Shares of Del Frisco's Restaurant Group (NASDAQ:DFRG) jumped more than 16% on Monday morning after the company said it was being taken private in a deal that values it at about $650 million. It's a nice premium to current prices, but considerably less than what the owner and operator of high-end restaurant concepts was worth just a year ago.
Before markets opened on Monday, Del Frisco's management said they had entered into a definitive agreement to sell the company to private equity firm L Catterton. Terms of the deal call for Del Frisco's shareholders to receive $8 per share, a premium of 22% over the company's Dec. 19, 2018, price. That was the day before the company said it was forming a special board committee to explore a potential sale.
The deal values Del Frisco's equity at about $267.3 million. The company also has about $336.1 million in debt.
"After a thorough process, including considering Del Frisco's current operations and future prospects, the committee and the board is confident that this transaction offers the most promising opportunity to realize the highest value for our stockholders," said Joe Reece, the Del Frisco's director who chaired the special committee, in a statement.
The deal ends a battle between Del Frisco's and hedge fund Engaged Capital, which owns just under 10% of the company's shares. In early December, Engaged Capital urged Del Frisco's to seek a buyer, complaining about "high leverage, weak and inconsistent operational performance, and value destruction under the current strategy."
Del Frisco's said Engaged has agreed to vote in favor of this acquisition deal.
L Catterton is no stranger to the restaurant industry, having invested in concepts including Outback Steakhouse owner Bloomin' Brands, P.F. Chang's, Cheddar's Scratch Kitchen, and others. Given that Engaged is on board, shareholders should expect the deal to proceed as planned and close before year's end.
Although the one-day premium is substantial, long-term holders likely aren't in much of a mood to celebrate. Even with Monday's jump, Del Frisco's shares are still off 41.5% over the past year and down 71.8% over a five-year period.