UPDATE: Brinker sells On the BorderUPDATE: Brinker sells On the Border

Ron Ruggless

DALLAS Brinker International Inc. said last week it is selling its 160-unit On The Border Mexican Grill & Cantina casual-dining chain to Golden Gate Capital, a private-equity firm based in San Francisco. Brinker also upped its annual earnings guidance and agreed to a larger share repurchase authorization.

Dallas-based Brinker, parent to the Chili’s Grill & Bar chain, among others, did not disclosed terms of the deal with the Golden Gate Capital affiliate, OTB Acquisition LLC. The company did say the deal was expected to close by the end of fiscal 2010.

Golden Gate purchased Romano’s Macaroni Grill from Brinker in December 2008, although Brinker holds 19.9-percent ownership in the 189-unit Italian chain.

"Brinker will not be retaining a minority interest in On The Border as we did with Macaroni Grill," company spokeswoman Stacey Sullivan said. "The decision to sell On The Border will enable Brinker to focus our resources on making our business better so we can grow again."

In the company's fiscal second quarter, which ended Dec. 23, On The Border reported a same-store sales decline of 4.7 percent.

“On The Border is well positioned to build on its current success and we are confident it will be a great addition to the Golden Gate portfolio,” Doug Brooks, Brinker’s chairman and chief executive said in a statement.

Joshua Olshansky, a managing director at Golden Gate Capital, added: “We are enthusiastic about the company's significant growth opportunities and we are very pleased to partner with the On The Border team to continue the success of the brand.”

Golden Gate also owns such brands as Express, Eddie Bauer and J.Jill.

In addition to its minority investment in Macaroni Grill, Brinker owns the 1,499-unit Chili’s and the 45-unit Maggiano’s Little Italy concepts.

Last week, Brinker raised its fiscal 2010 outlook, indicating that same-store sales were showing improvement. Brinker said earnings per share before special items would total between $1.40 and $1.44 per share, up from earlier guidance of between $1.15 and $1.30 per share. The company said same-store sales are expected to increase between 1 percent and 2 percent over last year, rather than decline between 2 percent and 4 percent forecast, which had been forecast earlier.

For the third quarter, which ended March 24, Brinker said systemwide same-store sales were expected to decline between 3.5 percent and 4.5 percent. While it expects quarterly same-store sales to rise between 1.5 percent and 2.5 percent at Maggiano's, it anticipates declines of between 4.5 percent and 5.5 percent at Chili's and between 2.5 percent to 3.5 percent at On The Border.

Also last week, Brinker said its board authorized an additional $250 million of share repurchases, which brings the total available to $310 million. The company said it would repurchase shares with the proceeds of the On The Border sale.

Contact Ron Ruggless at [email protected].