., operates or franchises 105 steak buffet restaurants and
boasts systemwide sales of $200 million.
In a
statement, the companies said the letter of intent to merge calls for
Western Sizzlin to distribute to its stockholders all of its Steak n
Shake shares, which total a 5.4-percent stake. At the merger’s closing,
each share of Western’s common stock would be converted into the right
to receive an amount equal to $8.11 in the principal amount of
debentures, or unsecured debt, issued by Steak n Shake. It is
anticipated that Steak n Shake’s debt will hold a term of five years,
will hold a 14-percent interest rate and will be pre-payable without
penalty after one year from the date of issuance.
Biglari,
who swept into the restaurant industry starting in 2006 with
investments at such companies as Steak n Shake, Friendly Ice Cream,
Applebee’s and Western Sizzlin, is the chairman and chief executive at
both Steak n Shake and Western Sizzlin. He has worked with both
companies for more than a year to close underperforming locations,
increase shareholder value and drive customer traffic.
Western
Sizzlin’s latest quarter ended June 30 included earnings of $1.9
million, or 68 cents per share, versus a loss of $2.0 million, or 72
cents per share, in the same quarter a year earlier. Revenue fell 2.5
percent to $4.4 million. Same-store sales at franchised locations,
which make up the majority of the chain, fell 4.4 percent.
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