The Wall Street Journal-20080129-Landry-s CEO Offers To Buy Rest of Company

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Landry's CEO Offers To Buy Rest of Company

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For years, Tilman Fertitta, the flamboyant executive who has built Landry's Restaurants Inc. into a multipronged business, has complained that Wall Street doesn't appreciate the company's worth and values its stock far too low.

Now Mr. Fertitta is doing something about it -- offering to buy the 61% of the Houston-based restaurant and casino company he doesn't own for $1.3 billion, or $23.50 a share.

While that represents a 41% premium over Friday's 4 p.m. price, it comes at a time when Landry's is trading near its 52-week intraday low of $14.18, reached last Tuesday. Restaurant stocks across the industry have been at depressed levels for months, but Landry's stock was trading at the proposed buyout level early last month.

Mr. Fertitta has displayed a flair for acquiring troubled chains at bargain prices, then turning them into moneymakers. Landry's now represents a veritable fish stew of casual-dining chains. They include Landry's Seafood House, The Crab House, Charley's Crab and The Charthouse, as well as Saltgrass Steak House and Rainforest Cafe, one of which features a volcano. The company also operates aquariums in downtown Houston and Denver, plus several hotels, including the Inn at the Ballpark across the street from Minute Maid Park, the home of the Houston Astros baseball team.

As of the end of 2006, Landry's owned and operated about 179 restaurants in 29 states. Earlier that year, it sold most of its Joe's Crab Shack units. Mr. Fertitta also has assorted private business interests, among them a Rolls Royce-Bentley dealership next to Landry's headquarters in Houston.

In a letter to Landry's board, Mr. Fertitta expressed confidence that he could obtain the required financing.

The company said its board established a special committee to review the proposal, as well as any alternative bids that may be received. It added that there was no assurance that a satisfactory deal will be reached.

Landry's shares jumped on news of Mr. Fertitta's offer, rising $3.78, or 23%, to $20.45 at 4 p.m. in New York Stock Exchange composite trading.

SMH Capital securities analyst Will Hamilton said that at about 1.1 times the company's book value, "at first glance, it appears to be a low bid." But, he added, "Fertitta has timed this well considering . . . the turmoil in the credit markets."

Another analyst, Michael Gallo of C.L. King & Associates, said in a note, "We believe the offer significantly understates the potential value of the company." But he added that, given the state of the credit markets and Mr. Fertitta's hefty stake in Landry's, "unless a higher offer emerges, he has a good chance of succeeding."

Mr. Fertitta, who is Landry's chairman, president and chief executive, became its controlling stockholder in 1988. He took Landry's public five years later. The company's announcement put its CEO's ownership at 39%. Its latest proxy statement showed a holding of 6.6 million shares, or 34.6% of the company's shares outstanding.

In its third quarter ended Sept. 30, Landry's had a loss from continuing operations of $3.2 million, or 18 cents a share, compared with a year-earlier profit of $6 million, or 27 cents a share.

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Kejal Vyas contributed to this article.