Landry's Is Hungry Again

You just can't satisfy Landry's (NYSE: LNY) voracious appetite.

The seafood eatery chain, which has devoured casinos and themed restaurants in the past, is now offering to buy high-end steakhouse Smith & Wollensky (Nasdaq: SWRG) for $7.50 a stub.

The buyout offer would represent a 49% premium to yesterday's closing price. If successful, it would also lay to rest one of the more disappointing public chophouse stocks.

Smith & Wollensky went public nearly six years ago at $8.50 a share, yet it has never traded at or above that price. Despite the eatery's success in growing comps, the company's spotty profitability and uninspiring margins have hampered any chance of expanding aggressively beyond its small base of 14 restaurants.

Landry's would be a welcome suitor; the company gives Larry Ellison a run for his money on the serial acquisition front, having gobbled up Chart House, Rainforest Cafe, and the Golden Nugget over the years. Smith & Wollensky would fit well in Landry's portfolio, especially since Landry's should be able to grow the concept ambitiously on healthier margins.

Despite this particular steakhouse's shortcomings, the sirloin business has been a hot niche for Wall Street. Ruth's Chris (Nasdaq: RUTH) and Morton's (NYSE: MRT) have recently gone public on the upscale end, while leading casual chains Lone Star and OSI's (NYSE: OSI) Outback Steakhouse both received buyout offers last year.

It may be humiliating for Smith & Wollensky to accept a buyout offer below its 2001 IPO price, but it's embarrassing enough that the company never managed to trade above $8.50 on its own. It had a brief run-up to $8.40 three years ago, but the concept is dying to be chewed upon by a proven operator with bigger teeth.

Ask for the check, Smith & Wollensky. You've overstayed your welcome as a standalone entity, and you're sitting at an empty table.

For more high-end cuts, check out:

• Smith & Whatever
• Wishing on a Star, Steak Lovers
• The Best Small Cap for 2007: Texas Roadhouse

Outback Steakhouse parent OSI Restaurant Partners is an Inside Value recommendation. Discover more of the market's best bargains with a free 30-day trial subscription.

Longtime Fool contributor Rick Munarriz is always on the lookout for a good steakhouse. Thankfully, he has plenty -- including a Smith & Wollensky -- in Miami. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.