Ignite Restaurant Group
) recently inked an agreement with private equity firm Golden
Gate Capital to buy the latter's Italian restaurant chain
Romano's Macaroni Grill for $55.0 million. This all-cash deal
will be financed through a $50 million upsizing of the company's
existing credit facility.
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The acquisition is expected to be completed late in the second
quarter of 2013 and Ignite management expects the deal to be
accretive to earnings in 2014.
Why Romano's Macaroni Grill?
First opened in 1988, Romano's Macaroni Grill offers authentic
Italian delicacies. The restaurant's open kitchen, brick ovens,
opera singers and the honor system house wine combine to create a
rich dining experience. Apart from its restaurants, the
brand also extends a packaged food line featuring the dishes
available at the restaurant. Also, the brand offers other
services like catering and online ordering.
The chain currently owns and operates 186 units and has 5
franchises across 36 states. Additionally, the brand franchises
an additional 19 units throughout nine U.S. territories and
Earlier, this chain was owned by
Brinker International Inc.
). On Dec 18, 2008, Brinker sold its majority stake in the chain
to Golden Gate Capital. In 2012, Romano's Macaroni Grill
generated approximately $385.0 million in revenues.
According to Ignite, Romano's Macaroni Grill operating model is
similar to Ignite's existing brands. Further, strong brand
recognition, sound business model and solid revenues make
Romano's Macaroni Grill a lucrative acquisition target.
Significant Synergy to be Derived
Ignite Restaurant currently owns and operates 129 Joe's Crab
Shacks and 15 Brick House Tavern + Tap. Post-acquisition, Ignite
will boast three casual dining brands.
Ignite expects to derive significant synergy off this deal and
remains optimistic of owning three high quality casual dining
brands and generating nearly one billion in revenues in the near
On the other hand, Romano's Macaroni Grill should benefit from
this combination as its new owner Ignite has experience of
improving operating performance of an acquired brand. For
example, Ignite has historically enhanced operating performance
at Joe's Crab Shack.
We also believe that this deal is strategically positive. We
expect Romano's Macaroni Grill to be well- managed by its new
Merger & Acquisition: An Industry Trend
Merger and acquisition activity is gaining momentum in the
restaurant sector. The companies are looking at potential
business partners to foray into different zones and unlock value.
Some latest acquisition deals that are worth mentioning include
the buyout of Caribou Coffee Company by JAB Group and
Bob Evans Farms Inc.
) divestiture of Mimi's Café concept to LeDuff America Inc. Yet
Frisch's Restaurants Inc.
) also sold its Golden Corral operations last year.