NEW YORK CKE Restaurants' $928 million buyout offer last month from a private-equity firm has sparked speculation that more suitors will line up for the Hardee's and Carl's Jr. parent, according to sources familiar with the restaurant M&A environment.
One prominent name already being thrown around as a potential bidder is Nelson Peltz, the non-executive chairman of Wendy's/Arby's Group and a well-known activist investor. According to an article Thursday in the New York Post, Peltz may have his eye on the rival fast-food company.
Under its deal with Thomas H. Lee Partners, CKE will consider additional acquisition offers through April 6. The $928 million deal includes the assumption of $309 million in debt, and a per-share cash price of $11.05 per CKE share.
CKE’s stock rose 1.2 percent Thursday to close at $11.42 per share.
With a tremendous amount of capital in the coffers of private-equity firms, and not many quality options to chase, sources said CKE may fetch more than its current multiple of 6 times its enterprise value, based on 2010 earnings before interest, taxes, deprecation and amortization. Two separate sources, a restaurant investment banker and a merger-and-acquisition consultant, told Nation’s Restaurant News that deal valuations are creeping upward because of the pent-up demand for quality transactions. Firms that frequent the restaurant space, like Bruckmann, Rosser, Sherrill & Co., Castle Harlan or KarpReilly, for example, may be interested in strong restaurant companies looking for equity owners.
Carpinteria, Calif.-based CKE operates or franchises 1,221 Carl's Jr. locations, which are primarily located in the West, and 1,913 Hardee's stores, which are found in the Midwest and South. While it has hit a rough patch in terms of same-store sales trends, both sources told NRN that it is generally perceived as a quality brand. Earlier this week, the company reported that blended same-store sales dropped 4.2 percent in February, reflecting drops of 2.6 percent at Carl's Jr. and 6.2 percent at Hardee's.
As for Peltz, the New York Post cited an unnamed source close to the matter, saying the interest could push CKE’s price tag to about $1 billion. Peltz had played a major role in the 2008 merger of Wendy's International Inc. with his company and Arby's parent, Triarc Cos. Inc. The combined company, Wendy's/Arby's Group, now operates or franchises more than 10,200 restaurants under both brands.
Peltz's various funds have invested in a variety of restaurant companies over the years, including Starbucks, P.F. Chang's and The Cheesecake Factory. His Trian funds held a 3.9-percent stake in CKE as of its latest fourth quarter, the Post reported.
“There was from the beginning lots of speculation that there is room for someone else to come in with another bid,” said Jeffrey Sherry, a director at Stifel, Nicolaus & Co. who focuses on restaurant and consumer investment banking. “Nelson has been in the QSR space for some time so it would make sense for him to look at it.”
Contact Molly Gise at [email protected] and Sarah Lockyer at [email protected].